Research › Search › Judgment

J&K High Court · body

2017 DIGILAW 1031 (JK)

K. B. Construction Co. v. Union of India

2017-11-27

ALOK ARADHE

body2017
JUDGMENT : 1. This Arbitration Application preferred by the UOI-petitioner containing objection under Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act, has been filed against award dated 30.11.2002 passed by the sole arbitrator. 2. Facts giving rise to filing of this application briefly stated are that the respondent contractor was awarded the contract pertaining to additional soakage wells, septic tank, sewerage lines and manholes at Jourian. Accordingly, the contract agreement was executed between the parties on 04.01.1996 and date of commencement of the work was 10.01.1996 and the date of completion was on 09.06.1996. As per schedule appended to the contract Schedule B stores, such as cement, steel, etc and other material as per the agreement were required to be issued by the Department for Consumption of the Contract work. The Engineer Incharge handed over the site to the respondent for construction of six numbers of septic tanks and four numbers of soakage wells along with connected works of laying of sewerage lines and manholes. The Engineer Incharge forwarded the approval in principle duly signed by him to Garrison Engineer. The respondent contractor commenced the contract work as per the technical requirement. The approval in principle (AIP) was sent for approval of the Garrison Engineer in which it was clearly mentioned that the work was in progress. However, despite being aware of the execution of the work and submission of approval in principle, the Garrison Engineer did not issue any formal instructions for minor deviations in the contract, which as per the condition No.7 of the General Conditions of governing the Contract clearly provided of +/- 25 per cent. The contract got stuck up and its progress was slowed down because of non availability of the schedule B stores and there were additional works such as increased depth of septic tanks. 3. Ultimately part of Schedule B stores were issued in the year 1997 by the Garrison Engineer which were not still sufficient for completion of the contract work forcing the contractor claimant to buy the material from the market. Ultimately the work as per the approval in principle was completed in the year 1997 which was taken over by the Department and the same was handed over to the users. Ultimately the work as per the approval in principle was completed in the year 1997 which was taken over by the Department and the same was handed over to the users. The work as per the measurement recorded in the measurement book and the report of Board of Officers constituted by Garrison Engineer had been executed to the extent of 119 per cent, completion of the work was verified by the site visits by the arbitrator in presence of both the parties. However, the Garrison Engineer did not release the payment to the respondent contractor and rescinded the contract vide order dated 24.03.1998 for the reason of slow progress. It is the case of the respondent contractor that the action of rescinding of contract by the Garrison Engineer was absolutely illegal as the respondent contractor had fully executed the work. The dispute, therefore, arose between the parties and reference was made to the Sole Arbitrator by the Chief Engineer, Udhampur Zone vide letter dated 21.09.2001. 4. The arbitrator vide award dated 30.11.2002 awarded a sum of Rs.3,42,408.96 in favour of the respondent contractor. Being aggrieved, the appellant/petitioner has filed an application under Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act. 5. Learned counsel for the petitioner submitted that the respondent/contractor had carried out the contract work in deviation of the plan and in view of Clause 7 of the General Conditions of the Contract, if any deviation is made, written consent of the Garrison Engineer was required. In the instant case, it is further submitted that there was no written consent of the Garrison Engineer and therefore no amount could be awarded in favour of the respondent contractor. It is further submitted that interest has been awarded on the higher rate. On the other hand, learned senior counsel for the respondent contractor has submitted that there was acquiescence on the part of the Garrison Engineer and during the entire execution of the work, the files were sent to his office, however, he did not issue any instructions. It is further submitted that stores were given by the Department and no objection was taken to the work which was completed by the respondent contractor successfully. Learned Senior Counsel for the respondent contractor has invited the attention of this Court to paragraphs 34, 36, 41,42, 51.1.1.3 and 57.1.6 and paragraph 64.2 of the award. It is further submitted that stores were given by the Department and no objection was taken to the work which was completed by the respondent contractor successfully. Learned Senior Counsel for the respondent contractor has invited the attention of this Court to paragraphs 34, 36, 41,42, 51.1.1.3 and 57.1.6 and paragraph 64.2 of the award. It is further submitted that all the clauses of the contract in particular Clause 7, 38, 40, 41 and 43 have to be read together. It is also submitted that arbitrator has taken a possible view which cannot be substituted by this Court while dealing with petition under Section 34 of the Act. In support of his submissions, learned Senior Counsel has referred to the decisions of Supreme Court in the cases of M/s Sudershan Trading Co. v. Govt. Of Kerala, AIR 1989 SC 890 , MC Darmott International v. Burn Standard Co. Ltd, 2006 (11) SCC 181 , P. R. Shah v. B. H. H. Securities, 2012 (1) SCC 594 , Rashtriya Ispat Nigam v. Dewan Chand Ram Saran, 2012 (5) SCC 306 . 6. I have considered the submissions and have perused the record. The Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd, (2006) 11 SCC 181 while taking note of the decision rendered by it in Renusagar Power Co. Ltd. V. General Electric Co., 1994 Supp (1) SCC 644 wherein it was held that an arbitral award can be set aside if it is contrary to fundamental policy of Indian law; the interests of India; or justice or morality, held that public policy is a matter dependent upon the nature of transaction and the nature of statute. However, subsequently, in the case of ONGC Ltd. V. Saw Pipes Ltd., (2003) 5 SCC 705 , the Supreme Court added another ground for exercise of courts’ jurisdiction for setting aside the award, i.e., if it is patently arbitrary. In Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 it was held by the Supreme Court that if an award suffers from patent illegality, which goes to the root of the matter, the court can interfere with the award passed by the arbitrator. In Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 it was held by the Supreme Court that if an award suffers from patent illegality, which goes to the root of the matter, the court can interfere with the award passed by the arbitrator. In a recent decision, in the case of Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 , the Supreme Court after taking note of various previous judgments rendered by it with regard to scope of interference with the arbitral award held that none of the grounds contained in Section 34(2)(a) of the Act deals with the merits of the decision rendered by an arbitrator. It is only when the award is in conflict with the public policy of India as prescribed in Section 34(2)(b)(ii) of the Act then the merits of an arbitral award are to be looked into under certain specified circumstances. It was further held that the Court would interfere with an award passed by an arbitrator if it is in violation of statute, interest of India, justice or morality, patent illegality, contravention of the Act or terms of the contract. It was also held that the Court hearing an appeal does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence, to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind, would not be held to be invalid on this score. 7. In the backdrop of the aforesaid well settled legal position, facts of the case may be examined. In the instant case, from perusal of the Clause 7, it is evident that the deviation in the contract work shall not exceed +/- 25 per cent of the value of the contract as a whole or half the deviation limit which is less except in the case of prime cost or provisional items. In the instant case, from perusal of the Clause 7, it is evident that the deviation in the contract work shall not exceed +/- 25 per cent of the value of the contract as a whole or half the deviation limit which is less except in the case of prime cost or provisional items. In the instant case, the contract was executed over all 119 per cent of the contract work which is less than 25 per cent of the deviation, as provided under restrictions contained in Clause 7(c) of the General Conditions of the Contract and, therefore, the same was within permissible limits. The contention raised on behalf of the respondents that the petitioner has violated Clause 7 of the contract, therefore, does not deserve acceptance. It is also pertinent to mention here that the Garrison Engineer did not raise any objection regarding minor deviations during the currency of the contract and never issued any order of rejection, and approval in principle sent by Engineer Incharge and rather on the contrary having issued Schedule B stores and having accepted the work done, he has, in fact, in substance acquiesced in the deviation as suggested in the approval in principle and executed by the claimant contractor. It is pertinent to mention here that once work is executed by the claimant and accepted by the Department, claimant contractor cannot be denied his lawful right to claim the cost of construction. The conduct of the Garrison Engineer in the fact situation of the case amounts to acquiescence. It is well settled legal proposition that interpretation of the contract is in the domain of the arbitrator. A joint reading of Clause 7, 38, 40, 41, 43 of the General Conditions as well as conduct of the parties clearly shows that the petitioner had acquiesced with the contract work carried out by the respondent contractor which was well within the restriction prescribed under Clause 7 of the General Conditions of the Contract. From close scrutiny of the award, it is evident that the arbitrator has taken note of the material produced before him and has assigned reasons for allowing the claim preferred by the respondent contractor, therefore, contention of the petitioner that claim of the respondent contractor could not have been awarded by the arbitrator, cannot be accepted. From close scrutiny of the award, it is evident that the arbitrator has taken note of the material produced before him and has assigned reasons for allowing the claim preferred by the respondent contractor, therefore, contention of the petitioner that claim of the respondent contractor could not have been awarded by the arbitrator, cannot be accepted. The Supreme Court in the case of M/S Sree Kamatchi Amman Constructions v/s Divisional Railway Manager (Works), Palghat and other, AIR 2010 SC 3337 has held that under Section 31(7) of the Act, the Arbitrator is bound by the terms of the contract in so far as the award of interest from the date of cause of action to the date of Award is concerned. Therefore, where the parties had agreed that no interest was payable, the Arbitral Tribunal cannot award interest between the dates when the cause of action arose to the date of Award. Section 31(7) reads as under: “31(7) Form and Contents of arbitral award.-(7)(a) Unless otherwise agreed by the parties, where and insofar as in arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.” 8. Thus, it is evident that the Arbitrator cannot award interest in respect of antelite and pendentelite period, unless agreed by the parties. Thus, in the instant case, the Arbitrator has awarded the interest in terms of Section 31(7) of the Act with which no fault can be found. 9. The petitioner has failed to make out any ground for interference with the award passed by the Arbitrator. The objections under Section 34 of the Act have no merit in the eye of law. In the result, Arbitration Application fails and is hereby dismissed. 10. The award made by the Arbitrator is accepted and is made the Rule of the Court. Disposed of.