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2020 DIGILAW 27 (CAL)

Union Of India v. Tapan Kumar Roy

2020-01-07

MOUSHUMI BHATTACHARYA

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JUDGMENT Moushumi Bhattacharya, J. - The present challenge is to an Award dated 25th February, 2010 passed by a learned Sole Arbitrator by which eight out of ten claims of the respondent (claimant before the Arbitrator) were allowed and amounts were awarded to the respondent under each of the claims. 2. The petitioner Railways entered into a contract with the respondent on 30th September, 2002 for undertaking several civil works. The work was awarded at a total cost of Rs.27,17,123.71/-. The original date of completion of the work as per the letter of acceptance (issued by the petitioners to the respondent on 2nd August, 2002) was 1st February, 2003. It is the petitioner's case that several extensions had to be given to the respondent for completing the work under the General Conditions of Contract, 2001 which formed part and parcel of the agreement executed between the parties. It is also the petitioner's case that the respondent was paid until the eighth on-account bill of Rs.19,64,769.40/- and only the ninth on-account of bill of Rs. 4,22,259/- remained outstanding. The respondent referred the dispute to the Deputy Chief Mechanical Engineer (Safety), Head Quarters, Eastern Railway who was appointed by the General Manager, Eastern Railway as the Sole Arbitrator on 14th July, 2009. According to the petitioner, the Measurement Book as well as the Site Register were produced before the learned Sole Arbitrator and were treated as part of the records in the proceedings. Of the ten claims, eight were awarded in favour of the respondent and the petitioners have paid the amounts awarded in respect of claim nos.1, 2 and 3 to the respondent. Therefore, the claims which are presently before court are 6, 7, 8, 9 and 10. 3. Learned counsel for the petitioner submits that Claim no.6, which was on account of labour work of Permanent Way/Contract, Barasat could not have been awarded to the respondent since there was no record of the alleged nonpayment of labour works in the Measurement Book and the claim made against such work was also not in terms of the Schedule of the agreement between the parties. Claim no.7 against which an amount of Rs.43,717/- was awarded was claimed on account of item pairing and butting of panel rail of 260m. Claim no.7 against which an amount of Rs.43,717/- was awarded was claimed on account of item pairing and butting of panel rail of 260m. Counsel contends that the final record of the work done by the respondent/contract would always be found in the Measurement Book, which was prepared in the presence of the parties and in the absence of which the Arbitrator could not have awarded the amount claimed. With regard to Claim no.8 in connection with which an amount of Rs.87,433/- claimed on account of inserting panel rail of 39 to 130m was awarded is liable to be set aside. There is no record of the said work in the Measurement Book. Counsel also opposes the Award of interest at 8% per annum on the total sum of Rs.8,31,601/- as being contrary to the provisions of The Arbitration and Conciliation Act, 1996. Counsel submits that the Arbitrator could not have granted the interest for pre-reference period as well as interest pendente lite. Counsel relies on Clauses 16(3) and 64(5) of the General Conditions of Contract, 2001 which prohibits payment of interest for any period till the date of making of the Award. Claim no.10 under which the respondent was awarded Rs.50,000/- is assailed on the grounds of breach of principles of natural justice. Learned counsel for the petitioner has relied on M/S. Rastriya Chemicals & Fertilizers Ltd. Vs. M/S. Chowgule Brothers, (2010) AIR SC 3543 on the point of interest. Counsel further cites a decision of the Supreme Court in Sree Kamatchi Amman Constructions Vs. Divisional Railway Manager (Works), Palghat, (2010) 8 SCC 767 as well of the Division Bench of this court passed in A.P.423 of 2009 (Union of India Vs. A.K. Mukherjee) which held that interest pendent lite cannot be granted if the agreement between the parties prohibits the same. 4. Learned counsel for the respondent seeks to sustain the Award on the ground of the many lapses and defaults on the part of the petitioner which prevented the respondent from completing the work within the time agreed upon between the parties. Counsel submits that the Award is a reasoned Award and that the Arbitrator has gone into the individual claims and has provided clear reasons for allowing or disallowing the claims. Counsel submits that the Award is a reasoned Award and that the Arbitrator has gone into the individual claims and has provided clear reasons for allowing or disallowing the claims. Counsel disputes the position taken on behalf of the petitioner that a court under Section 34 of the Arbitration and Conciliation Act, 1996 can go into the merits of the matter and re-appraise the factual evidence which the Arbitrator had examined. 5. Before considering whether the Award can be sustained, the reasons given by the Arbitrator are mentioned in brief. Claim no.1 was allowed on the ground that the petitioner had admitted in its counter-statement that the ninth bill was due and payable to the respondent. Claim no.2 was allowed since the earnest money had been withheld on the ground of the Final Bill not being paid and for the reason of the admission on the part of the petitioner in its counter-statement that the earnest money will be released under the terms of the agreement. Claim no.3 was allowed since, according to the Arbitrator, the petitioner admitted in its counter-statement that the Security Deposit will be released under the terms of the agreement. The Arbitrator found that the Security Deposit was not released by reason of the non-payment of the Final Bill. Claim no.6 was allowed since the Letter of Acceptance was used on 2nd August, 2002 for certain works in one of the sections for the construction of the road and that from records it was evident that the requisite materials for the construction of that particular stretch of the road was issued only on 6th/7th April, 2003. The Arbitrator also found that the records revealed that materials were issued vide Road Challans of October 2002 to the respondent. The Arbitrator found that payment was made to the labourers for the work done amounting to almost to Rs.2 lakhs. Two letters of April and May 2005 from the respondent have been referred to in this context from which it has been concluded that since the materials were issued to the respondent prior to inspection and hence the claim raised for extra labour work should be awarded to the respondent. Claim no.7 was allowed since the Arbitrator found from the Site Register that the respondent was issued more than 130 metres instead of the stated amount (in metres) as per the schedule of works for pairing and butting. Claim no.7 was allowed since the Arbitrator found from the Site Register that the respondent was issued more than 130 metres instead of the stated amount (in metres) as per the schedule of works for pairing and butting. The Arbitrator was of the view that since the respondent has done work more than 130 metres (up to 260 metres rail), the difference of Rs.43,717/- should be awarded to the respondent. Claim no.8 was allowed for the reason that as per the Site Register, the respondent had done inserting work of 52 kgs panel rail for up to 260 metres and had prepared a Final Bill for 130 metres length. However, since the respondent had performed the inserting work for more than 130 metres, the difference of Rs.87,433.58/- should be awarded to the respondent. Claim no.9 for interest at 18% per annum from the date of last extension given to the respondent until realization of the sum was allowed at 8% per annum for the period of 27th October, 2006 to 24th February, 2010 on the ground that 8% is in line with prevailing bank rates and that each of the claims allowed should be coupled with payment of interest since the claims were based on delayed payments which the respondent was entitled to. Claim no.10 (cost of arbitration) was awarded but at the reduced rate of Rs.50,000/- since the Arbitrator found that the petitioner had dragged the respondent to the arbitration. 6. Upon considering the reasons given by the learned Arbitrator for awarding the amounts to the respondent, this court finds that the Arbitrator has buttressed each of such amounts with reasons with reference to specific documents. The amounts awarded under the specific claims have either referred to the specific statements of the petitioner in its counter-statement or the Site Register or the Road Challans or the bills submitted by the respondent for the work done under the arrears head. The Arbitrator has also taken pains to refer to specific letters exchanged between the parties for bolstering the reasons given for allowing the claim. It should be mentioned that reasons have also been given for disallowing claim nos.4 and 5 and reducing claim no.10. The Arbitrator has also taken pains to refer to specific letters exchanged between the parties for bolstering the reasons given for allowing the claim. It should be mentioned that reasons have also been given for disallowing claim nos.4 and 5 and reducing claim no.10. This court finds no basis to hold that the amounts awarded were either bereft of reasons altogether or suffers from inadequacy of reasons; refer to the recent decision of the Supreme Court in Dyna Technologies Pvt. Ltd. Vs. Crompton Greaves Ltd., where the Supreme Court held that the reasons given must be proper, intelligible and adequate. The Award cannot be said to be an unintelligible Award as noticed by the Supreme Court in that decision. As has been reiterated in a number of decisions, (refer Ssangyong Engineering and Construction Co. Ltd. vs. National Highways Authority of India,2019 SCCOnlineSC 677 and Steel Authority of India Vs. Gupta Brothers, (2009) 10 SCC 63 ) the arbitrator is the master of facts and once the facts have been fine-combed, a Court in a setting-aside jurisdiction will scarce delve into a combing operation all over again, unless the conclusions are found liable to be brushed aside on account of perversity. The proviso to Section 34(2-A) gives statutory force to the restraint to be exercised by a court in a Section 34 regime. With regard to the rate of interest, which has been contested by the petitioner relying on certain clauses of the General Conditions of Contract, it is found that clause 16(3) of the Standard General Conditions of Contract for use in connection with Engineering works provides for the following; 16(3). No interest will be payable upon Earnest Money and Security Deposit or amounts payable to the contractor under the contract, but Government Securities deposited in terms of Sub-Clause 1 of this clause will be payable with interest accrued thereon. Clause 64(5) provides that where the arbitral award is for the payment of money, no interest shall be payable on whole or in part of the money for any period till the date on which the Award is made. 7. On perusing the above clauses, it appears that both the clauses prohibit payment of interest on the Earnest Money and Security Deposit as also for prereference period and interest pendent lite where the Arbitral Award is for the payment of money. 7. On perusing the above clauses, it appears that both the clauses prohibit payment of interest on the Earnest Money and Security Deposit as also for prereference period and interest pendent lite where the Arbitral Award is for the payment of money. Section 31(7)(a) of the 1996 Act provides that where the arbitral award is for the payment of money, unless the parties agree, the Arbitral Tribunal may include interest on the amount awarded at a reasonable rate 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. Reasonably construed, the section gives primacy to the terms agreed between the parties with regard to payment of interest on the sums awarded. Clauses 16(3) and 64(5), which form part of the agreement executed between the parties hence, must be seen as containing an embargo against payment of interest not only on Earnest Money and Security Deposit but also for the pre-reference and the period during which the arbitration continued. With particular regard to the condition precedent to section 31(7)(a), this court is inclined to disagree with that part of the Award which has allowed interest at 8% from 27th October, 2006 to 24th February, 2010, namely, from the last extension given to the respondent to one day before the Award was signed and delivered. Likewise, the interest awarded on claim no.3, namely, for Security Deposit as would be evident from the discussion in claim no.9 is also set aside for the same reason. Therefore, the amount awarded in claim no.9 to the extent of the interest at 8% calculated on claim no.3 and for all claims from the period of 27th October, 2006 to 24th February, 2010 are set aside. 8. This court is also unable to agree with the reason provided by the Arbitrator for awarding cost of arbitration. If the respondent had approached the arbitral forum, it cannot be said that the petitioner "dragged" (in the words of the Arbitrator) the respondent to arbitration by reason of which the respondent would be entitled to costs for the same. Hence, the amount awarded under claim no.10 is also set aside. 9. Since decisions have been cited on behalf of the petitioner, reference should be made to ascertain whether these decisions are relevant. Hence, the amount awarded under claim no.10 is also set aside. 9. Since decisions have been cited on behalf of the petitioner, reference should be made to ascertain whether these decisions are relevant. Chowgule Brothers laid emphasis on an Arbitrator having the jurisdiction to make an Award against the specific terms of the contract. In that decision, Clause 2.03 of the contract was found to contain specific obligations imposed on the contractor which the Supreme Court found to be the agreed term which the courts should be guided by. In this case, the petitioner has challenged the Award on merits specifically on the inability on the part of the respondent to complete the work within the time agreed upon and not on any clause in the contract which should have been taken into account by the Arbitrator for refraining from awarding certain sums to the respondent. In both Kamatchi and A.K. Mukherjee, the Supreme Court and the Division Bench of this Court considered the mandate of Section 31(7) of the 1996 Act and on the emphasis placed on the words "unless otherwise agreed by the parties" in the said Section. In Kamatchi, the Supreme Court upheld the Award on the basis of the discretion exercised by the Arbitrator in refusing to award interest pendent lite and held that the Award could not be interfered with. In A.K. Mukherjee, the Division bench of this court drew a distinction between the 1940 Act and the mandate under Section 31(7) of the 1996 Act and held that an Arbitrator exercising authority under the new Act does not have power to grant pendent lite interest if the agreement between the parties prohibits the same. The Division bench accordingly set aside the award of pendent lite interest. 10. The decision of this court with regard to award of interest under claim no.9 is in consonance with the decisions discussed above. 11. For these reasons, the impugned Award dated 25th February, 2010 is set aside only to the extent as discussed above, namely, the amounts awarded under claim no.9 and claim no.10. 12. A.P.293 of 2010 is disposed on the above basis. Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the parties upon compliance of all requisite formalities.