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TMI Blog2019 (3) TMI 2035X X X X Extracts X X X X X X X X Extracts X X X X ..... In short, by the impugned judgment the High court found that the arbitration awards were totally unsustainable in view of Clause 59 of the Agreement. 2. A tender was invited on 18.9.1978 by the Respondent-State for carrying out irrigation works. The Appellant having quoted the lowest rates which ranged between about 10-12% less than the standards specified rate, Appellant entered into Agreement No. 10/78-79 on 10/03/1979. Equally, the Appellant entered into Agreement No. 11/78-79 on 10/03/1979. He also entered into Agreement No. 14/79-80 on 28/06/1979. The work was to be completed within 18 months from the date of handing over the possession. It would appear that the site was handed over to the Appellant in regard to Agreement No. 10/78-79 on 16.11.1979. As far as the Agreement No. 11/78-79 is concerned, the site was handed over on 21.4.1979. The site was handed over to the Appellant in regard to Agreement No. 14/78-79 on 28.06.1979. Under the agreements, raising various claims, the Appellant originally filed claim on 28.11.1983 before a panel of three arbitrators. The panel rendered its awards. The awards came to be challenged by the Appellant and the awards were set aside. An ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the contract and sift the materials before him. His finding on facts cannot be rendered vulnerable in proceedings Under Sections 30 and 33 of the Act. As far as Clause 59 is concerned it is his contention that the said Clause would not stand in the way of the claims as awarded and which are pressed before us being countenanced in law. 6. Per contra learned Counsel for the Respondent would support the judgment of the High Court and would contend that Clause 59 of the agreement would bar the claims canvassed by the Appellant. Before we deal with Clause 59 it is appropriate to appreciate what happened before the arbitrator, the sub-Court and finally in the High Court. PROCEEDING BEFORE THE ARBITRATOR Claim No. I-Extra lead 7. The case of the Appellant was that the Appellant was to quarry and take stones and metal from a specified quarry which was located at a shorter distance than from where the Appellant contractor had to actually quarry the stones and metal and thereafter transport the materials to the work site. This resulted in extra rate and therefore extra expenditure. The claim of the Appellant was Rs. 15 per cubic meter. The arbitrator rejected the arguments of the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim for compensation for non-supply of cement would lie. The arbitrator, however, rejected all the contentions of the department and relied on Section 70 of the Contract Act. The non-production of the cement issue register and unstamped receipt by the department led the arbitrator to raise an adverse inference against the department. The arbitrator proceeded to award varying sums under the three contracts. Claim No. VII 10. Claim No. 7 which is pressed before us related to a claim on account of material accumulated by the Appellant for the work in the project was particularly awarded by the arbitrator. The claim of the Appellant was that he had purchased various materials and stocked at the work site for carrying out the work but the department prevented Appellant from carrying out the work and, therefore, the Appellant was entitled to the value of the materials which he had collected at his expense. The arbitrator after excluding sand awarded certain sums under the 3 contracts. Claim No. IX 11. Finally, under Claim No. 9 which related to interest at 18% under the Interest Act, the interest was awarded at the rate of 12% per annum on all claims from the date of the claim petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court set aside the award passed by the arbitrator. 15. It was found inter alia by the Court that the Appellant did not mention the source through which he had obtained the cement. There was no evidence before the arbitrator to show that the Appellant was permitted to bring his own cement and use it in his work. As per the terms of the agreement the Appellant was not allowed to use the cement other than the cement supplied by the Government. There is no evidence before the arbitrator to show any check/measurement taken at the time of alleged use by the Contractor. The tabular statement produced before the arbitrator by the Appellant was found to be only theoretical requirement of the quantity of cement for such work. 16. The contractual provisions were ignored by the arbitrator. In none of the letters written by the officers referred to by the arbitrator in the awards, the Engineers admitted about the alleged use of cement brought from outside by the Appellant. 17. There was no Clause in the contract permitting the contractor to use his own cement and claim reimbursement. The arbitrator exceeded his jurisdiction. 18. As regards Claim No. VII is concerned, which related to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... let in on behalf of the contractor. Therefore, it is again the compensation which comes within the bar of Clause 59. 22. In regard to Claim No. IV, the following is the finding by the High court: In the Claim No. 4 the reimbursement of non-supply of cement is again is similar such obligation as the one stated to be in the earlier claim and even on this account, nothing has been pointed out on behalf of the contractor on facts or in details as to how it can be taken out from the claim for compensation as barred under Clause 59. 23. As regards Claim No. I relating to extra lead, the High Court proceeded to hold as follows: The Claim No. 1 relates to extra lead of 4 K.M. for stone and metal is again attributable to the alleged delays, laches and breach on the department as complained by the contractor and therefore, such claim once again amounts to a compensation within the parameters of the bar as provided under Clause 59. Since we have found that the claims under item 2, 5, 3, 4 and 1 ex-facie squarely come under the bar of Clause 59 in view of the very maintainability which go to the very root itself, these claims are squarely barred under Clause 59 as held in the aforesaid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when ordering such alterations or additions. 26. It is our view that it will not be open to a contractor to claim compensation which arises on account of the fact that the work is delayed or hindrance caused to the work from any cause whatsoever. To demystify this further, it means that should the work be delayed on account of reasons which are attributable either partially or entirely to the employer namely the Respondent herein, the claim for compensation is barred. Equally, the Clause interdicts raising claim for compensation by the contractor if the employer poses hindrance to the work. If work gets delayed on account of the contractor himself, it is axiomatic that he cannot claim compensation as it would amount to a person taking advantage of his own wrong. Delay from any cause cannot found a claim for compensation. It may also happen that the work may get delayed not due to the fault of the employer. There may be natural causes such as natural calamities which may cause delay in carrying out the work. Even in such cases, in our view, Clause 59 would cast an embargo against a claim by the contractor. This interpretation gives full play to the words 'delays from any cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s located nearer to the work site was compelled to carry out the work of quarrying, both stone and metal, from a quarry located at a greater distance and to transport the same to the work site. The claim is based on the expenditure which the Appellant had purported to incur on this score. Though case of delay within the meaning of Clause 59 is sought to be set up, there is no support sought to be drawn from the second limb of Clause 59 which deals with hindrance to the work from any cause whatsoever. Therefore, we can safely confine our focus on the question whether the claim stands barred by virtue of Clause 59 on account of it arising out of delay. In this case, we must further notice that, in fact, before the arbitrator apparently Clause 59 was not as such pressed or at any rate seriously pressed. Before the civil court, in the counter affidavit filed, the State did not lay store by the said contention. It is in the additional counter affidavit filed that the contention based on Clause 59 was apparently raised by the State. Be that as it may, since the arbitrator is the creature of the contract, and therefore, he is bound by the contract, though late in the day, it may be, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) where the award contains a clerical mistake or an error arising from an accidental slip or omission. 32. Section 16 of the Arbitration Act deals with the power to remit the matter. We may straight away Rule out the question of remitting the award having regard to the efflux of time and also improbability the arbitrator being available even otherwise for the purpose of redoing the matter. 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. 33. 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. Cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following statement however in the said letter. After gaining practical experience it has been found possible to utilize this quarry only for major quantities of two contracts of Sri DV. Krishna Reddy & Co., against the total No. of seven works for which the stone from that quarry is proposed to be utilized. The quarry from which the stone is being obtained by Sri K. Marappan is at a distance 3.45 KM MR + 1.447 KM CT. He is obtaining the entire metal and stone totally from this quarry. 39. The sub Court, on the other hand, has found that the assumption made by the arbitrator about Rs. 15/- cu.m. over and above the quoted rates is without any basis. The sub-Court relied on the provisions in the agreement relating to the manner in which the rates were to be derived. The sub Court proceeded to make reference to the Clause in the agreement. The Clause reads as follows: VII. a) Procedure for working out rates for supplemental items: The contractor is bound to execute all supplemental items that are found essential, incidental and inevitable during execution of main works at the rates to be worked out as detailed below: i) Supplemental items directly deducible from similar item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was nearly 10-12% less than the estimated rates. The result was that the arbitrator gave Rs. 24/- per cu.m. as against Rs. 13.75 which is without deduction. In the written submission before us, the Appellant has not questioned the applicability of the Clause relating to supplemental item in regard to the extra lead. Therefore, we need not be detained by the question whether the provision as such is applicable in respect of claim based on extra lead. If that be so, the question would be whether it is a case whether arbitrator has awarded Rs. 15/- in place of Rs. 13.75 in which case we would be inclined to agree with the Appellant that the award in this regard should be sustained in its entirety. But the question is 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. 41. 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 clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be supplied to the contractor for being issued as wages to labourers employed on the work. 2. The tenderer shall bear the transport and other incidental charges for the transportation of wheat from nearest F.C.I. Wheat godown to the site of the work. He shall be responsible for the safe custody and storage of wheat at his own cost and ensure issue to the labourers of the quantity of wheat calculated at a price not exceeding Rs. 1-25 per K.G. in lieu of the amount of wages payable to them. 3. The contractor shall be responsible to produce the Accounts of receipts, distribution etc., of what to the labourers as and when required by the Engineer incharge of the work. 4. The supply of wheat to the contractor for issue to the labourers will be regulated from time to time according to the assessment of the Engineer in-charge of the work. 5. The department is not liable for any compensation on account of any fluctuation of market price of wheat or deterioration in quality of the wheat. The contractor is bound to accept the agreed quantity of wheat at the stipulated rate, if offered. Similarly, he shall have no claim for the supply of extra quantity of wheat on the ground of exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the High court does not appear to have anything to do with compensation for delay. The case based on hindrance also does not appear to be made. We shall, however, consider the matter in some detail. 47. The High Court has not adverted to the Clause in the contract under the heading 'negotiation' which we have referred to. Instead the High court has proceeded on the Clause which undoubtedly contemplated supply of food grain only subject to availability. The Clause after the negotiation was carried out however brought about the following changes: In place of wheat, the Appellant agrees to take either wheat or rice and the price at which it was to be supplied to the workers was also stipulated. The other conditions in the contract relating to the food grain remained unchanged. This means that it could be said that it was subject to availability and we have also referred to Clause which provides that Appellant is bound to accept the quantity at the stipulated rate, if offered. However, a significant change which was brought about was that in case of short supply of either wheat or rice compared to a specific quantity of 17,500 quintals, the Appellant was given the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages under the contract (It is true that under the contract Clause the Appellant shall not pay less than the fair wages). 49. It is found that department officers misunderstood the food for work in their letters. The arbitrator relied on such letters as if the Engineers are the master to interpret the term of the contract. It was further found that there is absolutely no basis that food grains were in plenty with the Government. The sub Court further finds that the reliance placed by the arbitrator at Exhibit A. 22 for availability was not justified. He referred to Exhibit A. 22 with annexure also. The contention of the Appellant was that he promised to the labourers that he would pay a portion of their wages by way of food grain at specified rate and he had to supply the food grains at the subsidized rates as promised by purchasing the food grains at higher rates. The sub Court finds that there is no evidence produced before the arbitrator to show that he purchased food grains from the open market and supplied those food grains to the labourers at the subsidized rates. In case of supply of food grains, the Appellant was bound to maintain record of proper distribution but the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of wheat at the quantities mentioned above. It also provides that the charges on account of the storage, transportation, the cost of the container as fixed by the Government, and sales tax have to be borne by the contractor. The contract condition also further stipulates that the contractor has to supply the wheat to the labourers consistent with their requirement and at the rates not exceeding Rs. 125/- per quintal. It is also mentioned in the contract that a particular quantity of wheat at Rs. 115/- per quintal, will be supplied to the contractor for being issued as wages to labourers employed on the work. On the representation made by the contractor on this Clause there was negotiation and agreement was arrived at between the contractor and the Department to the effect that the contractor will receive the quantity of grains to be supplied either as wheat or as rice or both, further stipulating the rate at which it is to be supplied fixing the rate at Rs. 115/- per quintal for coursed rice and at Rs. 130/- per quintal for fine rice and also stipulating the rates at which the contractor is to pay to the labourers, retaining the other conditions and clauses covered by the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was incorporated which provided for supply of rice or wheat and other terms. In other words, at the time when Appellant submitted his tender which may have been lesser than the estimated rate by about 10 to 12%, the negotiated Clause was not there. On this score, the case sought to be built up around the Clause being attractive cannot be accepted. 54. Secondly, as regards the supply of food grains, the Appellant is not correct in having contended that the Appellant was duty bound to supply food grain even if the food grains were not supplied by the department. The sub-Court is correct in concluding that Appellant was duty bound to supply food grains only if it was supplied to him by the department. This is because despite the Clause resulting from negotiation, the other conditions remained intact. A perusal of the Clause relating to supply of food grain would show that food grains would be supplied, if available. Again, the words "if offered" is conspicuous. The words in the Clause which provided that the Appellant shall supply food grain to the labourers is not to be considered in isolation. 55. The sub-Court is not correct in coming to the conclusion that the Appellant was bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of short supply of either wheat or rice compared to the quantity of 17,500 quintals, I shall have claim for compensation on this account. 58. Further, it is relevant for us to notice the discussion by the arbitrator regarding the quantum of compensation. The arbitrator relies upon the Statement No. 3 appended to claim No. III wherein he has shown the prevailing rate of rice in the open market during the period November 1979 to October 1982. The amount which he has paid for the labourers for purchase of food grain on the basis of rates in the open market, the price of food grain payable to labourers for purchase of food grain as per the agreement condition and the extra amount involved due to non supply of food grain by the department. The arbitrator found that the statement shows that the extra amount paid varies between Rs. 162/- and Rs. 211/- per quintal in the said period. On striking an average, it came roughly to about Rs. 185/- per quintal which the Appellant paid to the workers for non supply, finds the arbitrator. Further the arbitrator found that the labourers cannot purchase rice from the fair price shops because they were not rice card holders. The arbitrator referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum in the three contracts is noted as also the rate and the amount, the value in rupees is noted. The Superintending Engineer has agreed that the food grain could not be supplied since allotment was not received even though there is stipulation in the agreement to supply food grain if available. The aspirations of the Appellant could not be fulfilled, it is stated. It is noted that the price structure of various materials is increased from the date of tender i.e. 10.11.1978. In relation to wheat it is shown an increase of 147%. There is an increase in the case of rice to the extent of 178%. This letter is written on 30.11.1982 Exhibit B-7. 60. First letter written by Appellant is dated 30/06/1979. In the said letter this is what he says: I had requested on several times for the supply of food grains but so far no food grains were supplied to me. I request to make arrangement for the early supply of food grains. In this connection, I wish to state that I had engaged labours on the term that food grains will be supplied to them as a part of their wages and I am supplying food grains to them by purchasing in the local market. Hence, urgent action may be taken for the supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We would therefore think that the award of the claim by the arbitrator cannot be sustained. CLAIM No. IV 64. As regards, claim No. 4 is concerned, it arises from alleged short supply of cement. First of all, we have to find as to whether it is hit by the embargo contained in Clause 59 and also advert to the finding of the High Court. In this regard, the High Court holds that the obligation is similar in nature to the earlier claim, namely, claim No. 3 and nothing is pointed out on behalf of the Appellant on facts or in details as to how it can be taken out of Clause 59. We have to ascertain what exactly is the claim raised by the contractor. 65. The claim in brief is as follows: Cement is one of the items to be supplied by the Department at specific issue rates. The Appellant, accordingly, perceiving the same as attractive quoted 10 to 12% lesser than the estimate rate. Cement was to be supplied at the issue rate of Rs. 416/- per metric tonne. Right from the beginning, there was short supply. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he counter by the Government pleader that the Appellant was saving cement out of the quantity supplied by the Department was found untenable on the basis that engineers would not have permitted it. As far as, Clause 10 of the Agreement prohibiting any claim for compensation for non-supply or delayed supply, the arbitrator found that Appellant is only asking for return of cement brought by him and used in the construction on the assurance of the Department that it will be reimbursed. In total 3790 metric tonnes of cement were found to be brought by the Appellant. Rejecting the claim of the Appellant for market rate and applying the departmental issue rate of Rs. 416/- per tonne different amounts were awarded under the three different contracts. 67. We would think that this claim cannot be said to be hit by Clause 59 as Appellant is not claiming compensation for any delay. On the other hand, his case is that, contrary to the agreement that he would be supplied the cement it was not supplied and he had to use cement by spending money from his pocket and he only wanted that cement actually used which is in excess of the cement issued to be given to him. More importantly, the amount aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess quantity so drawn should be returned to the Department in good condition and no payment will be made to the contractor therefore. If they are not so returned to the department, their cost will be recovered at the market rate prevailing at the time of supply or the issue rate whichever is greater plus storage charges plus sales tax if leviable. If materials are drawn in excess of theoretical requirements indicated in the appended schedule, the excess quantity should be returned to the Department in good condition. If they are not so returned to the Department their cost will be recovered at issue rate plus 100% surcharge or market rate whichever is higher plus storage and sales tax if leviable. If materials are either short drawn or short used (though drawn according to schedule) (1) the savings due to short drawal/use should be secured to Government by recovering the cost thereof at issue rate from the Contractor. In the case of materials short used, though drawn according to Schedule this recovery will be in addition to the recovery to be made for the cost of materials not returned as stipulated above. The Executive Engineer will decide the approximate requirements of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn according to the Schedule and are short used then the excess quantity is to be returned to the Department in good condition and for the same the contractor will not get any payment. Furthermore, if the short-used material is not returned to the Department, their cost will be recovered at the market rate or at the issue rate which is greater plus wastage charges and sales tax. An example which we may take, would be if the requisite specifications is that 10 metric tonnes of cement is to be drawn and he draws 10 metric tonnes but he actually used only 8 metric tonnes there will be a short use of 2 metric tonnes which he would have to return to the Department. 73. The second situation is where the materials are drawn in excess of theoretical requirements. The contract contemplates that in such a situation, the excess drawn quantity must be returned to the Department in good condition and otherwise there will be recovery at the issue rate plus 100% surcharge or market rate whichever is higher plus storage and taxes. 74. The third situation contemplated is that if the materials are short drawn or short used it is specifically provided that in such a situation, the saving due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied quantum? It would be so, but it may have different implications. 77. At this juncture, we may look at the correspondence which may throw light. In the letter dated 30.06.1979 written by the Appellant to the Executive Engineer, we find there is no mention even about the inadequate supply of cement. Next letter is dated 26.07.1980. This is a letter where reference is made to all the three contracts. There is a reference in this letter no doubt about the purchase of cement from other sources. He seeks return of the cement so that extra quantity of cement may be reimbursed. There is no reference to any particular quantity and there is no reference to which the other sources are. 78. The next letter is dated 16.07.1981. Here the reference is made to Agreement No. 10/78-79. In this letter there is no complaint about the cement. Finally, there is letter dated 07.10.1982 which is addressed by the Appellant to the Superintending Engineer. Here the reference is made to the Agreement No. 11/78-79. No doubt in the body of the letter he also adverts to the other contracts. Substantially, the letter is one where he makes various complaints and finally, he makes a claim for enhancement. Her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his appears to be a case where sufficient cement may not have been supplied to the Appellant. However, it is to be remembered under Clause 10 of the agreement no right to compensation lies for short supply of cement. Here the case of the contractor Appellant which is accepted by the arbitrator is that this is not a case where compensation for short supply of cement is made by the Appellant. All that the Appellant is seeking is to be given, is the quantity of cement, which he brought from other sources or the monetary equivalent. 81. We proceed on the basis that the claim for return of the cement does not involve infraction of Clause 10 which forbids compensation on account of short supply of cement. The question, however, arises whether the arbitrator has misconducted himself in arriving at the amount of cement supposedly brought from other sources by the Appellant to carry out the work. As far as the monetary equivalent is concerned as we have already noted it is at the issue price fixed under the contract itself and it is not an escalated amount so the measure of the amount of reimbursement may not attract Clause 59. The only point, therefore, which remains is whether there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if the case pleaded by the State amounts to admission that the cement was brought from outside by the Appellant and the matter was only regarding the measurement to be carried out that may give the impression that the arbitrator particularly having regard to the non-production of the unstamped receipt and cement issue register despite being called for had some justification for coming to the conclusion that the Appellant had procured cement from outside. Then the further question would be the only quantity of cement which was purported to be bought from outside by the Appellant. 85. State definitely has a case, however, that there is no evidence by the Appellant having procured cement from outside sources as he has not produced vouchers as that is seen dealt with by the arbitrator. The exact quantity of cement purchased from outside is not pleaded. Instead what the Appellant contended for and what was accepted by the arbitrator was that the quantum of cement which was used could be found out from the quantum of work done. This is clear from the statement even on the basis that when a particular quantum of work is done, as per the theoretical requirement for cement involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, we are of the view that the Appellant has also not made out any cause for compensation in regard to this claim. CLAIM No. IX 88. As far as the question relating to interest is concerned, the arbitrator has awarded interest at 12% from the date of the claim but excluded interest from commencement of proceeding till date of award. The question relating to interest is no longer res integra as we find that the issue has been dealt with in a recent judgment of this Court in Assam State Electricity Board and Ors. v. Buildworth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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