2019 (3) TMI 2035 - SC - Indian Laws

Grant of decree in terms of the Arbitration Award though in a modified way in respect of certain claims raised by the Appellant set aside - decision of the sub-Court refusing to make the Award decree of the Court in regard to certain claim also rejected. Claim 1 - Claim for extra lead for carrying out the work of quarrying stone and metal from a quarry located at a greater distance from the work site - HELD THAT - Coming to Section 15 of the Act, the power available to the Court to modify the award was available inter alia when a part of the award is not referred to arbitration and such part can be separated from the other part and clearly Clause (a) is applicable as it is not the case of either party that the matter relating to the amount to be paid by way of extra lead was not a matter which was referred to arbitration - Under Clause (c), an award can be modified if it contains a clerical mistake or there is an error which arises from an accidental slip or omission. There cannot be any doubt that this is not a case where there is clerical mistake or an error arises from an accidental slip or omission. Lastly, the power of the court to modify extend to a case where the award is imperfect in form. Certainly, it is not the situation in the facts of the case. Of course, where the award contains an obvious error which can be amended without affecting such decision. Court has power to modify. When the Sub court modified the sale at which the amount is to be calculated would affect the 'decision' of the 'arbitrator'. It is not the sale of Rs. 15/C.M., not an essential part of the 'decision' of the arbitrator - there is no power to modify the award, the legality and correctness of the civil court decreeing the claim would be considered in regard to Claim No. 1 by modifying the award of the arbitrator. Claim-2 - whether the arbitrator has actually awarded Rs. 15/- cu.m. over and above the amount which the Appellant already received on the basis of the actual lead in the contract? - HELD THAT - The arbitrator, in fact, found that the claim of the Appellant for higher rates at Rs. 15/- per cu.m. is reasonable and legal and on the basis of the tabular statement which was prepared by the Appellant and awarded different sums under the three different contracts. It would appear that the claim for Rs. 15/- per cu.m. is based on abnormal increase in transport charges due to increase in cost of fuel, automobile spare parts etc. If escalated rates are claimed, then it may attract the wrath of Clause 59 - The claim of Rs. 15/- per cu.m., if it is over and above the amount which is already received will be in the teeth of the contractual provision which is relied on by the sub Court for which he has not taken any exception to in which case we would think that the amount as ordered by the sub Court is to be awarded to him under this claim. This means the amount is to be worked out as provided in the letter dated 13.11.1982. In other words, the amount must be awarded on the basis of the cost of conveyance being calculated at the rate of Rs. 13.75 and the amount must be calculated and paid. Claim-3 - non-supply of food grain - HELD THAT - The sub Court is right in holding that the correspondence referred to by the arbitrator did not show that the food grains were actually available with the department and department was only trying to get the food grains from the administration with which the food grains was available. As long as there is some material which substantiated Appellants claim before the Arbitrator, the Court hearing the petition Under Article 30 and 32 would not reappraise the material to come to the conclusion that the arbitrator went wrong in arriving at a finding of fact. At the same time, if virtually there were no material then it becomes a case of no evidence. No doubt the contractual provision which provides that the Appellant is to keep accounts and produce accounts relating to receipts and distribution may assume relevance when Appellant receives food grains from the department and distributes - There would certainly be material to evidence the actual purchase and further actual supply to the workers or payment as alleged. Even assuming everything that the Appellant says is correct about the fact of the negotiated settlement, there is virtually no material except the Appellants statement that the Appellant paid for the price of food grains to the workers. Further, the claim involves payment of price of rice at escalated rates for period beyond the contract also and it invites the wrath of Clause 59 - the award of the claim by the arbitrator cannot be sustained. Claim-4 - alleged short supply of cement - HELD THAT - A party is supposed to produce the best evidence or rather the evidence which under the contract is contemplated. The failure on the part of the Appellant to produce the ledger has fatal consequences. The matter becomes further aggravated by the failure on the part of the Appellant to even produce vouchers or bills in support of the claim to purchase the cement from outside sources. This is even if we are to ignore the fact that there is no written permission for purchase of cement from outside. We proceed on the basis that a contractor may without written permission but for the purpose of the work purchased cement from outside. But certainly, the fact that there are neither vouchers nor any ledger entries nor bills produced which persuades us to hold that the matter may warrant interference with the award Under Section 30 - the claim cannot be accepted. Claim-7 - Appellant collected materials and it was lying at the site - HELD THAT - Insofar as the Appellant has not used any of the materials to carry out the work and sets up the claim only on the basis of assurance which has not been admitted, the action of the Appellant in purchasing the materials cannot result in establishing his claim for compensation. It is to be noticed that the Appellant raised a claim for enhanced compensation. He alleged that there was delay on the part of the Respondent on various grounds. This is apart from alleging other factors like breakout of malaria, unfavourable weather and delay in taking decision by the departmental officers, which contributed to escalation in cost. Correspondence was exchanged with the Executive Engineer and the Superintending Engineer, the Superintending Engineer and the Chief Engineer and finally between the Chief Engineer and the Government. It appears that at that stage Appellant invoked the arbitration Clause and a panel of arbitrators gave their award. In fact, the work itself was stopped. Clause 59 prevents the Court from awarding compensation on account of any factor relating to the delay which may be due to any cause whatsoever. In such circumstances, the Appellant has also not made out any cause for compensation in regard to this claim. Claim-9 - question relating to interest - HELD THAT - The sub Court set aside the award of interest for the period from 26.4.1988 till the date of the award namely 19.8.1988 which is the pendente lite interest. This is on the basis that arbitrator has no power to award interest on amounts found due - This Court took the view that entering upon reference is to be taken as the date of commencement of arbitration proceedings for calculation of interest. And this Court took the view therein that there is no power to grant interest from the date of commencement of arbitration. Appeal allowed in part.

Summary

Issues Involved:
1. Claim No. 1 - Extra lead of 4 kms/6 kms-stone and metal.
2. Claim No. 3 - Non-supply of food grains as per the conditions of the agreement.
3. Claim No. 4 - Reimbursement of short supply of cement.
4. Claim No. 7 - Claim on account of stock of materials accumulated by the contractor for work in the project.
5. Claim No. 9 - Interest of 18% per annum under the Interest Act.

Detailed Analysis of the Judgment:

Claim No. 1 - Extra Lead of 4 kms/6 kms-Stone and Metal
The Appellant claimed compensation for extra lead due to quarrying from a site further than specified. The arbitrator awarded Rs. 15 per cubic meter, rejecting the Respondent's argument that the Appellant chose the distant quarry voluntarily. The sub-Court agreed on entitlement but reduced the rate to Rs. 3.23 per cubic meter, citing lack of supporting material for Rs. 15. The High Court found the claim barred under Clause 59, which prohibits compensation for delays. The Supreme Court held that the claim for extra lead is not associated with delay and should be compensated at Rs. 13.75 per cubic meter as per the Executive Engineer’s letter, thus modifying the sub-Court’s decision under Article 142.

Claim No. 3 - Non-Supply of Food Grains
The Appellant claimed compensation for non-supply of food grains, which he had to procure from the open market at higher prices. The arbitrator awarded compensation, finding that food grains were available but not supplied. The sub-Court and High Court set aside the award, noting no evidence of availability or extra wages paid. The Supreme Court observed that the contract allowed compensation for short supply but found no evidence of non-supply or the Appellant purchasing food grains. The claim was rejected due to lack of evidence and potential violation of Clause 59.

Claim No. 4 - Reimbursement of Short Supply of Cement
The Appellant claimed reimbursement for cement procured from outside due to short supply by the Respondent. The arbitrator awarded compensation based on the issue rate of Rs. 416 per metric tonne. The sub-Court set aside the award, citing lack of evidence for external purchase and contractual provisions requiring ledger maintenance and permission for external procurement. The High Court upheld this view. The Supreme Court agreed, noting the absence of ledger entries, vouchers, or bills, and found that the claim could not be sustained under Section 30 of the Arbitration Act.

Claim No. 7 - Stock of Materials Accumulated by the Contractor
The Appellant claimed compensation for materials accumulated but not used due to alleged assurances of further work. The arbitrator awarded compensation, but the sub-Court and High Court rejected the claim, noting no evidence of such assurances and the contractual prohibition on compensation for delays. The Supreme Court upheld the rejection, emphasizing that the Appellant had not used the materials for the project.

Claim No. 9 - Interest of 18% Per Annum
The arbitrator awarded interest at 12% per annum from the date of the claim petition. The sub-Court set aside the interest for the period from the commencement of arbitration to the award date, citing lack of arbitrator’s power. However, the Supreme Court restored the interest, referencing the judgment in Assam State Electricity Board v. Buildworth (P) Ltd., which allows arbitrators to grant pendente lite interest unless explicitly prohibited by the contract.

Conclusion:
The Supreme Court partially allowed the appeals, restoring the award for Claim No. 1 as modified by the sub-Court and the interest as awarded by the arbitrator, while rejecting the other claims due to lack of evidence or contractual prohibitions. The Respondents were directed to calculate and pay the amount within two months of the judgment.