1988 (3) TMI 454 - SC - Indian Laws

Summary

Issues Involved:
1. Delay in completion of the contract.
2. Entitlement to extra costs incurred.
3. Applicability of specific contract clauses.
4. Arbitration and validity of the award.
5. Interpretation of legal provisions and contract terms.

Summary:

1. Delay in Completion of the Contract:
The petitioner entered into a contract with the State of Madhya Pradesh on 31st March 1970 for construction work, which could not be completed within the stipulated time due to alleged delays by the State. The petitioner incurred unforeseen expenditure and sought compensation, which was refused by the Superintending Engineer.

2. Entitlement to Extra Costs Incurred:
The contractor claimed extra costs due to increased labor charges and material prices, as well as alterations and substitutions of works. The Superintending Engineer dismissed these claims, citing Clause 3.3.15, which barred compensation unless claims were submitted within one month of occurrence.

3. Applicability of Specific Contract Clauses:
The contract contained several clauses relevant to the dispute:
- Clause 3.3.15: Time limit for unforeseen claims.
- Clause 3.3.29: Finality of the Superintending Engineer's decision unless referred to arbitration within 28 days.
- Clause 3.3.32: Action where no specification exists.
- Clause 3.3.33: Definition of work.
- Clause 3.3.34: No claim for quantities entered in the tender or estimate.

4. Arbitration and Validity of the Award:
The petitioner invoked arbitration, and an award was made partly in favor of the petitioner. The District Judge made the award a rule of the Court, but the High Court remanded the matter for fresh decision. The District Judge set aside the award, and the High Court upheld this decision, leading to the present appeal.

5. Interpretation of Legal Provisions and Contract Terms:
The High Court considered whether the claims were barred by Clause 3.3.15 and whether the contract was rendered ineffective u/s 56 of the Contract Act due to abnormal rise in material and labor costs. The High Court found that:
- The contractor did incur extra costs but was not entitled to compensation for certain claims.
- The contract was not rendered ineffective by the rise in costs.
- The claims were not barred by time in terms of Clause 3.3.15.
- The arbitrator had misconducted himself by not addressing the State's objections.

The Supreme Court upheld the High Court's decision, emphasizing that the arbitrator must follow the law and cannot ignore contract terms. The petition for special leave to appeal was dismissed.