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TMI Blog2006 (11) TMIX X X X Extracts X X X X X X X X Extracts X X X X ..... ion 17 of the Arbitration Act for passing a decree in terms of the award. The State of Kerala filed a petition under Section 30 of the Act challenging the award and for setting aside the same. The application filed by the State was dismissed and aggrieved thereby the State of Kerala preferred an appeal in the High Court of Kerala at Ernakulam, being MFA No. 980 of 1990 C. 2. The appellant herein raised claims under 12 different heads but the Arbitrator allowed only claims (a), (e), (g), (i) and (k). Although, in the memorandum of appeal, the entire award in favour of the appellant had been challenged, but the arguments were addressed only with regard to claims under heads (a), (g), (i) and (k). A preliminary objection was raised in the appeal that the Superintending Engineer, who had been appointed as the Arbitrator and had entered on the reference, had been suspended from service for gross mal-practice, and the Government had informed all concerned that the Arbitrator was not to continue with the reference. The Arbitrator retired on superannuation while he was under suspension and the award was made after his retirement. According to the State of Kerala, in the circumstances, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal period of contract till 9th February, 1987. Claim (i) was confined to the question regarding the claimant's entitlement for compensation for the losses purported to have been suffered by him because the Department was unable to hand over a suitable quarry which resulted in the claimant having to bring rubble and metal from far off places involving additional transportation costs. The Arbitrator came to a positive finding that the claimant had procured rubble from quarries situated at different places. According to the initial estimate, the quarry ought to have been within 25 Kms. from the place of work, but from the evidence it would be clear that the nearest quarry from which the claimant had to procure rubble would be about 47 Km. away from the site of the work. The other quarries were even further away from the work site. It was the definite finding of the Arbitrator that the average extra lead involved would be not less than 22 Kms. and accordingly while the claimant had claimed a sum of Rs. 24,86,574/-, the Arbitrator awarded a sum of Rs. 13,35,000/- under this head for the work executed up to 9th February, 1987. The other claim which was pressed by the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in order to maintain peace at the work site, the claimant had to keep the entire local work force in the muster rolls and to pay wages when the actual work was done with bull dozers. The Arbitrator was satisfied that although the claimant had aimed to complete the work within the original period, he was faced with adverse site conditions which are not usually met with at construction sites. The Arbitrator was also satisfied with the claimant's contention that adequate space had not been provided for dumping the excess earth which had to be conveyed to distant places for dumping. On assessment of the evidence and the ground realities under which the claimant was constrained to execute the Supplemental Agreement, the Arbitrator was convinced that the claim made by the claimant under the different heads could not be brushed aside. 6. Apart from the preliminary objection taken with regard to the competence of the Arbitrator to complete the arbitration proceedings and to publish his award, it was also contended before the Arbitrator that the State had no responsibility in settling the disputes between the claimant and his employees and it was really due to the non-cooperation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od at the rates and in the manner agreed to in the Agreement and would not claim any enhanced rate for such item of work on account of the extension of time either due to the increase in the rate of labour or materials or on any other ground whatsoever. The High Court took the view that although the Arbitrator had come to a finding that the appellant had to execute the Supplemental Agreement under the force of circumstances, there was no material before the Arbitrator in support of such contention. On such finding also, the High Court held that the Arbitrator had acted beyond his jurisdiction in allowing claim (g). 10. The award of the Arbitrator against claim (i) also met the same fate and the High Court held that the Arbitrator had travelled outside the contract in granting such claim and thus mis-conducted himself. The only claim which was allowed by the High Court was claim (k). The High Court accordingly set aside the judgment and decree of the court below to the extent it affirmed the award as far as claims (a), (g) and (i) are concerned. The said order of the High Court is the subject-matter of the present appeal. 11. Appearing for the appellant, Mr. Dushyant Dave, learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f materials and costs of labour and transport during the extended period of the contract and accordingly allowed 20 per cent of the compensation sought. The question before this Court was whether the Arbitrator had travelled beyond his jurisdiction in awarding escalation costs and charges. This Court came to a finding that the Arbitrator had not mis-conducted himself in awarding the amount as he had done. Once it was found that there was delay in execution of the contract due to the conduct of the respondent, respondent was liable for the consequences of the delay, namely, increase in prices. It was held that the claim was not outside the purview of the contract and arose as an incidence of the contract and the Arbitrator had jurisdiction to make such award. 14. Reference was then made to the decision of this Court in T.P. George v. State of Kerala and Anr. AIR 2001 SC 816, where a similar situation arose and the contractor was compelled to execute a Supplemental Agreement. Although, a question was raised as to whether the Supplemental Agreement debarred the contractor from pursuing his claims, the Arbitrator allowed the claims which were however set aside by the High Court. This C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract merely because its performance has become onerous on account of an unforeseen turn of events. According to Mr. Muth Raj the award made in the instant case could not also be justified on the basis of quantum meruit since such a concept would be applicable when services are rendered but the price thereof is not fixed by a contract. 18. Mr. Muth Raj also referred to various other decisions of this Court, including the decision in State of U.P. v. Patel Engg. Co. Ltd. and Ors. reported in (2004) 10 SCC 566 where a question arose as to whether on the basis of a modified contract which specifically excluded payment of freight charges, claims for variation in payment of such charges could be awarded by the arbitrator. It was held that the arbitrators had exceeded their jurisdiction in awarding freight charges in respect of steel and handling transportation charges and that the District Judge had rightly held that the same was not sustainable inasmuch as the claimant was not entitled to such freight charges. It was urged that when no provision had been made in the contract for escalation of costs and the Supplemental Agreement entered into between the parties specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment stepped in to maintain the law and order problem which had been created at the work site. It is also clear that the rubble and metal, which should have been available at the departmental quarry at Mannady, had to be obtained from quarries which were situated at double the distance, and even more, resulting in doubling of the transportation charges. Even the space for dumping of excess earth was not provided by the respondents which compelled the appellant to dump the excess earth at a place which was far away from the work site entailing extra costs for the same. 22. In the aforesaid circumstances, the Arbitrator appears to have acted within his jurisdiction in allowing some of the claims on account of escalation of costs which was referable to the execution of the work during the extended period. In our judgment, the view taken by the High Court was on a rigid interpretation of the terms of contract and the Supplemental Agreement executed between the parties, which was not warranted by the turn of events. We accordingly allow the appeal and set aside the order passed by the High Court and restore the award made by the Arbitrator. There will, however, be no order as to costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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