Assam State Electricity Board v. Buildworth Pvt. Ltd.
2006-11-21
AFTAB H.SAIKIA, B.D.AGARWAL
body2006
DigiLaw.ai
JUDGMENT B.D. Agarwal, J. 1. This first appeal is arising out of the judgment and order dated 22.12.2000 passed by the learned Civil Judge, Kamrup, Guwahati in Misc. (Arb) Case No. 6 of 1999, whereby the learned trial judge has affirmed the award of the arbitrator and has made it a Rule of the Court. Being aggrieved and dissatisfied with this judgment, the Defendants have preferred this appeal. 2. We have heard Sri B.D. Das, learned Standing Counsel for the Appellants, i.e. M/s Assam State Electricity Board and its officers ('A.S.E.B.' in short). We have also heard Sri S. Sharma, learned Counsel appearing for the Plaintiff/Respondent at length. Also perused the award of the arbitrator as well as the impugned judgment and the relevant records. 3. The facts leading rise to the filing of this appeal are that the Respondent was awarded the work of supply and installation of circulating water-piping system for B.T.P.S. vide Work Order No. BTPS/PM/Tech-31/Stage-II/2853-58 dated 06.09.1982. This work order contained exhaustive terms and conditions to be complied with by either party. The value of the contract work was fixed at Rs. 36,82,687.50 and the work was to be executed within a period of 12 months from the date of issue of the letter of intent, i.e. by 25.06.1983. Subsequently the date for completion of the work was extended till 06.09.1983. However, the Respondent could not complete the work even within this extended period. It is an admitted fact that the work was completed only on 28.05.1985 and one portion of the work of TG-IV was completed on 31.01.1986. It may also be mentioned here that the work order also provided escalation clause of prices of materials, fixing the outer ceiling of Rs. 9,16,825/-. According to the Respondent, the work could not be executed within the stipulated period since the Appellants failed to provide clear front/site for installation of pipes etc. and because of this delay on the part of the Appellants they were liable to pay idle charges of labour, machineries, equipments and further escalation in the prices of certain consumable goods, with interest there on. 4. The work order provided resolution of disputes either by way of mutual and bilateral discussion or by way of arbitration under Clause 2:9.
and because of this delay on the part of the Appellants they were liable to pay idle charges of labour, machineries, equipments and further escalation in the prices of certain consumable goods, with interest there on. 4. The work order provided resolution of disputes either by way of mutual and bilateral discussion or by way of arbitration under Clause 2:9. Since, the Appellants did not accept the claim of the Respondent, the Respondent filed an application in the Civil Court at Guwahati which was registered as T.S. (Arb.) 166 of 1993 for appointment of arbitrator. Under the arbitration clause, the sole arbitrator was to be appointed by the Chairman of A.S.E.B. and arbitration proceeding was to be decided as per the provisions of the Arbitration Act, 1940. Accordingly on the basis of the Court's order Sri K. Laskar, lawyer by profession, was appointed as a sole arbitrator. 5. The arbitrator received claims and objections from the parties. The parties were also heard personally as well as their representatives. The parties also submitted their documents before us to support their claims and objections. 6. The Respondent/claimant staked a claim of nearly 77 lakh before the arbitrator under the following heads: 26. That the claimant submits that based on the above facts and circumstances the claimant claimed for price variation due to over and extended stay as follows: a) Price variation on labour for Balance mechanical work from 6.09.83 till 28.02.85 as per formula given in the tender and escalation paid by the respondent with the ceiling upto 06.09.83 claimant’s claimed for- Rs. 46,7,733.00 b) The claimant claimed for the idle charge of supervisory staff, fitter, helpers, welders etc. from 28.02.85 to 31.01.86- Rs. 23,3,950.00 c) The claimant claimed for idle charge for machine tools and tackles for- Rs. 13,5,960.00 d) The claimant claimed for extended stay for civil work for- Rs. 15,9,849.00 e) The claimant claims interest on the total amount of Rs. 99,7,492.00 from the date of submission viz. from 07.03.86 to 31.12.97@ 18& which work out to- Rs. 60,84,650.00 f) The claimant further claimed For the escalation on gas for- Rs. 8,853.00 g) The claimant claimed for the price variation on electrodes for- Rs. 67,571,00 h) The claimant claims interest @ 18& from the date of submission of the bills viz. from 3rd April `86 to 31st December `97 on Rs. 76,424.00 which is- Rs.
60,84,650.00 f) The claimant further claimed For the escalation on gas for- Rs. 8,853.00 g) The claimant claimed for the price variation on electrodes for- Rs. 67,571,00 h) The claimant claims interest @ 18& from the date of submission of the bills viz. from 3rd April `86 to 31st December `97 on Rs. 76,424.00 which is- Rs. 45,9,123.00 i) The claimant further claims for legal expenses and the cost of arbitration for- Rs. 100,000.00 7. However, learned arbitrator awarded a sum of Rs. 10,73,969.16 on account of idle charges of labour, machineries and increased price on account of consumable items. In addition to that a lump-sum amount of Rs. 20,00,000/- was awarded as interest for the period 07.03.1986 to 31.12.1997. The arbitrator further directed that the entire payment shall be made within a period of three months failing which it will carry interest @ 18%. The award was passed on 31.12.1998. The date for payment of interest with effect from 07.03.1986 has been fixed on the basis that on this date the claimant had submitted their bills to A.S.E.B., which was placed in a meeting held on 21.08.1986. This award was challenged before the learned Civil Judge who affirmed the award. Hence, both this award and the order of the Court are under challenge before this Court. 8. Sri B.D. Das, learned Senior Counsel appearing for the Appellants submitted that both the award as well as the impugned judgment are liable to be set aside in as much as the award has been passed beyond the terms and stipulations of the contract agreement. According to the learned Counsel the outer limit of price variation was fixed at Rs. 9,16,825/- and the said sum has already been paid to the contractor and, as such, the Respondent could not have laid any further claim. The learned Counsel has also cited certain decisions from the Hon'ble Supreme Court and other High Court to buttress his point that the arbitrator cannot go beyond the terms of the contract. The learned Counsel has also submitted that similarly awarding of interest was also not permissible, without any corresponding clause in the contract order. 9. Sri S. Sarma, learned Counsel for the Respondent contended that since the period of execution of the contract work was not adhered to by the A.S.E.B., all the terms and conditions, including the escalation clause have been rendered non-existent.
9. Sri S. Sarma, learned Counsel for the Respondent contended that since the period of execution of the contract work was not adhered to by the A.S.E.B., all the terms and conditions, including the escalation clause have been rendered non-existent. According to the learned Counsel the fact of non availability of clear site for execution of the work was repeatedly intimated to the A.S.E.B. and their maintaining silence in this regard coupled with extension of period for execution of the work were sufficient grounds for the arbitrator to award idle charges with interest. Sri Sarma, learned Counsel has also submitted that awarding of interest on the idle charges is based on law, equity and conscience and the new law of arbitration, i.e. the Arbitration and Conciliation Act, 1996 has also empowered the arbitrators to award interest under Section 31(7) (a) and as such, no illegality has been committed by the arbitrator in awarding interest. 10. Apart from the question of awarding compensation of idle charges etc. a legal controversy was also raised relating to filing of written objection by the A.S.E.B. beyond the period of limitation in the Civil Judge's court against the prayer of the claimants to make the Award a Rule of the Court. It was the contention of the Respondent/claimant in the Trial Court that only 30 days period is prescribed under Article 119 of the Limitation Act, 1963 to file an application under Section 30 of the Arbitration Act for setting aside the award. However, in the present case, the A.S.E.B. submitted their written objection nearly after three months of the filing by the award in the court, and as such, the court has rightly held that the objection of the A.S.E.B. is barred by limitation. While supporting the impugned judgment on this count the learned Counsel has also cited few judgments. 11. In reply Sri B.D. Das, learned Senior Counsel for the Appellant submitted that the trial court had itself granted time to the A.S.E.B. to submit its objection beyond the statutory period, the Appellants are protected under law as they acted in good faith. Citing a series of judgments from the Apex Court, the learned Counsel contended that 30 days time fixed for filing an application under Section30 of the Act for setting aside the award can be extended and the delay, if any, can be condoned under Section 5 of the Limitation Act.
Citing a series of judgments from the Apex Court, the learned Counsel contended that 30 days time fixed for filing an application under Section30 of the Act for setting aside the award can be extended and the delay, if any, can be condoned under Section 5 of the Limitation Act. 12. Before entering into the merit of the case it would be appropriate to extract the relevant clauses of the work order dated 06.09.1982, which are as under: a) Escalation. 2.2.3. 1. The increase in price of steel labour valve expansion joints, electrodes etc., shall be to Board's accounts, with the over all ceiling of Rs. 9,16,825/- on submission of documentary evidence. 2.6.3. DELIVERY AND COMMISSIONING PERIOD: 2.6.4. The supply, erection testing and commissioning period is 12 (twelve) months from date of issue of letter of intent i.e. by 25.06.83. 2.6.5. Should progress be delayed by strikes, lockouts, fire, accident, or any cause whatsoever beyond reasonable control of the supplier and whether such delay or impediment occur before or after the time or extended time for despatch or completion reasonable extension of time maybe granted on the application made by the supplier in writing to the undersigned but without prejudice to other terms and conditions of the order. 2.6.6. SECURITY DEPOSIT: i) You will have to deposit within 20 (twenty) days to the extent of 21/2% of the total value of the order as security deposit. The security deposit shall be submitted to the Executive engineer. In taking and plant water Bandling division, B.T.P.S., Salakati pledge in the favour of A.O. BTPS in the shape of Bank Call Deposit/Bank Guarantee Bank Draft. ii) If the supplier fails or neglects to observe or to perform any of his obligation under the contract, it will be lawful for the purchase to forfeit at his absolute description, the security deposit furnished by the supplier. iii) No interest shall be payable on such deposit. 2.6.7. PENALTY: 2.7.1.
ii) If the supplier fails or neglects to observe or to perform any of his obligation under the contract, it will be lawful for the purchase to forfeit at his absolute description, the security deposit furnished by the supplier. iii) No interest shall be payable on such deposit. 2.6.7. PENALTY: 2.7.1. In case of failure to deliver/erect/commission of the materials/equipments in full or in part and completion of work or progress thereof within the stipulated period or delay in erection works, the undersigned shall be entitled to recover a penalty of total value of the under delivered materials or materials delivered late or value of incomplete erection works per fortnigh delay to a maximum 10% of the total value of the undelivered materials and incomplete erection works to A.S.E.B. The actual date of delivery shall be counted from the date of actual despatch of the materials. 2.8. DISPUTE 2.8.1. All disputes/difference of question whatsoever arising between purchaser the supplier upon or in relation to or/in connection with this contract, shall be deemed have arised at Gauhati (Assam) and no courts other than court(s) in Guwahati shall have jurisdiction to entertain or try the same. 2.9. ARBITRATION 2.9.1. Any dispute arising out of this contract will first be discussed and settled bilaterally between the Board and the contractor. However, in case such dispute cannot be settled bi-laterally this may be referred to arbitration of an arbitration to be appointed by the chairman, A.S.E.B. The procedure of arbitration shall be as per the Arbitration Act, 1940. 13. As per terms of the contract, if the disputes were to be resolved by way of Arbitration, the provisions of the Arbitration Act, 1940 were to be applicable. The relevant provisions of the said law are also reproduced below for better appreciation of the case: 14. Award to be signed and filed.- (1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.
Award to be signed and filed.- (1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award. (2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filling of the award. (3) Where the arbitrators or umpire state a special case under Clause (b) of Section 13, the Court, after giving notice to the parties and hearing them, shall pronounce its opinion thereon and such opinion shall be added to, and shall form part of, the award. 17. Judgment in terms of award.- Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. 29. Interest on awards.- Where and in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree. 30.
29. Interest on awards.- Where and in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree. 30. Grounds for setting aside award.- An award shall not be set aside except on one or more of the following grounds, namely- (a) that an arbitrator or umpire has misconducted himself or the proceeding; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have be come invalid under Section 35: (c) that an award has been improperly procured or is otherwise invalid. 14. From the scheme of the arbitration law the award should be filed before the competent court either on the request of the party or under direction of the court for passing an appropriate decree. In the present case, the award was filed in the Court on the basis of an application made by the Respondent in the civil court under Section 14 of the Act. Before asking the arbitrator to file the award, the court issued notices upon the A.S.E.B. and only after hearing them the order for filing the award was passed. Accordingly award was filed in the court on 27.01.2000. However, the A.S.E.B. did not file its objection or any application under Section 30 of the Act for setting aside the award within a period of 30 days. Instead, they prayed for time for filing objection and it was allowed by the court. Ultimately the written objection to the application of the claimant/Respondent Under Section14 for passing the decree as per the award was submitted on 18.04.2000. The learned Civil Judge has held that the A.S.E.B. had appeared in the Court on 06.04.1999, but they did not file any application under Section 30 nor the objection was filed within 30 days with effect from 27.01.2000, i.e. the date of filing of the award in the court. On this ground the learned trial judge held that the objection was barred by limitation. The Court has also relied upon the judgment of Hon'ble Mysore High Court rendered in the case of Mohammad Esoof v. R. Subramanyam and Anr. AIR 1957 KANT 78.
On this ground the learned trial judge held that the objection was barred by limitation. The Court has also relied upon the judgment of Hon'ble Mysore High Court rendered in the case of Mohammad Esoof v. R. Subramanyam and Anr. AIR 1957 KANT 78. In this case their Lordships have held that extension of time for filing objection by the court cannot be a ground to extend the statutory period of 30 days from the date of service of notice of filing the award. In addition to this judgment, the learned Counsel for the Respondent has also pressed into service the judgment of Hon'ble Supreme Court given in the case of Nilkantha v. Kashinath AIR 1962 SC 666 and another judgment of Mysore High Court given in the case of Ratna Bai v. N. Narayani AIR 1973 KANT 174. 15. In regard to the question of limitation, the learned Counsel for the Appellants is relying upon the judgment of the Apex Court given in the case of State of A.P. v. Chandra Sekhar Reddy and Ors. 1998 (7) SCC 141 ; Union of India v. Manager M/s Jain and Associates 2001 (3) SCC 277 ; Asia Resorts Limited v. Usha Breco Limited 2001 (8) SCC 710 ; Union of India v. Tecco Trichi Engineers and Contractor 2005 (4) SCC 239 and State of Goa v. Western Builders 2006 (6) SCC 239 . 16. In the case of General Manager, Northern Railway v. Sarvesh Chopra 2002 (4) SCC 45 , the Hon'ble Supreme Court had the occasion to observe that a decision of that Court is an authority for the proposition which it decides and not for what it has not decided or had no occasion to express any opinion on a particular law. I have referred the above observation with limited intention to clarify that in the case of Neelkantha (supra) the Hon'ble Supreme Court has no doubt held that the period of limitation for filing objection against an award fixed under Article 158 of the Limitation Act, 1908 can not be extended, but the Apex Court did not deal with the question of condonation of any delay in filing the objection against an award. As such, the aforesaid authority cited on behalf of the Respondent is not squarely applicable in this case.
As such, the aforesaid authority cited on behalf of the Respondent is not squarely applicable in this case. Similarly the view taken by the judgment of the Hon'ble Mysore High Court that granting of time by the court can not extend the period of limitation, can not be followed by us in as much a the said judgment has not been approved by the Apex Court so far. Similarly the judgment of Ratna Bai (supra) did not decide the question of condonation of delay. The case of National Insurance Co. Ltd. v. Punam Chand Jain AIR 1983 Cal 148 of Calcutta High Court was also cited on behalf of the Respondent. We and that, in this case also the Hon'ble Calcutta High Court has basically dealt with the question of actual date from which the limitation period would run and not the question involved under Section 5 of the Limitation Act. 17. On the other hand, the series of judgments cited on behalf of the Appellants show that the court has the power to condone the delay in filing objections against an award. In the case of Jain and Associates (supra), the Hon'ble Supreme Court has held that issuing a decree on the basis of the award is not the Rule. Their Lordship's have held that the Court can even suo moto refuse to make the award a Rule of the Court. Their Lordship's have further held that while making the award a Rule of the Court, the procedure of Code of Civil Procedure should be followed. In the above case, the question of extension of time for filing objection against an award under Section 5 of the Limitation Act, 1963 also came up for consideration. The Hon'ble Apex Court has explicitly held that Section 5of the Limitation Act gives a discretion to the Court to extend the time for filing application under Section 30 or 33, raising objections to the award. In our considered opinion, the same legal principle would also apply mutatis-mutandis to the objections which can be filed under Section 14 of the Arbitration Act, 1940. 18.
In our considered opinion, the same legal principle would also apply mutatis-mutandis to the objections which can be filed under Section 14 of the Arbitration Act, 1940. 18. In the case of Asia Resorts Ltd (supra), the question arose for determination was whether a party to the contract can be allowed to refer the matter for arbitration under Section 20 of the old Arbitration Act, which was required to be filed within three years from the date of cause of action under Article 181 of the Limitation Act, 1908, beyond the statutory period fixed. The said Article 181 has been replaced by Article 137 in the Limitation Act, 1963. The Apex Court has held that the benefit of Section 5 of the Act can be extended in appropriate cases. With this observation the delay in filing an application under Section 20 was also condoned. Similarly in the case of Tecco Trichi Engineers and Contractors (supra) and again in the case of Western Builders (supra), the Hon'ble Supreme Court has reiterated that Under Section 5 the period of limitation for filing application for setting aside an arbitral award can be condoned. Few other judgments were also referred on behalf of the Appellants to buttress the same points. However, we do not feel it necessary to multiply the authorities. 19. The ratio of the above decisions of the Apex Court is that any delay in filing the objection against an arbitral award can be condoned, provided the requirements of Section 5 are fulfilled. 20. To get the benefit of Section 5 of the Limitation Act, the defaulting party has to satisfy the court that he had sufficient cause for not filing the appropriate application within the prescribed period. In the case before us, the Appellants have pleaded that they acted bonafide, in as much as, prayer for allowing them to file objection was made in the court immediately after filing of the award and the court allowed them to file their objection. Sri B.D. Das, learned Counsel for the Appellants urged that since the court itself granted time for filing objection it would be unjust to hold that the Appellants were negligent in not filing the objection within time. 21. We find from the record that award was filed in the court on 27.01.2000 and the objection by A.S.E.B. was filed on 18.04.2000.
21. We find from the record that award was filed in the court on 27.01.2000 and the objection by A.S.E.B. was filed on 18.04.2000. In this way there was nearly 50 days delay in filing the objection. In our considered opinion, it is a fit case where the delay deserves to be condoned keeping in mind that public money is involved. Hence, we set aside the findings of the lower court in this regard. Consequently the delay in filing the objection against making the award a rule of the court is hereby condoned. 22. The next question which falls for our determination is whether an award of arbitrator is a sacrosanct and non-justiceable document. Admittedly the Arbitration Act contains provisions for setting aside arbitral awards. Such provision in the statute clearly indicates that awards can be scrutinized and reviewed by courts. Despite this fact, one theory of judicial pronouncements is that since awards are passed by the person (s) of the choice of the parties and upon their reference, and as such, the courts should be slow to interfere in such awards. 23. In the case of Union of India v. B.K. Construction reported in 2003 (3) GLT 712, this Court had an occasion to consider the scope of courts in interfering with the awards and after exhaustive deliberation and adumbrating to series of authorities from the Apex Court came to the following opinion: 18. Situated thus, with regard to the sanctity of an award passed by the arbitrator, the following general principles, as culled out from the judicial authorities noticed hereinabove, have to be borne in mind before entering into the core issues as have been agitated before this Court. (a) Since arbitration is an adjudicator process by the choice of the parties, the award made by an arbitrator is conclusive as a judgment between the parties and the approach o the Court should be to preserve the award as far as possible rather than to destroy it. (b) The arbitrator is the sole judge of the quality as well as quantity of evidence and it will not be for the Court to take upon itself the task of being a judge of the evidence before the arbitrator.
(b) The arbitrator is the sole judge of the quality as well as quantity of evidence and it will not be for the Court to take upon itself the task of being a judge of the evidence before the arbitrator. The Court should not reassess and re-appreciate the evidence even if it is possible that on the same evidence, the Court might have arrived at a different conclusion than the one arrived at by the Arbitrator. (c) If the arbitrator has construed a particular clause of the contract agreement in a particular way which is conceivable and possible view, the Court would not be justified to interfere with the award. Even if an award is based on a proposition of law on which two views are possible, the Court would not be justified to interfere with the award. (d) If the arbitrator has made a speaking award i.e. with reasons which reasonable and rational, the Court would not interfere with the award, unless there is total perversity. 24. Again in the case of Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 , the Hon'ble Supreme Court has reiterated the judicial power of review of awards in the following words: 12. Hence, the jurisdiction or the power of the Arbitral Tribunal is prescribed under the Act and if the award is de-hors the said provisions, it would be, on the face of it, illegal. The decision of the Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract. In exercising jurisdiction, the Arbitral Tribunal cannot act in breach of some provision of substantive law or the provisions of the Act. 30. ...Further, for achieving the object of speedier disposal of dispute, justice in accordance with law cannot be sacrificed. In our view, giving limited jurisdiction to the court for having finality to the award and resolving the dispute by speedier method would be much more frustrated by permitting patently illegal award to operate. Patently illegal award is required to be set an naught, otherwise it would promote injustice. 25. Sri B.D. Das, learned Counsel for the writ Petitioners submitted that the arbitrator had gone beyond the terms of the contract and as such it is within the purview of this Court to interfere with the same.
Patently illegal award is required to be set an naught, otherwise it would promote injustice. 25. Sri B.D. Das, learned Counsel for the writ Petitioners submitted that the arbitrator had gone beyond the terms of the contract and as such it is within the purview of this Court to interfere with the same. On the other hand, Sri S. Sharma, learned Counsel for the sole Respondent relied upon the judgment of the Hon'ble Supreme Court given in the case of Sudarshan Trading Company v. The Government of Kerela and Ors. AIR (1989) SC 890 to reinforce his argument that the award should be maintained. In this cited authority, the Hon'ble Supreme Court has observed that the court has no jurisdiction to substitute its on evaluation. Their Lordships have further held that in any event, reasonableness of the reasons given by the arbitrator cannot be challenged. At the same time, the Apex Court has maintained the jurisdiction of the courts to interfere with the awards in the following words: An award may be remitted or set aside on the ground that the arbitrator in making it had exceeded its jurisdiction and evidence of matters not appearing on the face of it will be admitted in order to establish whether the jurisdiction had been exceeded or not, because the nature of the dispute is something which has to be determined outside the award whatever might be said about it in the award or by the arbitrator. 26. From the above authorities of this Court as well as by that of the Apex Court, it is apparently clear that arbitral awards are justiceable. At the same time, such interference is warranted only if the parties can prove that the arbitrator had misconducted himself or that he has acted without jurisdiction or the award is ex-facie improper and patently illegal. The grounds for setting aside the award under the Arbitration Act, 1940 (the 'Act' hereinafter) has been set-out Under Section 30 and Under Section 34 of the Arbitration and Conciliation Act, 1996. In the present case the former law will be applicable. 27. Now the question is whether the arbitrator has either mis-conducted himself or the Respondent has procured the award improperly. The Act has not defined the word misconduct. According to Black's Law Dictionary, 7th Edition, misconduct means a deriliction of duty, unlawful or improper behaviour.
In the present case the former law will be applicable. 27. Now the question is whether the arbitrator has either mis-conducted himself or the Respondent has procured the award improperly. The Act has not defined the word misconduct. According to Black's Law Dictionary, 7th Edition, misconduct means a deriliction of duty, unlawful or improper behaviour. Such misconduct and impropriety in the award can be deduced from the findings of the arbitrator, which are discussed below. 28. As noted earlier the work order contained certain terms and conditions. Under Clause 2.3 the outer ceiling for escalation of prices of consumable goods was fixed at Rs. 9,16,825/-. Learned Counsel for the Petitioners is solely banking on this condition to make a point that the arbitrator could not have awarded any compensation on account of idle charges. According to the learned Counsel, the escalation price fixed in the contract has already been paid to the contractor, and as such, the Respondent is not entitled to any further compensation. 29. In support of the above submission, the learned Counsel cited the judgment of Hon'ble Supreme Court rendered in the case of State of Orissa v. Sudhakar Das 3 SCC 27; Ramchandra Reddy and Co. v. State A.P. and Ors. (2001) 4 SCC 241 and Ispat Engineers and Foundry works v. Steel Authority of India Ltd. (2001) 6 SCC 347 . 30. In the case of Sudhakar Das (supra) the Hon'ble Supreme Court has held that no amount could have been awarded in absence of any escalation clause. How ever, in the case before us, there is such provision in the contract. In the case of Ramchandra Reddy (supra) the Apex Court turned down the extra claim for excavation of hard rock, claimed by the contractor on the ground that the quantity of excavation of the hard rock being abnormally high and much beyond the anticipated quantity indicated in the agreement. The said claim was earlier refuted by the arbitrator as well as by the High Court and then affirmed by the Apex Court relying upon specific condition in that regard in the contract agreement. Be that as it may, this cited case related to escalation of prices and cost of excavation, whereas in the case before us, we are examining the claim of the contractor based on altogether a different head. As such the decision cited by the Petitioners is distinguishable on facts.
Be that as it may, this cited case related to escalation of prices and cost of excavation, whereas in the case before us, we are examining the claim of the contractor based on altogether a different head. As such the decision cited by the Petitioners is distinguishable on facts. In the case of Ispat Engineers (supra), relied upon by the Petitioners, we find that the Apex Court has emphasized that the arbitrator or umpire has no authority or jurisdiction to abdicate the terms of the contract or what the parties desired under the contract and not beyond the same. This observation of the Hon'ble Supreme Court cannot be read as laying down that arbitral awards are immune to review. Rather, the observation of the court supports the view that awards can be reviewed if it is found to be improper. 31. Interpreting the contract agreement in their favour, Sri S. Sharma, learned Counsel for the Respondent relied upon the judgment of the Hon'ble Supreme Court rendered in the case of Sarvesh Chopra (supra) and submitted that unless the contract agreement contain any clause of "excepted matter" the arbitrator is free to entertain any claim. The learned Counsel also relied upon the judgment of the Apex Court given in the case of Hyderabad Municipal Corporation v. M.K. Mudaliar and Ors. AIR 1985 SC 607 , to make a point that if the work spread over beyond the stipulated period the contractor may be awarded extra payment on that account. 32. In the case of Sarvesh Chopra (supra) the contractors made extra claim against few items, which were referred to arbitrator for decision by the High Court. Against that decision the department preferred an appeal in the Supreme Court. Out of few items, claim No. 5 was related to idle charges and the contractor claimed some amount of money on the ground that the site was not made available for one month. In the said case, the contract agreement provided that few clauses of the agreement shall be deemed to be "excepted matters" and those shall be out of the purview of the arbitration clause and not to be referred to arbitration. The contract agreement also incorporated in clause No. 9.2 that no material price variation or wages escalation on any account whatsoever and compensation for force majeure etc. shall be payable under the contract.
The contract agreement also incorporated in clause No. 9.2 that no material price variation or wages escalation on any account whatsoever and compensation for force majeure etc. shall be payable under the contract. The Hon'ble Supreme Court has held that any claim falling under "excepted matters" arena will be one category and other claims, which can be determined by the department, would form a different category. After deliberating the facts of the case the Apex Court gave to the following opinion: 15. ...If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party i.e. the contractor, cannot claim compensation for any loss occasioned by the non-performance of the reciprocal promise by the employer at the time agreed, 'unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so'. Thus, it appears that under the Indian law, in spite of there being a contract between the parties whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertained in one of the following situations: (i) if the contractor repudiates the contract exercising his right to do so under Section55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor in spite of delay and such notice by the contractor putting the employer on terms. 16. Thus, it may be open to prefer a claim touching an apparently excepted matter subject to a clear case having been made out for excepting or excluding the claim from within the four corners of 'excepted matters'. 33. In the case at hand, the contract order did not prescribe any stipulation that no claim shall be entertained on account of idle charges of men and machineries in any eventuality. The arbitration clause is loosely worded. To say it differently the arbitration clause did not put any cap on the powers of the arbitrator to decide any particular claim. 34.
The arbitration clause is loosely worded. To say it differently the arbitration clause did not put any cap on the powers of the arbitrator to decide any particular claim. 34. The escalation clause, on which the learned Counsel for the Appellants is relying on, relates to only price escalation to consumable goods. Hence, in the strict sense the work order did not debar the contractor from claiming damages on account of delay in execution of the work due to fault of the department etc. Hence, it cannot be said that the arbitrator had no jurisdiction to entertain the claim for idle charges. 35. Again in the case of Hyderabad Municipal Corporation (supra) the prayer for execution for work was fixed for one year. However, the work period had VJ be spread to three years since the department did not have sufficient monetary budget. The contractor agreed to complete the work in the extended period of two years on the condition that extra payment will have to be made on account of escalation of price of material and wages. The Hon'ble Supreme Court has approved extra payment both on equity and law, basically on the ground that the Government did not intimate the contractor that no extra payment would be paid to him or that the contractor will have to complete the work on the basis of the original rates despite extension of work period. 36. Turning back to the impugned judgment, we find that the Respondent stake the claim of Rs. 10,73,416/- on account of idle charges for machineries, tools and tackles and over stay of men power on the ground that A.S.E.B. did not provide clear front to complete the work in time. The contractor/Respondent also made claim on account of escalation of consumable goods as well as interest upon Rs. 10,73,416/-. The arbitrator has granted the principal amount of Rs. 10,73,416/- on account of idle charges of machineries and men power as well as lump-sum amount of Rs. 20,000,00/- being interest there on with effect from 07.03.1986 @ 18% per annum. However, the arbitrator rejected the claim of escalation of prices of consumable goods. The learned Civil Judge has affirmed the award in toto. 37.
10,73,416/- on account of idle charges of machineries and men power as well as lump-sum amount of Rs. 20,000,00/- being interest there on with effect from 07.03.1986 @ 18% per annum. However, the arbitrator rejected the claim of escalation of prices of consumable goods. The learned Civil Judge has affirmed the award in toto. 37. Sri B.D. Das, learned Counsel for the Appellants submitted that the Respondent failed to produce concrete evidence that men and machineries remained idle at work site and, as such, no compensation ought to have been granted. It is true that no oral evidence was laid before the arbitrator. It is needless to say that oral evidence is not a sine-qua-non to prove a particular fact. In the present case, the above amount was awarded on the basis of admitted facts. We reiterate that initially the period for execution of work was fixed for one year, which was expired on 25.06.1983 and the work could be completed only in the month of February 1985. Not only this, some part of the work related to TG-IV was completed on 31.01.1986. During this period the Respondent informed the A.S.E.B. vide letter dated 05.06.1983 that work font was not handed over to them and as such, escalation clause order 2:6:4 would not be applicable to them. Identical remainders were given vide letters dated 07.06.1983; 16.11.1983 and 03.06.1984 and so on. Not only this, the officers of the A.S.E.B. also admitted the position about non-release of work front clearly in their letter dated 08.03.1984. However, at no point of time the A.S.E.B. refuted the contractor's objection nor refuted the claim of idle charges etc. At the same time the bills of the contractor on account of idle charges and escalation prices etc. were put up for consideration in a meeting held on 28.01.1986. This act of the A.S.E.B. clearly indicates that they had impliedly admitted substance and justification in the claim of the contractor. 38. Be that as it may, as has been held in the case of Sarvesh Chopra (supra), if the parties do not rescind the contract invoking Sections 55 and 56 of the Indian Contract Act, 1872 and accepts belated performance of reciprocal obligation, it would entitle the innocent party to make a claim of damages. In addition to this authority other conduct of the A.S.E.B. also indicates that they were at fault.
In addition to this authority other conduct of the A.S.E.B. also indicates that they were at fault. The work order had also provided for imposing penalty under Clause 2.6.7. However, the penalty clause was not invoked for commissioning of the work. Non-invoking of the penalty clause also proves the deficiency and default on the part of the A.S.E.B. at some point of time. The established principles of law is that the award passed by the arbitrator should be considered as a conclusive findings unless it is totally perverse and against public policy. Besides this, reappraisal of findings of arbitrator is ordinarily not permissible by the court. Above all, in this case, the arbitrator was appointed by the Chairman of A.S.E.B. as per the arbitration clause. In other words, the arbitrator was of the choice of the department and this fact also cannot be overlooked by this Court while affirming the award given under the head 'idle charges' of men and machineries. Accordingly, we hereby affirm the award to this extent. 39. Now we turn to examine the justification of interest. As noted earlier the arbitrator has also awarded a sum of Rs. 20 Lacs on account of interest upon the principal claim for idle charges. From the impugned award, we find that the arbitrator has not assigned any reason for granting lump-sum interest and the power under which the said amount was awarded. 40. To defend the amount of interest awarded in their favour Sri Sharma, learned Counsel for the Respondent is relying upon the judgment of Hon'ble Supreme Court given in the case of State of Orrisa and Ors. v. S.N. Agarwalla (1997) 2 SCC 469 and Ram Nath International Construction Pvt. Ltd. v. State of U.P. (1997) 2 SCC 645. In these cases, the Apex Court has held that the arbitrators are permitted to award interest both for pre-reference period as well as pendente lite. 41. On the other hand, learned Counsel for the Appellants cited the judgment of Hon'ble Supreme Court given in the case of Mahabir Pd. Rungta v. Durga Dutta AIR 1961 SC 990 ; Union of India v. A.L. Ralia Ram AIR 1963 SC 1685 ; Union of India v. The West Punjab factory Ltd. AIR 1966 SC 395 and the judgment of Hon'ble Patna High Court given in the case of Rajendra Prasad v. Goya Pd. Sah AIR 1975 Pat 312 .
Rungta v. Durga Dutta AIR 1961 SC 990 ; Union of India v. A.L. Ralia Ram AIR 1963 SC 1685 ; Union of India v. The West Punjab factory Ltd. AIR 1966 SC 395 and the judgment of Hon'ble Patna High Court given in the case of Rajendra Prasad v. Goya Pd. Sah AIR 1975 Pat 312 . In all these cases, it has been held that interest for the pre-reference period can be awarded only if the contract agreement expressly or impliedly so permits but not as damages. 42. Section 29 of the Arbitration Act, 1940 has empowered the arbitrators to award only pendente lite interest from the date of the decree. Besides this, we do not find any stipulation in the work order that A.S.E.B. would be liable to pay interest on the contract amount, if there will be any delay in such payment. Had there been any such provision of payment of interest for delayed payment of the bills, i.e. on the principal amount of the contract, we would have inferred inference and would have certainly interpreted the said provision in favour of the contractor for payment of interest on idle charges also. However, in absence of any such clause in the contract agreement, we hold that awarding of interest is per se without jurisdiction. In our opinion awarding of interest without express provision in the contract agreement amounts to misconduct and this part of the impugned award can also be termed as improper. 43. Before parting with the judgment, we would like to put on record that both the parties had also cited few judgments from different High Courts. However, we have not referred those authorities since on the same point judgments from the Apex Court as well as from this Court were available. 44. In the result we hold that the Appellants have been successful in assailing the award and impugned judgment of the learned Civil Judge partly. For the reasons and findings given herein above, we hereby affirm the award of Rs. 10,73,416/- on account of 'idle charges'. However, the amount of Rs. 20 Lacs awarded on account of interest is hereby set aside. 45. Send down L.C.R. with a copy of this judgment.