2004 (4) TMI 645 - SC - Indian Laws

Limitation for filing objections to the arbitration award - Validity and quantum of various claims made by the respondent - Interest awarded by the arbitrator - Costs of arbitration - HELD THAT - When there was no dispute as to the fact that materials had been used for the purpose of the project and the value thereof, the claim made by the appellant having been duly examined by the arbitrator and after giving due allowance to the advances that have been made the award made by the arbitrator cannot be stated to be as one suffering from any error apparent on the face of the award. Therefore, this conclusion also cannot be interfered with. It is not unusual for the contractors to claim loss of profit arising out of diminution in turn over on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same. Therefore, we have no hesitation in deleting a sum of ₹ 6,00,000/- awarded to the claimant. So far as interest that is payable is concerned, the arbitrator has appropriately considered the same and no real objection can be raised in this regard. As regards arbitration costs also there cannot be any serious dispute. Therefore, except for the sums coming under the heading No. 5, that is, Refund of Sales Tax and claim for payment of losses arising out of turn over due to prolongation of work, other part of the award having been upheld by us, the award made by the arbitrator shall stand modified accordingly. In similar terms in respect of second contract, for the very reasons stated in this part of the order, we disallow the claim for refund of sales tax and compensation for losses arising out of on account of prolongation of work. In other respects, we maintain the award made by the arbitrator. The civil appeals stand disposed of in the aforesaid terms.

Summary

Issues Involved:
1. Limitation for filing objections to the arbitration award.
2. Validity and quantum of various claims made by the respondent.
3. Interest awarded by the arbitrator.
4. Costs of arbitration.

Summary:

1. Limitation for Filing Objections:
The primary issue was whether the objections to the arbitration award were barred by limitation u/s Article 119(b) of the Limitation Act. The court held that the period of limitation commences only upon notice of filing of the award in the court being given to the parties. In this case, the office report dated 18.02.2002 did not constitute such notice. Therefore, the objections filed on 11.04.2002 were not barred by limitation.

2. Validity and Quantum of Claims:
- Claim No. 1 (Payment of Final Bill): The arbitrator allowed a sum of Rs. 49,531/- for the final bill and Rs. 91,013.72 for extra items of work, based on entries in the measurement book.
- Claim No. 2 (Payment of P.O.L. Escalation) and Claim No. 3 (Compensation for Late Payment of Running Account Bill): These claims were not contested.
- Claim No. 4 (Payment of Labour Escalation): The arbitrator awarded Rs. 1,30,000/- considering both parties were responsible for the delay.
- Claim No. 5 (Refund of Sales Tax): The award of Rs. 35,050/- was set aside due to a clear error in applying the notification dated 19.02.1985.
- Claim No. 6 (Payment of Extra Items): The arbitrator awarded Rs. 1,25,000/- for watch and ward expenses, finding sufficient basis for the claim.
- Claim No. 7 (Payment of Material Escalation): The arbitrator allowed half of the claim, considering the secured advance and the rise in prices.
- Claim No. 8 (Keep Back Account): This claim was rejected.
- Claim No. 9 (Compensation for Loss Due to Prolongation of Work): The award of Rs. 6,00,000/- was deleted as there was no evidence to support the claim for loss of profits.

3. Interest Awarded by the Arbitrator:
The court found no reason to interfere with the interest awarded by the arbitrator, deeming it appropriate.

4. Costs of Arbitration:
The costs awarded by the arbitrator were upheld.

Conclusion:
The award was modified by disallowing the claims for refund of sales tax and compensation for losses due to prolongation of work. In all other respects, the award was upheld. The civil appeals were disposed of accordingly.