2020 (2) TMI 679 - SC - Indian Laws

Whether the learned Arbitrator had appropriately considered the matter in its correct perspective and in that light whether the Award of the amount at the premium of 93.12% would be justified and the manner of consideration by the learned Arbitrator without assigning reasons for his Award is sustainable? HELD THAT - Having taken note of Clause 39 of the Contract Agreement, it cannot be considered as a statutory limitation or bar for the claim in all circumstances. The said Clause no doubt prescribes a method by which the claim is to be put forth in the statement every month. The said requirement will have to be construed as being put in the agreement so as to ensure that the additional work has actually been done, the claim is put forth along with details so that baseless claim is not made at a distant point in time when it will not be possible to determine. Though the Clause also indicates that if such claim is not made, it would amount to waiver, in a circumstance where the claim is ultimately put forth in the forum where an adjudication is made and based on the material if the adjudicating authority is satisfied that the actual work had been done and the contractor being entitled to the extra amount spent by him to carry out the work in an appropriate manner, it would not be just and proper to deny such claim only on the ground that it had not been indicated strictly in the manner as provided in the contract specially keeping in view the nature of work undertaken. To that limited extent a perusal of the Award passed by the learned Arbitrator would indicate that the learned Arbitrator had taken into consideration the letter dated 14.11.1986 wherein the identification of soil which was agreed to. The matter in a normal circumstance ought to have been remitted to the learned Arbitrator to redo the proceedings afresh in accordance with law. Such course ought to have been adopted by us as well. We had proceeded to examine the matter with regard to the validity of the claim keeping in view the time lapse and since the validity of the claim was to be taken note at the appropriate premium if not at the percentage of premium at 93.12% as determined by the learned Arbitrator - In view of our conclusion relating to the claim being sustainable to the extent as indicated by us above at the premium of 35.02%, under Claim Nos.2, 3, and 12 the calculation based on the extent and measurement of the extra items is an exercise which cannot be undertaken herein and as such the opposite party keeping in view the directions herein shall work out the actual amount payable in respect of the extent, measurement, quantity and price based on which the claim is made. The claimant is entitled to the claim for extra items as put forth under Claim Nos. 2, 3, 8 and 12 by working out the difference of cost on the tender premium at 35.02%. On arriving at the quantum of the Page 24 of 26 amount, the same shall be payable with interest at 12% per annum in the manner as ordered by the First Appellate Court. The claim No.1 ordered by the High Court is sustained. Appeal allowed.

Issues Involved:

1. Legitimacy of the Arbitrator's Award for Claim Nos. 2, 3, 8, 12, and 16.
2. Requirement for the Arbitrator to provide reasons for the Award.
3. Calculation of premium rates for extra work.
4. Adherence to contractual provisions for submitting claims.
5. Grant of interest on awarded amounts.

Detailed Analysis:

1. Legitimacy of the Arbitrator's Award for Claim Nos. 2, 3, 8, 12, and 16:

The appellant challenged the High Court's partial acceptance of Claim No. 1 and rejection of other claims. The contract involved construction work with an estimated cost of ?31 lakhs and a contract amount of ?59,86,732. The claimant sought additional payment due to increased scope of work. The Arbitrator awarded the claimed amounts with 18% interest, which was partially modified by the Sub-Judge and further by the District Judge, leading to the appellant's revision petition.

2. Requirement for the Arbitrator to Provide Reasons for the Award:

The contract's Clause 63 mandated that Awards exceeding ?1 lakh must state reasons. The Arbitrator's Award for Claim No. 2 merely stated, "As per agreement premium works out to 93.12% which is awarded," without providing detailed reasoning. The First Appellate Court and High Court found this insufficient, emphasizing the need for reasons as per the contract.

3. Calculation of Premium Rates for Extra Work:

The claimant argued for a premium of 93.12%, based on the difference between the estimated cost and the contract amount. The opposite party contended that the premium should be 35.02%, as per the communication dated 05.01.1987. The courts concluded that the Arbitrator's Award lacked justification for the 93.12% premium and did not adhere to the contract's provisions. The Supreme Court concurred, directing the premium to be calculated at 35.02%.

4. Adherence to Contractual Provisions for Submitting Claims:

Claim No. 8 involved extra work on marshy land (DALDAL). The contract required monthly returns for extra work claims, which the claimant failed to submit. The First Appellate Court and High Court rejected the claim based on this non-compliance. The Supreme Court, however, held that outright rejection was too technical, recognizing the actual work done and directing the premium to be calculated at 35.02%.

5. Grant of Interest on Awarded Amounts:

The Arbitrator awarded 18% interest, which was reduced to 12% by the Sub-Judge and upheld by the High Court. The Supreme Court found the 12% interest appropriate, given the absence of an agreed rate.

Conclusion:

The Supreme Court modified the orders of the First Appellate Court and High Court, directing that in addition to Claim No. 1, the claimant is entitled to amounts under Claim Nos. 2, 3, 8, and 12, calculated at a premium of 35.02% with 12% interest per annum. This calculation and payment must be completed within six weeks, failing which the interest rate will increase to 18% per annum. The appeal was allowed in part, and the Registry was directed to draw up the decree/award accordingly.

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