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2024 DIGILAW 1114 (RAJ)

State of Rajasthan v. Bharti Construction Company

2024-08-21

PANKAJ BHANDARI, PRAVEER BHATNAGAR

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JUDGMENT : PANKAJ BHANDARI, J. 1. Appellant-State has preferred the instant appeal aggrieved by the judgment dated 16.11.2019 passed by the Commercial Court, Kota, whereby the application filed by the appellant-State under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act of 1996’) was rejected and the award dated 09.11.2015 was confirmed. 2. Succinctly stated the facts of the case are that the Superintending Engineer, Irrigation Circle, Jhalawar invited tenders on 19.11.1996 for the work of construction of Earthen Dam from R.D. (-) 60m to R.D. 1290m of Chauli Irrigation Project, Pirwa, District Jhalawar. The respondent-claimant submitted the tender, which was found lowest and accepted by the competent authority of the Government and the same was communicated to the claimant. An Agreement was executed between the parties on 28.03.1997. The claimant submitted their claims before the learned Arbitrator amounting to Rs.14,24,721/- towards enhanced rate for extra work beyond 50% in the work of head outlet sluice; Rs.52,24,900/- towards extra lead of sand and filter material; Rs.181.18 lacs on account of infrastructure overhead expenses and loss of profit being retained longer on the contract; Rs.41,65,750/- on account of idling of men and machineries and; Rs.45,38,686/- towards the increase in the rate of minimum wages. 3. The defence of the appellant-State was that the contractor before submitting the tender must have verified all the facts about the site i.e. source of material, labour, borrow area, quarry sites and other necessary information useful for the execution of the work. The contractor is not entitled for payment of extra lead as per Clause-63 of the Agreement. The appellant-State also stated in their reply that delay in executing the work within the stipulated period is due to failure of the contractor to accelerate the work. Several letters were written to the contractor in this regard, but no attention was paid by the contractor. In regard to the excess quantity of the work, it is pleaded in the reply by the appellant that there was no mutual agreement regarding executing the additional quantity of work and thus, the contractor is not entitled for any payment in this regard. 4. Learned Arbitrator had framed as many as seven issues and along with these issues, decided five claims raised by the claimant. 4. Learned Arbitrator had framed as many as seven issues and along with these issues, decided five claims raised by the claimant. Claim No. 1 pertained to a claim of Rs.14,24,721/-towards enhanced rate for extra work beyond 50% in the work of head outlet sluice, was decided in favour of the claimant; Claim No. 2 is pertaining to Rs.52,24,900/- towards extra lead of sand and filter material, was also decided in favour of the claimant; Claim No. 3 of Rs.181.18 lacs on account of infrastructure overhead expenses and loss of profit, was rejected; Claim No. 4 of Rs.41,65,750/- on account of idling of men and machineries, was partly allowed and Rs.4,09,200/- was awarded to the claimant and; Claim No. 5 of Rs.45,38,686/- towards increase in the rate of minimum wages, was also rejected. Aggrieved by the award dated 09.11.2015, appellant-State filed an application under Section 34 of the Act of 1996 before the Commercial Court, Kota, which was rejected vide order dated 16.11.2019. Thus, aggrieved by the award dated 09.11.2015 as well as the Judgment and Order dated 16.11.2019, the appellant-State has preferred the present appeal before this Court. 5. It is contended by Mr. B.S. Chhaba, Additional Advocate General, appearing for the appellant-State that the learned Arbitrator has misconducted the proceedings by not considering the specific clause in the Agreement that no extra payment will be made on account of extra/excess lead involved in carting the material from longer lead. It is also contended that the learned Arbitrator has failed to consider Clause No. 2 & 63 of the Agreement which provides that it was the duty of the contractor to acquaint himself and it was specifically provided that it shall be deemed that the contractor has carefully examined the work and site conditions, special conditions, the specifications and drawings and shall be deemed to have visited the site of the work and to have fully informed himself regarding the local conditions. It is contended that it was specifically provided in Clause No. 63 of the Agreement that no extra lead/lifts for any material for any item of work whatsoever it may be due to any reason shall be paid to the contractor on this account. The lead/source adopted are of computing the rates. The contractor should verify the source/lead before quoting the rates as no claim on account of change of source/lead will be entertained. 6. The lead/source adopted are of computing the rates. The contractor should verify the source/lead before quoting the rates as no claim on account of change of source/lead will be entertained. 6. It is contended that when there was a specific bar on providing extra amount for lead, the learned Arbitrator has gone beyond the terms of the Agreement and thus, the award should have been quashed by the Commercial Court. It is argued that the Arbitrator is bound by the terms of the Agreement and cannot go beyond the same and thus, the Arbitrator has committed misconduct in conducting the proceedings. It is further contended that the learned Arbitrator has erred in awarding claim for additional work which was contrary to Clause- 12A of the Agreement. It is contended that the learned Arbitrator has further erred in awarding idling charges and also awarding 12% p.a. interest when there was no condition of interest in the Agreement. It is argued that the award is contrary to public policy. 7. Counsel appearing for the respondent-claimant has vehemently opposed the appeal filed under Section 37 of the Act of 1996. It is contended that the scope under Sections 34 & 37 of the Act of 1996 is limited. The Court cannot sit as Appellate Court in matters of award passed by the Arbitrator. It is also contended that the learned Arbitrator has rightly allowed the claim of Rs.14,24,741/- towards enhanced rate for extra work beyond 50% in the work of head outlet sluice as Superintending Engineer-I (S.E.-I) and Executive Engineer had given assurance to the claimant to execute the work & that payment will be made after sanction and it is only on this assurance that the contractor executed the work. It is contended that the learned Arbitrator has properly dealt with the letters written by S.E. Irrigation and the correspondence which took place between the Officers of the Department. It is argued that the claimant cannot be held responsible for inaction of Addl. Chief Engineer for not taking decision with regard to extra lead of sand and filter material. It is argued that quarry site of filter material and sand was specified from Himmatgarh with a lead of 2 kms, but as the material was not available as per specification, the claimant had to carry the material from AHU river, which involved a lead of 55 kms. It is argued that quarry site of filter material and sand was specified from Himmatgarh with a lead of 2 kms, but as the material was not available as per specification, the claimant had to carry the material from AHU river, which involved a lead of 55 kms. It is argued that the claimant is entitled to extra lead as he had submitted his tender considering the lead to be 2 kms. It is contended that the Arbitrator has rightly awarded amount in lieu of idling charges as the men and machinery of the claimant remained idle due to lapses on part of the appellant. 8. We have considered the contentions. 9. It is settled preposition of law that the powers under Sections 34 & 37 of the Arbitration Act can be exercised only if the case falls within the purview of Section 34 of the Act. It is also settled preposition of law that the Courts cannot sit over the award passed by the Arbitrator as an Appellate Authority. However, it is also settled preposition of law that if the Arbitrator passes an award against the terms of the contract, the same can be set aside by the Court. In the present case in hand, we have to see whether the Arbitrator has passed the award against the terms of the contract. 10. Learned Arbitrator in the present case has awarded amount for excess lead as the sand was not available at a distance of two kms. and was to be carried from a distance of 55 kms. from the place of construction. It would be appropriate to reproduce Clause No. 12(a) & 63 of the contract: “12(a): The quantum of additional work for each item shall not exceed 50% of the original quantity given in the agreement and the total quantum of additional and or extra items shall not exceed 20% of the total contract value unless otherwise naturally agreed by the Engineer-in-Charge and the contractor. 63. Leads and Lifts: The unit price of individual item shall include all leads and all lifts and other items involved in execution of work as per specifications and drawings specified in the Schedule “G”. No extra lead/lifts for any material for any item of work, whatsoever it may be due to any reason shall be paid to the contractor on this account. The lead/ sources adopted are for computing the rates. No extra lead/lifts for any material for any item of work, whatsoever it may be due to any reason shall be paid to the contractor on this account. The lead/ sources adopted are for computing the rates. The contractor should verify the source/lead before quoting the rate as no claim on account of charge of source/lead will be entertained. The materials as per specifications (as entered in schedule ‘A-6’) shall have to be used irrespective of source/lead taken for estimation purpose and entered in unit price and no claim on account on change of leads/source will be entertained.” 11. A bare perusal of above clause reveals that it was the duty of the contractor to acquaint himself and it was specifically provided that it shall be deemed that the contractor has carefully examined the work and site conditions, special conditions, the specifications and drawings and shall presume that he has visited the site of the work and carefully informed him regarding the local conditions. A bare perusal of Clause-63 also reveals that no extra lead/lifts for any material for any item of work whatsoever it may be due to any reason shall be paid to the contractor on this account. It was also mentioned that the lead/source adopted was for computing the rates and that the contractor should verify the source/lead before quoting the rates as no claim on account of change of source/lead would be entertained. Thus, there was a specific bar on payment of extra amount for change of source/lead. There being a specific bar, it was beyond the scope of the Arbitrator to go beyond the terms of the agreement. This issue was also brought to the notice of the Arbitrator but the Arbitrator has awarded claim on the ground that in the tender document, the lead was shown at a distance of two kms. Thus, the Arbitrator has awarded the amount on the ground of equity. 12. We are of considered view that the Arbitrator is a creature of the agreement and he cannot go beyond the terms of the agreement. If there is specific bar on payment of extra amount on account of change of source/lead then the Arbitrator was not competent to award the said amount. It is settled preposition of law as held by the Apex Court in Oil & Natural Gas Corporation Ltd. Vs. If there is specific bar on payment of extra amount on account of change of source/lead then the Arbitrator was not competent to award the said amount. It is settled preposition of law as held by the Apex Court in Oil & Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd. (2003) 5 SCC 705 that if the Arbitrator has gone beyond the terms of the agreement, the award can be set aside. Since the award on account of extra lead is beyond the terms of the agreement, the same cannot be sustained by this Court. 13. However, as far as the claim of Rs.14,24,741/- towards enhancement rate for extra work beyond 50% is concerned, from letter written by the S.E. Irrigation and the correspondence which took place between the Officers of the Department, it is clear that the extra work was done on the assurance given to the claimant by the Superintending Engineer and the Executive Engineer. The claimant was thus, entitled for the extra work that he had done beyond 50%. The learned Arbitrator has not committed any error in awarding the said amount. Thus, the objections to the claim of Rs.14 lac on account of enhanced rate for extra work cannot be sustained. Learned Arbitrator has also properly appreciated the documents and evidence and has committed no illegality in awarding Rs.4 lac for idling of resources. 14. Consequently, the appeal deserves to be and is accordingly, partly allowed. The claim with regard to the extra lead of sand is rejected, however, the rest of claim as awarded by the Arbitrator is upheld. The decree be modified accordingly. 15. Pending applications, if any, stand disposed.