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2013 DIGILAW 862 (HP)

STATE OF H. P. v. GIAN PRAKASH

2013-10-03

A.M.KHANWILKAR, V.K.SHARMA

body2013
JUDGEMENT A.M.KHANWILKAR, J. 1. HEARD counsel for the parties. 2. THIS appeal takes exception to the judgment of the learned Single Judge dated 15th October, 2009, dismissing the Arbitration Case No.15 of 2005, preferred by the appellants, before us. The appellants had challenged the award, passed by the Arbitrator, limited to the extent of relief granted to the respondent -contractor, inspite of additional Condition No.6 in the contract. The additional Condition No.6 of the contract reads thus:- "No payment shall be made to the contractor for any damage caused by rain, snowfall floods or any other natural causes whatsoever during the execution of the work. The damage to work will be made good by the contractor at his own cost and no claim on the account shall be entertained." The appellants had filed counter -claim for costs of the material, supplied to the contractor, being sum of Rs.3,59,308/ -. It is undisputed position that the material, so supplied by the appellants, was washed away due to flash floods. The cost, towards the said material was, therefore, claimed from the respondent -contractor by way of counter claim. That claim of the appellants was rejected by the Arbitrator. The Arbitrator also directed the appellants to refund the amount of Rs.45,691/ -, deposited by the respondent towards security charges which were adjusted by the appellants while computing the claim amount. In addition, the Arbitrator granted claim 1(b) to the respondent towards loss on account of washing away of material, stacked at the work site, amounting to Rs.1,50,000/ -. The Arbitrator also awarded amount of Rs.31,540/ - towards loss of profit against the said claim of the respondent. In addition, the Arbitrator awarded 12% interest on security amount deducted and adjusted by the appellants being @ 12% per annum on Rs.45,691/ - withheld by the appellants from 8th December, 1998 to actual date of payment. The Arbitrator also granted claim No.2 in the sum of Rs.1,12,350/ - to the respondent towards loss sustained in flash floods by the respondent. 3. THE appellants have challenged the above -said award and not the other claim items considered and granted by the Arbitrator. 4. The Arbitrator also granted claim No.2 in the sum of Rs.1,12,350/ - to the respondent towards loss sustained in flash floods by the respondent. 3. THE appellants have challenged the above -said award and not the other claim items considered and granted by the Arbitrator. 4. WHILE considering the objection (counter claim) of the appellants, the Arbitrator observed thus: - "In the instant case since the respondent has not alleged misappropriation and mis -utilization of materials, the unutilized material therefore remained stacked at the site for onward use on remaining work. This material unfortunately was washed away by the flood caused by cloud burst. Cloud burst is very rare phenomena and cannot be foreseen. The claimant who was working as agent of the respondent for executing the work, cannot be made liable to pay for the material lost in unprecedented floods especially when the material was stacked at a safe place, where the material of the respondent was also stored, which also got washed away. The loss is due to natural calamity. The additional condition No.6 of the agreement is not attracted as the damage to the material was due to flash flood caused by cloud burst which is very rare phenomena and an act of God. The claimant cannot be blamed for natural cause and unforeseen reason for damage. I, therefore, hold that recovery of the cost is not justified and, therefore, the loss be got written off. The security of the claimant withheld be also released to him." (Emphasis supplied) The reason, recorded by the Arbitrator, as can be discerned from the extracted portion and also at Page -100 and 101, which reads thus: - "After hearing / going through the arguments of both the parties, I am of the view that the loss could have been avoided had the claimant been allowed to work continuously after allowing the extension in completion period. Since the work was stopped in 12/97 and allowed to be restarted only in 6/99, caused delay in procurement of material and its onward use. On account of this delay, the material remained unutilized and in the meantime due to cloud burst unprecedented flood occurred, which washed away the material. There is no fault of the claimant, it all happened by an act of God. Since cloud burst is a phenomena which cannot be foreseen as such additional clause No.6 of Agreement is not attracted. On account of this delay, the material remained unutilized and in the meantime due to cloud burst unprecedented flood occurred, which washed away the material. There is no fault of the claimant, it all happened by an act of God. Since cloud burst is a phenomena which cannot be foreseen as such additional clause No.6 of Agreement is not attracted. As the claimant is not responsible for the loss caused, therefore, the claimant is entitled to be compensated." (Emphasis supplied) We are conscious of the fact that the scope of interference by the Court with the award, passed by the Arbitrator, is circumscribed by Section 34 of the Act. The Apex Court in the case of Oil and Natural Gas Corporation Ltd. versus Saw Pipes Ltd.1, which is pressed into service by the counsel for the appellants, has held that the expression "Public Policy" must be widely construed, inter -alia, to include patent illegality committed by the Arbitrator and of such nature which would go to the root of the matter. Keeping in mind the said observation of the Apex Court in Paragraph -31 of the reported decision, the objection, raised by the appellants, will have to be considered. It is obvious that the Arbitrator was convinced that the flash flood, caused by cloud burst, is an act of God. Notwithstanding that finding, he proceeded to allow the claim of the respondent towards the loss of material as well as damage to work caused due to flash flood. 5. ON plain language of additional Condition No.6, it is obvious that respondent -contractor was not entitled to receive any payment for any damage caused by rain, snowfall and floods or any other natural causes whatsoever during the execution of the work. It is not in dispute that execution of the work was still in progress when the flash flood was caused by cloud burst. The first part of additional Condition No.6 leaves no manner of doubt that it covers all situations within the meaning of act of God. The Arbitrator, having found that the flash flood, caused by cloud burst, was an act of God, by no stretch of imagination, could have still answered the claim in favour of respondent -contractor and against the appellants. It is a jurisdictional error. The Arbitrator, having found that the flash flood, caused by cloud burst, was an act of God, by no stretch of imagination, could have still answered the claim in favour of respondent -contractor and against the appellants. It is a jurisdictional error. Further, the reasoning as well as the conclusion of the Arbitrator, with regard to the objectionable claim, is, to say the least, perverse and patently illegal. This patent illegality goes to the root of the matter. The Arbitrator could have assumed jurisdiction to award the claim in favour of Contractor / Respondent only if had interpreted additional Condition No.6 to mean that it excludes the situation of damage or loss to the material due to flash flood as a result of cloud burst. No such opinion is recorded by the Arbitrator. 6. WE find that the Arbitrator has jumped to the conclusion without making any effort to analyze the additional Condition No.6. In any case, on the plain language of additional Condition No.6, no other view is possible than the one that loss and damage caused to the material supplied by the appellants to the contractor due to flash flood on account of cloud burst, the contractor was not entitled to receive any payment therefor. The second part of additional Condition No.6 deals with the damage to work caused in the similar manner due to act of God and in that case it will be the responsibility and obligation of the contractor to make good the same at his own cost and cannot claim any amount in that behalf from the appellants -State. 7. THE learned Single Judge, however, glossed over this crucial aspect even though referred to the decision of the Apex Court, relied upon by the appellants, before us. The learned Single Judge proceeded to observe that the decision of the Arbitrator deals with the question of fact and which cannot be interfered with by the Court. The learned Single Judge has committed not only error apparent on the face of the record but also concluded contrary to the dictum of the Apex Court, referred to above. As a result, this appeal ought to succeed and for which reason the award of the Arbitrator is partly set aside. 8. AFTER setting aside the award in part, the same would now read thus: - Claim No.1(a): Claim of the claimant on account of unmeasured work is rejected. As a result, this appeal ought to succeed and for which reason the award of the Arbitrator is partly set aside. 8. AFTER setting aside the award in part, the same would now read thus: - Claim No.1(a): Claim of the claimant on account of unmeasured work is rejected. Thus nothing is payable to him on this account. Claim No.1(b): Loss on account of washing away of material stacked at work site. This claim of the claimant is disallowed. Claim No.1(c): Loss on account of idle labour and machinery. An amount of Rs.1,50,300/ - is awarded against this claim. Claim No.1(d) Loss of profit, an amount of Rs.31,540/ -. This claim of the claimant is disallowed. Claim No.1(e) Claim of interest, 12% interest on security amount of Rs.45,691/= withheld from 8.12.1998 to actual date of payment. This claim of the claimant is disallowed. Claim No.2 Loss sustained in Flash Floods, a sum of Rs.1,12,350/ -. This claim of the claimant is disallowed. Claim No.3 Loss of profit. Nothing has been awarded against this item of claim. Claim No.4 Damage for prolongation of work. Compensation of Rs.1,83,052/ - has been allowed against this item of claim. Claim No.5 Interest past, pedente lite and future. Claim has been disallowed. The award of all the claims totaling to Rs.6,72,933/ - is announced. Respondent is directed to pay this amount of Rs.6,72,933/ - within three months from the date of award failing which respondent shall pay interest @12% per annum till realization. Appeal disposed of accordingly.