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2008 DIGILAW 926 (BOM)

State of Goa v. Rani Construction Pvt. Ltd.

2008-07-02

R.C.CHAVAN, S.A.BOBDE

body2008
JUDGMENT R.C. Chavan, J. This State takes exception to the judgment of Learned Civil Judge Senior Division, Bicholim in Civil Misc. Application No. 113/92, whereby the learned Judge rejected objections raised by the appellants to an award made on 7.5.1992 and proceeded to make the award rule of the Court. 2. The appellant had issued notice inviting tenders for the work of construction of Left Bank Main Canal of Tillari Irrigation Project from Ch. 4.012 to 7.500 kms. in Bicholim Taluka. The respondent's tender was accepted by a work order dated 17.2.1988 for a value of Rs. 80,43,170.43. The respondent was to commence work within 15 days. An agreement as signed between the parties which contained an arbitration clause. A Schedule of the work to be carried out had been tendered by the respondent on 28.3.1988. According to it the earth work was to commence from March, 1988 and the work of lining including sleepers was to commence from April, 1989. The work was to be concluded by 29th August, 1990 which was extended upto 31.5.1991. However, in between the parties exchanged notices on 26.12.1990 and the appellant terminated the contract w.e.f. 14.2.1991 stopping the work being executed by the respondent contractor. 3. On 10.12.1990, by a notice the respondent invoked arbitration clause requesting the Chief Engineer of the appellant to appoint an Arbitrator. Shri M. Raghuchander was appointed arbitrator on 14.5.1991 by the appellant's Chief Engineer. Respondent filed a claim statement a before the Arbitrator claiming a sum of Rs. 26,06,731.60 towards extra expenditure, Rs. 4,54,500/- towards idle charges for men and machinery, Rs. 8,87,793/- on account of loss of overheads, Rs. 5,91,864/- on account of loss of profits, Rs. 10,00,000/- for illegal termination of contract, and release of security deposit with interest at the rate of 18% per annum and pendente lite, with cost of arbitration of Rs. 50,000/-. 4. The appellant also filed a counter statement and made a counter claim of Rs. 23,69,695.30. 5. With the help of the parties the Arbitrator identified as many as 16 issues and after considering the material produced before him and an award. A summary of the award made by the Arbitrator is as under : Sl. No. In favour of Claimants Amount Claimed Amount Awarded 1. Extra cost for excavation due to Rs. 26,06,731.60 Rs. 10,32,582.5 restrictions imposed on the claimants 2. Idle charges for men and machinery Rs. A summary of the award made by the Arbitrator is as under : Sl. No. In favour of Claimants Amount Claimed Amount Awarded 1. Extra cost for excavation due to Rs. 26,06,731.60 Rs. 10,32,582.5 restrictions imposed on the claimants 2. Idle charges for men and machinery Rs. 4,54,500.00 Nil 3. Loss of overheads Rs. 8,87,793.00 Rs. 5,94,037.53 4. Loss of Profits Rs. 5,91,864.00 Rs. 2,99,762.00 5. Damages on account of loss of Rs. 10,00,000.00 Nil reputation due to illegal, termination of contract. 6. Interest pendente lite on items 1, 3, 4 Rs. @ 18% p.m. @ 18% p.m. and from date or reference to date of Award and future interest from the date of Award to date of decree or payment. 7. Cost of Arbitration Rs. 50,000.00 Rs. 5,000 In favour of respondents 1. Counter claim of Respondent Rs. 23,69,695.30 Nil 2. Income Tax Rs. 676.00 Rs. 676.00 3. Penalty Rs. 8,400.00 Nil The Arbitrator also granted interest at the rate of 18% per annum. 6. This award challenged by the appellant by raising objections before the Civil Judge, Senior Division, Bicholim. It was alleged that the Arbitrator accepted whatever was said by the claimant. Through he had framed issues, he did not render findings on each of these issues. The approach of the Arbitrator was to favour the claimant. The award was unjust and therefore was non-est in view of provisions of Section 30 of Arbitration Act, 1940 and was liable to be set aside on the ground of misconduct committed by the Arbitrator. 7. The learned Civil Judge Senior Divisions considered the reply filed on behalf of the claimants whereby the claimants had contended that an award could be set aside only on the grounds enumerated under Section 30 of Arbitration Act, 1940, and since the grounds enumerated by the appellant did not fall within those enumerated in Section 30, they prayed for dismissal of the objections raised. After hearing the parties, the learned Civil Judge, Senior Division held that the objections to the award could be considered only under Sections 30 and 33 and since the grounds made out did not fall within the scope limited by these provisions, the objections were liable to be rejected. 8. Aggrieved thereby the appellant is before us. After hearing the parties, the learned Civil Judge, Senior Division held that the objections to the award could be considered only under Sections 30 and 33 and since the grounds made out did not fall within the scope limited by these provisions, the objections were liable to be rejected. 8. Aggrieved thereby the appellant is before us. We have heard the learned Government Advocate Shri S.R. Rivonkar for the appellant, and did not consider it necessary to hear Advocate Shri S.G. Dessai, Senior Counsel for the respondent. According to Advocate Rivonkar for the appellant the award was liable to be set aside on the ground of legal misconduct committed by the Arbitrator in not considering the material tendered on behalf of the appellant. For this purpose he placed reliance on a judgment of Supreme Court in K.P. Poulose v. State of Kerala reported in AIR 1975 SC 1259 . It is not necessary to go through the facts of the said case. The learned counsel for the appellant relies on the following observations of the Supreme Court : "It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decisions." (emphasis supplied) The learned counsel submitted that the Arbitrator has committed legal misconduct by arriving at a decision by ignoring very material documents which threw abundant light on the controversy to help a just and fair decision. 9. The learned counsel for appellants submitted that the Arbitrator has wrongly held that appellant had not supplied designs to the respondent, justifying the claim made by the respondent. This aspect has been dealt with the Arbitrator in page 9 of his award. The claimant had alleged that the appellant has not provided working drawings in respect of concrete sleepers, till one year after signing of the agreement. The appellant argued that the drawings appended to the tender document were construction drawings. The Arbitrator found that the drawings for concrete sleepers were not appended to the tender. He also found whatever drawings were appended to tender did not bear the signature of the Engineer incharge or any other approving authority, though they were signed by both the parties at the time of entering into agreement. The Arbitrator found that the drawings for concrete sleepers were not appended to the tender. He also found whatever drawings were appended to tender did not bear the signature of the Engineer incharge or any other approving authority, though they were signed by both the parties at the time of entering into agreement. 10. In this connection the learned counsel for the appellant submitted that in view of time table of the work supplied by the contractor himself, the work of laying sleepers was to commence in April, 89. He submitted that by letter dated 22.1.1990, the Executive Engineer enclosed detailed drawings in response to a request by contractor's a letter dated 6.1.1990. 11. It is not the case of the appellant that drawings for sleepers had been supplied as claimed by them. On the other hand the appellant seek refuge in the time table tendered by the Contractor, claiming that drawings were not needed as the section of canal stretch was not ready for lining. Appellant also fell back on the drawings which had been supplied at the time of entering into an agreement. The Arbitrator has observed that the drawings duly signed by the b Engineer incharge had not been provided. This grievance of the Contractor was accepted by the Arbitrator because appellant could not show that the drawings duly signed by the Engineer incharge had in deed been provided. 12. While considering the question of misconduct of an Arbitrator under Section 30 of the Arbitration Act, 1940 it would not be permissible for us to go into correctness of the award made by the Arbitrator or the conclusions drawn by him. For proving misconduct it would have to be shown by the appellant that the Arbitrator did not take into consideration material documents as held in the case of Poulose, referred to above. Here it appears that the Arbitrator had duly considered the material placed before him. 13. The next grievance is about not handing over the entire site because of work regarding some CCs. A 'CD' is a sort of cross drainage built over or below canals, either for people to pass or for water courses to be conveyed. There is no dispute that the work of building CDs had been given to another contractor with whom the claimant was supposed to co-operate. A 'CD' is a sort of cross drainage built over or below canals, either for people to pass or for water courses to be conveyed. There is no dispute that the work of building CDs had been given to another contractor with whom the claimant was supposed to co-operate. The contractor had informed the appellant by letter dated 18.1.1989 that non-completion of work of CDs, culverts etc. was causing hindrance in completion of work. Letter dated 15.7.1989 was written to point out again obstruction caused by incomplete CD work as also fact of not handing over complete site. Protest by villagers was also brought to the notice of Executive engineer by letter 19.2.1990. On 2.3.1990 the Executive Engineer himself acknowledged existence of the problem and even indicated that state may have to abandon portion of canal for the time being. He asked contractor to shift elsewhere. These aspects have been duly considered by the Arbitrator on pages 8 and 9 of his award. Whether the CD work had created a partial hindrance or a total hindrance is a matter of degree which had been considered by the Arbitrator. But it cannot be said that the Arbitrator had not taken into consideration this aspect of the matter, in order to contend that the Arbitrator misconducted himself. In fact, by letter dated 2.3.1990, the appellant had admitted existence of problems which needed stoppage of work at a site. After so saying by letter dated 2.3.1990 it is strange that the appellant wants to contend that the Arbitrator did not consider all aspects of the ground of delay due to not handing over the entire site. 14. It is not necessary to independently consider the question of legality of termination of contract since it depended on the above two grounds, which justified delay. 15. The learned Government Advocate for the appellant submitted that the Arbitrator had made an award in excess of the amount claimed by notice dated 10.12.1990. It may be seen that against Rs. 15,14,623.00 claimed in notice for extra work, a sum of Rs. 10,32,582.52 has been awarded. Nothing was awarded towards revision of rates. Against claim of Rs. 6,47,872 towards loss of overheads, Rs. 5,94,037.53 have been awarded Rs. 4,31,915 were claimed towards loss of profit against which Rs. 2,99,762 have been awarded. It may be seen that against Rs. 15,14,623.00 claimed in notice for extra work, a sum of Rs. 10,32,582.52 has been awarded. Nothing was awarded towards revision of rates. Against claim of Rs. 6,47,872 towards loss of overheads, Rs. 5,94,037.53 have been awarded Rs. 4,31,915 were claimed towards loss of profit against which Rs. 2,99,762 have been awarded. It cannot be therefore said that the Arbitrator had mis-conducted by awarding amounts in excess of those claimed. 16. It was lastly submitted that the Arbitrator could not have awarded interest at 18% per annum since the work allotted to the respondent/ claimant pertained to an irrigation project executed c from public funds and was not a commercial project. If such an arguments were to be accepted the State would be immune from paying interest on most of the works executed by the contractors for the State, since most of the projects are not profit making commercial ventures of the Government. This contention has to be rejected, since the object for which the work was undertaken is totally irrelevant for determining the nature of transaction. As far as the contractor is concerned it was purely commercial transaction of executing a work in response to a contract executed, for which he has to borrow funds from the market at such rates at which the funds may be available. 17. In this view of the matter we find that the learned Civil Judge Senior Davison rightly rejected the objections raised by the appellant. The order of the learned Civil Judge does not call for any interference by this Court. The appeal is therefore dismissed. Appeal dismissed.