Bharat Sanchar Nigam Limited v. Narusinghalal Aggarwal
2006-04-21
L.MOHAPATRA
body2006
DigiLaw.ai
JUDGMENT L. MOHAPATRA, J. : This appeal is directed against the judg¬ment dated 23.7.2002 passed by the learned District Judge, Khurda at Bhubaneswar in Arbitration Misc. Case No.185 of 2001 rejecting the application filed by the applicant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter after called as the ‘Act’). 2. The claimant-respondent had been entrusted with the work of construction of six numbers of Type-I, 12 numbers of Type-II and six numbers of Type-III quarters for an estimated cost of Rs.30,46,465.30 by the appellant under an agreement. The respondent was required to complete the work within 18 months and as per the terms of the agreement the date of commencement of the work was 26.2.1991 and the date of completion was fixed to 25.8.1992. According to the appellant due to inefficiency, negligence and default of the claimant-respondent the work did not progress properly and in spite of repeated instructions to the claimant-respondent to complete the work, the same could not be completed and on 28.8.1996 notice was issued to show-cause to the claimant-respondent and in absence of any response from the side of the claimant-respondent the contract was rescinded on 29.9.1996. Further cases of the appellant is that by that time the respondent had received money claimed under 11 numbers of running account bills. Since the claimant-respondent did not complete the work within the time granted, balance work had to be completed by some other agency by incurring extra expenditure. The claimant-respondent, on the other hand, raised a dispute invoking arbitration clause contained in the agreement on 27.5.1997 and the matter was referred to Arbitrator. The Arbitra¬tor awarded a sum of Rs.11,88,827/- with pendente lite interest @ Rs.15% per annum with a condition that if the awarded amount is not paid within 90 days from the date of publication of the award, future rate of interest would be at the same rate. Chal¬lenging the said award the appellant filed an application under Section 34 of the Act before the learned District Judge and the same having been dismissed, this appeal has been filed. 3. Learned District Judge referring to Section 34 of the Act dismissed the petition without assigning any reason and therefore this was a fit case for remitting back to the learned District Judge for disposal afresh in accordance with law.
3. Learned District Judge referring to Section 34 of the Act dismissed the petition without assigning any reason and therefore this was a fit case for remitting back to the learned District Judge for disposal afresh in accordance with law. Howev¬er, learned counsel for both parties submitted that instead of remitting the case back to the learned District Judge, this Court may decide the appeal on merits with reference to each item of claim. Accordingly, the appeal was heard on merits. 4. From the award it appears that the Arbitrator awarded a sum of Rs.2,23,157/- in respect of claim item No.1, Rs.5,20,000/- in respect of claim Item Nos. 2,3,4, and 5, a sum of Rs.2,42,670/- in respect of claim Item No.6, a sum of Rs.1,03,000/- in respect of claim Item No.7 and Rs.1,00,000/- in respect of claim Item No.9, thus a total of Rs.11,88,837/-. 5. The appellant in its application under Section 34 of the Act challenged the award passed in respect of the aforesaid items of claim. In the application under Section 34 of the Act it was specifically contended by the appellant that under clause 25 of the Agreement if the total claim is more than Rs.75,000/- the Arbitrator has to give reasons and in the present case the award has been passed in respect of the claims either by giving no reason or cryptic reasons. While the award in respect of the claim item No.1 is challenged on the above ground, award in respect of claim items 2,3,4, and 5 is challenged on the ground that clubbing was not permissible and therefore the award in respect of the aforesaid four items is unsustainable. So far as claim item No.6 is concerned, the award is challenged on the ground that the same has been allowed without support of any document whatsoever and for the lathces of the respondent he has been rewarded with the award. So far as the award in respect of claim item No.7 is concerned, same is challenged on the ground that the award is speculative, vague and unjustified.
So far as the award in respect of claim item No.7 is concerned, same is challenged on the ground that the award is speculative, vague and unjustified. So far as ward in respect of claim item No.9 is concerned, learned counsel challenged the same on the ground that the agreement having been rescinded and the balance work having been done through some other agency the appellant had incurred extra expenditure and therefore security deposit should not have been directed to be released in favour of the claimant-respondent. Rate of interest both pendente lite and future interest was also challenged before the District Judge in the application filed under Section 34 of the Act. Learned District Judge in the impugned judgment only quoted the Section 34 of the Act and in para-5 of the judgment held that since the Arbitrator has given reasons in making the award the contention that the award is violative of clause 25 of the contract is untenable and the grounds taken in the applica¬tion under Section 34 of the Act do not come within the purview of the said provision. 6. Since the learned counsel appearing for both parties suggested that this Court should hear the appeal in respect of each item of claim referring to the objection raised by the appellant, I proceed to examine the legality of the award passed in respect of each item of claim under challenge before this court, though the scope of interference in appeal is very limited. 7. So far as claim item No.1 is concerned, same relates to compensation on account of the work executed but not paid by the appellant. Claim amount in respect of the said item is Rs.4,65,000/-. In respect of the said claim the learned Arbitra¬tor has observed that the appellant in the final bill agreed that gross amount payable is Rs.78,831/- after deducting Rs.38,905/- toward penal recovery. Penal recovery has been done for non-refund of unutilized cement and steel. Learned Arbitrator further observed that the appellant have not produced any documentary evidence to show as to when notice was issued to the claimant-respondent for return of balance unutilized cement and steel. It has also not claimed pilferage, misuse or theft of materials issued to the respondent. In absence of any such material recov¬ery was found to be illegal.
Learned Arbitrator further observed that the appellant have not produced any documentary evidence to show as to when notice was issued to the claimant-respondent for return of balance unutilized cement and steel. It has also not claimed pilferage, misuse or theft of materials issued to the respondent. In absence of any such material recov¬ery was found to be illegal. Calculating the said amount which is not recoverable from the respondent, the learned Arbitrator passed an award of Rs.2,23,157/- in respect of the said item of claim. I, therefore, disagree with the submission of the learned counsel for the appellant that the Arbitrator has not given any reason whosoever for passing the award in respect of the said item of claim. Detailed reasons have been given by the arbitrator in the award itself in respect of the said claim and therefore requirement of clause 25 of the agreement is satisfied. So far as the award in respect of claim item Nos.2,3,4 and 5 is concerned, learned counsel for the appellant challenged the same on the ground that all the four claims could not have been clubbed together for consideration. Claim item No.2 relates to compensation on account of maintenance of establishment at site during the enlarged over-run/spill-over period. Claim item No.3 relates to compensation on account of additional expenses due to prolongation of work beyond the stipulated period of completion. Claim item No.4 relates to compensation on account of loss of profit/earning capacity during the aforesaid period and claim item No.5 relates to compensation on account of depreciation of tools and plants, unconsumable materials engaged at the site of work during the extended period. Since all the four claim items relate to the extended period there is nothing illegal in club¬bing four claims together and decide the same. Learned Arbitrator has observed that the stipulated period of completion was 18 months from the date of commencement. The work could not be completed due to failure on the part of the appellant to issue cement and steel, architectural and structural drawings in item and failure to pay running account bills in time. Referring to the running account bills the learned Arbitrator has further observed that the appellant failed to pay monthly payments which is stipulated in the agreement and there were serious breaches on their part which resulted in non-completion of work within the stipulated period.
Referring to the running account bills the learned Arbitrator has further observed that the appellant failed to pay monthly payments which is stipulated in the agreement and there were serious breaches on their part which resulted in non-completion of work within the stipulated period. Considering the same the appellant had allowed the claimant to continue with the work and therefore the claimant is entitled to claims made under different heads during the extended period. Learned Arbitrator has further observed that during the currency of the contract and up to the date of rescis¬sion, no notice under clause 2 was issued. No amount was withheld from the claimant on account of non-settlement of EOT and the work was allowed to proceed till the date of rescission which otherwise meant time extension as granted to the claimant-re¬spondent for completion of the work. He has also observed that the work couldn’t be completed because of failure on he part of the appellant to fulfill the conditions stipulated in the agree¬ment and awarded a sum of Rs.5,20,000/- in respect of four items of claim. I am, therefore, of the view that having given sound reasons for passing such an award there is no reason for this Court to interfere with the same. So far as the award in respect of claim item No.6 is con¬cerned, claimant claimed Rs.7,85,000/- as compensation on account of increased cost of materials and labour. Learned Arbitrator observed that admittedly no payment has been made to the claim¬ant-respondent as provided under clause 10CC of the agreement during the currency of the contract till the date of rescission. On this count the claimant item was partly allowed and the claim¬ant was awarded with a sum of Rs.2,42,670/-. In view of the above, it cannot be said that the Arbitrator has not given any reason while passing the award. I am, therefore, of the view that there is no reason for this Court to interfere with the said award. So far as claim item No.7 is concerned, claimant claimed compensation for an amount of Rs.1,06,000/- on account of loss of expected profit on the value of unexecuted portion of the con¬tract. Learned Arbitrator has observed that the tender amount for the work was Rs.30,46,456/- and as confirmed by the appellant the claimant-respondent had executed work worth Rs.20,09,241/-. Balance work could not be completed which works out to Rs.10,37,215/-.
Learned Arbitrator has observed that the tender amount for the work was Rs.30,46,456/- and as confirmed by the appellant the claimant-respondent had executed work worth Rs.20,09,241/-. Balance work could not be completed which works out to Rs.10,37,215/-. Referring to the reasons given for passing the award in respect of claim item Nos.2,3,4, and 5, where the deci¬sion has been admitted to be illegal, the learned Arbitrator found that the claimant-respondent is entitled to compensation on the loss of profit and awarded a sum of Rs.1,03,000/-. It is, therefore, held that the Arbitrator having given reasons for passing an award on the said claim which does not run contrary to the provisions contained in the agreement, there is no reason to interfere with the same. So far as the award in respect of claim item No.9 is con¬cerned, the Arbitrator has passed an award of Rs.1,00,000/- which had been given by the claimant-respondent as security deposit. The learned Arbitrator has observed that as the rescission of the contract is illegal and wrongful, security deposit could not be withheld by the appellant. The award in this respect appears to be reasonable and need not be interfered with. 8. Learned counsel for the appellant submitted that the award in respect of the aforesaid item of claims had been passed by the learned Arbitrator illegally and such award are beyond scope of agreement. As is evident from the petition filed under Section 34 of the Act, the only ground taken by the appellant before the learned District Judge is that there has been viola¬tion of clause 25 of the agreement which provides that in the event claim is more than Rs.75,000/-, the Arbitrator has to give reasons. As discussed earlier, the Arbitrator has given reasons for passing award in respect of each item of claim and nothing has been placed by the learned counsel for the appellant to show that any award in respect of the aforesaid items of claim has been passed beyond the scope of agreement. The Apex Court in the case of Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd., reported in AIR 2003 S.C. 2629 has laid down guidelines as indi¬cated in paragraphs 10 to 31 of the said judgment on which the Court can interfere with an award.
The Apex Court in the case of Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd., reported in AIR 2003 S.C. 2629 has laid down guidelines as indi¬cated in paragraphs 10 to 31 of the said judgment on which the Court can interfere with an award. No such ground having been taken in the application under Section 34 of the Act except violation of clause 25 of the agreement, I am of the view that since there is no violation of Clause 25 of the agreement and the Arbitrator has given reason while passing award in respect of each item of claim, the other grounds taken in the application under Section 34 of the Act do not come within the purview of the said provision. Learned counsel for the appellant has also not been able to convince the Court as to how the award is against public policy or opposed to public policy. In the case of Central Inland Water Transport Corporation Limited and another -v- Brojo Nath Ganguly and another, reported in (1986)3 SCC 156 , the Su¬preme Court has explained what is ‘public policy’ and what is “opposed to public policy”. Learned counsel for the appellant could not place anything from the record to show that the award passed by the learned Arbitrator comes within the purview of the term “opposed to public policy”. I am, therefore, of the view that there is no reason for this Court to interfere with the Award passed by the Arbitrator. Though the learned counsel for the parties cited several decisions of the Apex Court, in view of the law laid down by the Apex Court in the above two cases, there is no necessity to refer to all the decisions referred to by the learned counsel for the parties. 9. Last ground of challenge is that the rate of interest awarded by the Arbitrator. From the Award it appears that the learned Arbitrator has directed payment of interest at the rate of 15% per annum both pendente lite and future. The award was passed in the year 2000 and considering the rate of interest prevalent at that point of time, I am of the view that same is not unreasonable or excessive. On this count also I do not find any reason to interfere with the award. 10.
The award was passed in the year 2000 and considering the rate of interest prevalent at that point of time, I am of the view that same is not unreasonable or excessive. On this count also I do not find any reason to interfere with the award. 10. Having found no ground to interfere with the award as discussed earlier, the appeal considers no merit and is accord¬ingly dismissed. Appeal dismissed.