Jharkhand High Court
State Of Jharkhand vs Mr. Hardeo Singh on 20 June, 2024
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Commercial Appeal No.08 of 2020
----
State of Jharkhand, Water Resources Department,
Irrigation Division, Sikatial, P.O. & P.S. - Sikatial, Dist.
Deoghar, through its Executive Engineer, namely, Mahesh
Kumar Chaudhary, S/o Late Sukdeo Chaudhary, R/o
Village - Gopalpur, P.O. & P.S. - Vidyapati Nagar, District -
Samastipur (Bihar), PIN-848503.
... ... Appellant/Applicant/Respondent
Versus
Mr. Hardeo Singh, Contractor, through its Partner Sri Avtar
Singh, Son of Hardeo Singh, Station Road, P.O., P.S. and
Dist. - Deoghar.
... ... Respondent/Respondent/Original Claimant
-------
CORAM :HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
HON'BLE MR. JUSTICE ARUN KUMAR RAI
------
For the Appellant : Mr. Rajiv Ranjan, Advocate General
Mr. Mrinal Kanti Roy, G.A.-I
Mr. Rishi Ranjan, Advocate
Ms. Komal Tiwary, Advocate
Ms. Aparajita Chaterjee, Advocate
For the respondent : Mr. Arun Kumar De, Advocate
Mr. Manoj Kumar-II, Advocate
--------
C.A.V. on 08.05.2024 Pronounced on 20.06.2024
Per Sujit Narayan Prasad, J.
1. At the outset, it needs to refer herein that on earlier occasion the instant appeal was dismissed on the ground of limitation vide order dated 21.12.2021. However, by an order dated 08.04.2022 passed in Civil Appeal Nos. 2820- 2822 of 2022, the Hon'ble Apex Court has quashed and set aside the said order remitting the matter before this Court for adjudication of the issue on merit, for ready reference the order passed by the Hon'ble Apex Court is being referred hereunder as :-
Page 1 of 39
Commercial Appeal No.08 of 2020 "Leave granted.
We have heard Ms. Ekta Bharati, learned counsel appearing on behalf of the State and Shri A.K. De, learned counsel for the respondent.
Feeling aggrieved and dissatisfied with the impugned order passed by the High Court refusing to condoned the delay of 275 days in preferring the appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the State has preferred the present appeals.
Having heard the learned counsel appearing for the respective parties and considering the averments in the application in support of the prayer to condone the delay, we are of the opinion that in the facts and circumstances of the case, one opportunity ought to have been given to the State to submit the case on merits rather than non-suiting the State on the ground of delay.
In view of the above, the present Appeals are allowed. The impugned order passed by the High Court is set aside and the delay caused in preferring the appeal before the High Court is hereby condoned. Now, the appeal preferred by the State under Section 37 of the Arbitration Act to be dealt with and considered by the High Court in accordance with law and on its own merits at the earliest subject to compliance of other statutory requirements under Section 37 of the Arbitration Act.
The appeals are allowed accordingly to the aforesaid extent. No costs."
The instant appeal, in view thereof, has been revived for hearing the issue on merit.
Prayer
2. The instant appeal preferred by the State under Section 13 of the Commercial Courts Act, 2015 is directed Page 2 of 39 Commercial Appeal No.08 of 2020 against the judgment dated 24.08.2018 passed by learned District Judge-XIV-cum-Presiding Officer, Commercial Court, Dhanbad in Original Suit No.23 of 2017 corresponding to Misc. Case No. 7 of 2010 by which the arbitral award dated 11.07.2007 passed by the Sole Arbitrator exercising the power conferred under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as the Act, 1996) has been affirmed. Facts of the Case
3. The brief facts of the case which are required to be enumerated, reads hereunder as :-
It is the case of the appellant that a Notice Inviting Tender was floated by Executive Engineer Irrigation Department, Sikatia, Deoghar for construction of Ajay Barrage from 0 to 11 bay and its head regulator. Against which, along with other tenderers M/s Hardeo Singh have also submitted their tender.
4. In the light of the decision of Tender Committee, the work was awarded to M/s Hardeo Singh by executing agreement No. 1 - LCB of 1989-90 dated 01.01.1990 for Rs.13,31,64,735/ against estimated value of work for Rs. 12,97,24,165/. The work under the contractor was to be completed within 24 months commencing from 01.01.1990 by 31.12.1991.
Page 3 of 39
Commercial Appeal No.08 of 2020
5. The work was not completed till 31.12.1991 then time was extended up to June 1994 but the work was not completed. Then after the work progressed slowly with intermittent stoppage till March 1994 and then after completely stopped till October 1998. The work restarted in November 1998 and subsequently a supplementary agreement dated 18.12.1998 was executed for completion of remaining work and some additional work up to June 2000 which was completed within time. The final bill was prepared and paid on 26.02.2004. The execution of work under the contractor and delay in its completion resulted in raising a number of claims by M/s Hardeo Singh related to non-payment of dues as per agreement, payment against additional work and losses suffered due to delay in the execution of the work.
6. In spite of repeated submission of the Claimant, correspondence and meetings between the parties when the claim was not settled the Claimant invoked arbitration clause 53 of General Condition of Contract (GCC) vide notice dated 27.09.2005.
7. Vide notice dated 27.09.05 the Claimant/ Respondent has requested the Chief Engineer to send a list of name of three persons, so that the Claimant could select one person from the said list and communicate the same to Chief Engineer for him to appoint a person as sole Page 4 of 39 Commercial Appeal No.08 of 2020 Arbitrator. On failure on the part of Chief Engineer, the Claimant as per clause-53 of GCC vide letter dated 09.11.2005 sent a list of name of three persons including Dr. C. K. Singh to the Chief Engineer to select and appoint one person from the said list as sole arbitrator. The Chief Engineer failed to select one person out of the list of three persons then the Claimant/Respondent vide letter dated 12.12.2005 has communicated the Chief Engineer that Dr. C. K. Singh may be appointed as sole arbitrator. No response was given by the Irrigation Department then Claimant/Respondent has filed an application U/s 11 (6) of the Arbitration and conciliation Act. 1996 before this Court for appointment of Arbitrator.
8. Before this Court, learned counsel for irrigation department made statement that the arbitrator has already been appointed then the case was dismissed on 19.01.2007 by the High Court. Accordingly, Ld. Dr. C. K. Singh was appointed as Sole Arbitrator in this case and vide award dated 11.7.2007 the learned sole Arbitrator ordered to pay a sum of Rs.26,68,34,267.92 paisa including the principal amount of Rs.11,26,21,041.21 and interest of Rs.15,42,13,226.71 to the respondent herein.
9. Being aggrieved with the Award passed by the learned Sole Arbitrator, the appellant herein filed Misc. Appeal u/s 34 of the Arbitration and Conciliation Act 1996 Page 5 of 39 Commercial Appeal No.08 of 2020 and under the relevant provisions of Commercial Courts Act 2016 before the Learned court of District Judge - XIV cum Presiding Officer, Commercial Court, Dhanbad and the Learned Court vide Judgment/Order dated 24.08.2018 has affirmed/upheld the Award dated 11.07.2007 passed by learned Sole Arbitrator by which the learned Sole Arbitrator has allowed the most of the claims of the Original Claimant.
10. Against the said order, the State has preferred the instant commercial appeal.
11. It is evident from the factual aspect that notice inviting tender was issued for construction of Ajay Barrage from 0 to 11 bay and its head regulator.
12. The work having been allotted in favour of the respondent as also as per the claim of the respondent, the same was completed but the amount has not been disbursed, hence, a dispute was raised in view of the arbitration clause as under Clause 53 of the contract.
13. The respondent made request for appointment of Arbitrator as also furnished the name for appointment of sole Arbitrator but when no decision was taken by the State of Jharkhand through Chief Engineer, Water Resources Department by accepting the insistence made for appointment of sole Arbitrator, it prompted the Page 6 of 39 Commercial Appeal No.08 of 2020 respondent herein to prefer an application under Section 11(6) of the Act, 1996.
14. The State of Jharkhand appeared and submitted that the request for appointment of sole Arbitrator referring the name of Dr. C.K.Singh, has been accepted.
15. The Court exercising the power under Section 11(6) of the Act, 1996 has rendered the application filed under Section 11(6) of the Act, 1996 to be infructuous.
16. The arbitral proceeding initiated. The State of Jharkhand through Secretary, Water Resources Department appeared before the sole Arbitrator and taken the ground of lack of jurisdiction to act as sole Arbitrator on the ground that the request so made for appointment of sole Arbitrator is contrary to the condition of contract as stipulated under Clause 52 whereby and whereunder the request for appointment of Arbitrator was to be made within 30 days from the date of order which was to be passed by the Superintending Engineer or if no order has been passed, but herein, the dispute was agitated before the Executive Engineer which was forwarded before the Superintending Engineer but the claim was rejected on 09.05.1998. Hence, the request for appointment of Arbitrator ought to have been made within 30 days from 09.05.1998.
Page 7 of 39
Commercial Appeal No.08 of 2020
17. But, herein the request for appointment has been made by invoking the arbitration clause as provided under Clause 53 of the General Condition of Contract (GCC) on 27.09.2005 which is much much after the period of 30 days.
18. The learned sole Arbitrator has considered the aforesaid ground but has discarded the same by assigning the reason that the decision of Superintending Engineer dated 09.05.1998 neither attained finality nor was conclusive in terms of clause 52 of the GCC to constitute a bar on the claimant/respondent to refer the disputes under Clause 53 of GCC.
19. Being aggrieved with the aforesaid Award, the State preferred Original Suit No.23 of 2017 before the District Judge-XIV-cum-Presiding Officer, Commercial Court, Dhanbad but the learned court vide order dated 24.08.2018 has affirmed the Award passed by the learned Sole Arbitrator.
Argument advanced on behalf of the appellant-State
20. Mr. Rajiv Ranjan, learned Advocate General appearing for the State of Jharkhand, has submitted that he is conscious with the power of the appellate court which is to be exercised under Section 13 of the Commercial Courts Act, 2015 since the restriction is there to the appellate court while exercising the power of appeal in the Page 8 of 39 Commercial Appeal No.08 of 2020 commercial disputes by re-appreciating the evidence, hence the sole ground has been taken in challenging the Award passed by the Sole Arbitrator having been agitated under the forum of Section 34 of the Act, 1996 with respect to the propriety of the appointment of Sole Arbitrator which is contrary to the condition stipulated under Clause 52 of the Contract.
21. It has been contended that under the Act, 1996, the contract being bilateral, is to be given strict adherence and there cannot be any deviation. Herein, the parties have agreed with respect to the conditions as stipulated in the contract. One of the conditions is as under Clause 52 and
53.
22. The Clause 52 provides specific condition of raising the dispute and settlement which finally is to be decided by the Superintending Engineer in case the request so made before the Executive Engineer has not been decided by way of settlement of dispute. The period to make request has been provided under Clause 52 is the 30 days.
23. It has been submitted that the arbitration clause is only to be invoked as provided under Clause 53 of the contract with 30 days from the date of rejection of the claim of the claimant or in case no instruction or decision has been taken. Therefore, the forum available under Section 34 of the Act, 1996 since has not appreciated the Page 9 of 39 Commercial Appeal No.08 of 2020 aforesaid specific condition in the contract, hence, the order passed by the concerned court in exercise of power conferred under Section 34 is not sustainable in the eyes of law and in consequence thereupon, the Sole Arbitrator since has entertained the claim even without taking into consideration the specific condition provided under Clause 52, as such, the Award passed by the learned Sole Arbitrator is also not sustainable in the eyes of law.
24. It has been contended that Clause 52 and 53 of the contract is to be read together. But, the learned court, while exercising the power under Section 34 of the Act, 1996, has come to the finding that both the Clauses i.e., Clause 52 and 53, are independent to each other.
25. Learned Advocate General, in order to buttress his argument, has relied upon the judgment rendered by Hon'ble Apex Court in the case of P.Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation and Others reported in (2009) 2 SCC 494. Argument advanced on behalf of the respondent- claimant
26. Per contra, Mr. Arun Kumar De, learned counsel appearing for the respondent-claimant, has defended the Award passed by the Sole Arbitrator as also the order passed by the concerned learned court under Section 34 of Page 10 of 39 Commercial Appeal No.08 of 2020 the Act, 1996 by declining to interfere with the Award passed by the Sole Arbitrator.
27. It has been contended that it is incorrect on the part of the appellant to take the ground that the request for appointment of Sole Arbitrator was made after the expiry of the period of 30 days. Such submission has been made on the ground that admittedly the request made for settlement of dispute in view of the conditions stipulated under Clause 52 of the contract was rejected on 09.05.1998 but, thereafter a supplementary agreement was executed for completion of remaining work + additional work up to June, 2000 which was entered on 18.12.1998.
28. The respondent, after completion of the work, has again raised his claim on 10.01.2005 which travelled to the Superintending Engineer, Irrigation Circle, Madhupur, Deoghar which finally was considered on 02.09.2005 and immediately on 27.09.2005 the claimant, respondent herein, has invoked the arbitration clause as provided under Clause 53 of the GCC and in pursuance thereto, the name of the Sole Arbitrator has also been furnished to the appellant which has also been accepted.
29. The further submission has been made that the fact about rejection of the claim by the Superintending Engineer on 09.05.1998 cannot be said to be prevailing date for the purpose of invoking the arbitration clause, Page 11 of 39 Commercial Appeal No.08 of 2020 reason being that the extension of time was given for completion of remaining work and additional work up to June, 2000 by virtue of entering into a supplementary agreement on 18.12.1998.
30. Thereafter, on completion of the entire work as per the agreement, when the bill was not paid and the issue was not settled, then again all the claim which was the subject matter of rejection by the Superintending Engineer vide order dated 09.05.1998 had again been agitated before the concerned engineer in pursuance to Clause 52 of the GCC which was again considered on 02.09.2005 and it is only thereafter and within 30 days from the said date, the arbitration clause has been invoked on 27.09.2005.
31. The matter would have been different if the supplementary agreement would not have been executed or the claim which is said to be rejected would not have been agitated again which was forwarded by the Executive Engineer vide communication dated 10.01.2005 and would not have been considered by the concerned Superintending Engineer vide covering letter dated 02.09.2005 addressed to the Chief Engineer, Water Resources Department, Government of Jharkhand.
32. Therefore, the argument which has been advanced on behalf of learned counsel for the appellant is not Page 12 of 39 Commercial Appeal No.08 of 2020 sustainable for the purpose of unjustifying the jurisdiction of the learned Sole Arbitrator.
33. The learned court exercising the power conferred under Section 34 of the Act, 1996 has taken into consideration this aspect of the matter and by giving a specific finding to that effect, has come to the conclusive finding that the Sole Arbitrator has not deviated from his jurisdiction said to be not in consonance with Clause 52 read with Clause 53 of the GCC.
34. It has been contended that the judgment upon which reliance has been placed rendered in the case of P.Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation and Others (Supra) is not applicable in the facts and circumstances of the present case since the factual aspect in the said case is quite different to the present one.
35. Based upon the aforesaid submission, learned counsel for the respondent has submitted that the impugned order may not be interfered with. Analysis
36. We have heard learned counsel for the parties and gone across the material available in the pleading.
37. This Court, before appreciating the argument advanced on behalf of the parties, deems it fit and proper Page 13 of 39 Commercial Appeal No.08 of 2020 to refer the power of judicial review in the matter of arbitral Award.
38. In the case of Associate Builders v. Delhi Development Authority reported in (2015) 3 SCC 49, the Hon'ble Apex Court while dealing with the scope of judicial review in the matter of an arbitral Award has taken into consideration the judgment passed in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 and has held at para 22 which is required to be referred herein which reads hereunder as:-
"22. In McDermott International Inc. v. Burn Standard Co. Ltd. [(2006) 11 SCC 181] , this Court held:
"58. In Renusagar Power Co. Ltd. v. General Electric Co. [1994 Supp (1) SCC 644] this Court laid down that the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality. A narrower meaning to the expression 'public policy' was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd. v. Saw Pipes Ltd. [(2003) 5 SCC 705] (for short 'ONGC'). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156] wherein the applicability of the expression 'public policy' on the touchstone of Section 23 of the Contract Act, 1872 and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/or Page 14 of 39 Commercial Appeal No.08 of 2020 otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Contract Act, 1872. In ONGC [(2003) 5 SCC 705] this Court, apart from the three grounds stated in Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.
59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter.
60. What would constitute public policy is a matter dependent upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular Government."
39. Further, the Hon'ble Apex Court in the case of PSA SICAL Terminals Pvt. Ltd. Vs Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others reported in 2021 SCC OnLine SC 508, has taken the similar view which has been observed at paragraph 43 of the judgment which is being referred hereunder as:- Page 15 of 39
Commercial Appeal No.08 of 2020 "43. It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible.
However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award."
40. In a recent judgment passed in Reliance Infrastructure Ltd. v. State of Goa reported in 2023 SCC OnLine SC 604, the Hon'ble Apex Court has reiterated its view and has observed at paragraph 48 which reads hereunder as:-
"48. In MMTC Limited (supra), this Court took note of various decisions including that in the case of Associate Builders (supra) and exposited on the Page 16 of 39 Commercial Appeal No.08 of 2020 limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act of 1996, particularly when dealing with the concurrent findings (of the Arbitrator and then of the Court). This Court, inter alia, held as under:--
"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An Page 17 of 39 Commercial Appeal No.08 of 2020 arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."Page 18 of 39
Commercial Appeal No.08 of 2020
41. It is evident from the judicial pronouncements referred hereinabove, that the appellate court while exercising the power regarding the illegality and propriety of the arbitral Award is not supposed to reappraise the evidence as also interference to the arbitral Award does not intend a review of the merits of the dispute, rather, it is limited to the situations whether the findings of the Arbitrator are arbitrary or capricious or perverse or when the conscience of the court shocks or when the illegality is not trivial but goes to the root of the matter.
42. Further, an arbitral Award may not be interfered with if the view taken by the Arbitrator is a possible view based on facts.
43. So far as the fact of the given case is concerned, for the purpose of execution of the work, a notice inviting tender was issued for Ajoy Barrage from 0 to 11 bay and its head regulator.
44. An agreement was executed in between the parties. The said agreement contains a clause of settlement of dispute as under Clause 52 and 53. It is evident that a clause has been inserted for settlement of the dispute in a case if the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, record or ruling of the Executive Engineer on any matter in connection with or arising out of the contract Page 19 of 39 Commercial Appeal No.08 of 2020 or the carrying out of the work to be unacceptable, he shall promptly ask the Executive Engineer in writing or written instructions or decision. Thereupon Executive Engineer shall give his written instructions or decision within period of 15 days of such request. The same, for ready reference, is being quoted hereunder as :-
"52. SETTLEMENT OF DISPUTE :
If the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, record or ruling of the EXECUTIVE EIGINEER on any matter in connection with or arising out of the contract or the carrying out of the work to be unacceptable, he shall promptly ask the EXECUTIVE ENGINEER in writing or written instructions or decision. Thereupon EXECUTIVE ENGINEER shall give his written instructions or decision within period of 15 days of such request. Upon receipt of the written instructions or decision the contractor shall promptly proceed without delay to comply with such instructions or decision.
If the EXECUTIVE ENGINEER fails to give his instructions or decision in writing a period of 15 days after being requested of if the contractor is dissatisfied with the instructions or decision of the EXECUTIVE ENGINEER the contractor may within 15 days after receiving the instructions or decision appeal to the SUPERINTENDING ENGINEER who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal. This shall give a decision within a period of 60 days after the contractor has given the said evidence in support of his appeal.Page 20 of 39
Commercial Appeal No.08 of 2020 If the contractor is dissatisfied with this decision, the contractor within a period of thirty days from receipt of the decision shall indicate his intension to refer the dispute to Arbitration, failing which the said decision shall be final and conclusive.
53. ARBITRATION:
All disputes or differences in respect of which the decision has not been final and conclusive shall be referred for arbitration to a sole arbitrator appointed as follows:
Within thirty days of receipt of notice from the contractor of his intention to refer the dispute to arbitration the Chief Engineer WATER RESOURCE DEPT., Deoghar shall send to the contractor a panel of three names of persons who shall all be presently unconnected with the Government. The contractor shall within fifteen days of receipt of this list select and communicate to the Chief Engineer the name of one person from the list who shall then be appointed as the arbitrator. If contractor fails to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one person from the list and appoint him as the sole arbitrator. If the Chief Engineer fails to send such a list within thirty days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days. The Chief Engineer shall then select one person from the list and appoint him as the sole arbitrator within fifteen days. If the Chief Engineer fails to do so the contractor shall communicate to the Chief Engineer the name of one officer from the list, who shall then be the sole arbitrator.
The arbitration shall be conducted in accordance with the provision of the Indian Arbitrator Act, 1940 or any statutory modification thereof.Page 21 of 39
Commercial Appeal No.08 of 2020 The arbitrator shall determine the amount of costs of arbitration to be awarded to either parties. Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor shall not be withheld unless they are the subject matter of the arbitration proceedings.
Neither party is entitled to bring a claim to arbitrations if the arbitrator has not been appointed before the expiration of thirty days after defect liability period."
45. It is, thus, evident so far as Clause 52 is concerned, that a clause has been inserted for settlement of dispute in a case if the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, record or ruling of the Executive Engineer on any matter in connection with or arising out of the contract or the carrying out of the work to be unacceptable, he shall promptly ask the Executive Engineer in writing or written instructions or decision. Thereupon Executive Engineer shall give his written instructions or decision within period of 15 days of such request.
46. It further stipulates that upon receipt of the written instruction or decision, the contractor shall promptly proceed without delay in complying with such instruction or decision.
47. If the Executive Engineer fails to give his instructions or decision in writing a period of 15 days after Page 22 of 39 Commercial Appeal No.08 of 2020 being requested of if the contractor is dissatisfied with the instructions or decision of the Executive Engineer the contractor may within 15 days after receiving the instructions or decision appeal to the Superintending Engineer who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal. The decision will be given within a period of 60 days after the contractor has given the said evidence in support of his appeal.
48. The further condition is that if the contractor is dissatisfied with this decision, the contractor within a period of thirty days from receipt of the decision shall indicate his intension to refer the dispute to Arbitration, failing which the said decision shall be final and conclusive.
49. Thereafter, the stipulation has been made under Clause 53 by providing the clause for arbitration. The same provides that all disputes or differences in respect of which the decision has not been final and conclusive shall be referred for arbitration to a sole arbitrator appointed as follows:-
Within thirty days of receipt of notice from the contractor of his intention to refer the dispute to arbitration the Chief Engineer Water Resource Department, Deoghar shall send to the contractor a panel of three Page 23 of 39 Commercial Appeal No.08 of 2020 names of persons who shall all be presently unconnected with the Government. The contractor shall within fifteen days of receipt of this list select and communicate to the Chief Engineer the name of one person from the list who shall then be appointed as the arbitrator. If contractor fails to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one person from the list and appoint him as the sole arbitrator. If the Chief Engineer fails to send such a list within thirty days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days. The Chief Engineer shall then select one person from the list and appoint him as the sole arbitrator within fifteen days. If the Chief Engineer fails to do so the contractor shall communicate to the Chief Engineer the name of one officer from the list, who shall then be the sole arbitrator.
50. It also needs to refer herein that the learned Advocate General appearing for the appellant State, has submitted that he is only raising one issue in questioning the Award, i.e., the jurisdiction of the Sole Arbitrator to act as a Sole Arbitrator in view of non-observance of the condition stipulated under Clause 52 and 53 which is based upon the argument that there cannot be any deviation from the terms and conditions of the contract Page 24 of 39 Commercial Appeal No.08 of 2020 once the contract is concluded one. Therefore, this Court is only dealing with the aforesaid ground.
51. The learned Advocate General, while arguing the case raising the ground of non-observance of the condition stipulated under Clause 52 and 53, has submitted that Clause 52 and 53 are to be taken together but the learned Sole Arbitrator has concluded that both are independent to each other.
52. While on the other hand, learned counsel appearing for the respondent has submitted that the condition stipulated under Clause 52 and 53 cannot be said to be deviated on the basis of the factual background, particularly, the request for appointment of Sole Arbitrator in terms of Clause 52 and 53 has been made within 30 days from the decision taken by the Superintending Engineer.
53. We, in order to consider the rival submissions and adverting to the factual aspects, need to refer herein some undisputed fact.
54. Admittedly herein, the tender was invited for construction of Ajoy Barrage from 0 to 11 bay and its head regulator at Sikatia. The tender was awarded in favour of respondent M/s Hardeo Singh by executing agreement No.1-LCB of 1989-90 dated 01.01.1990 for Rs.13,31,64,735/-. The work since was not completed Page 25 of 39 Commercial Appeal No.08 of 2020 within the stipulated time, as such, the time was extended up to June 1994 vide order dated 31.12.1991. The work was stopped in between the month of March, 1994 and October, 1998. The respondent had submitted a claim on 28.06.1997 as per Ext. C-11 against the work of construction of Ajoy Barrage from 0 to 11 bay and its head regulator. However, the said claim was rejected by virtue of rejection report of the office of Superintending Engineer, Irrigation Circle, Madhupur on 09.05.1998.
55. The further undisputed fact is that the State has entered into a supplementary agreement which was executed on 18.12.1998 for completion of remaining work + additional work up to June, 2000.
56. The claimant, respondent herein, has completed the work sometime in the month of June, 2000. The final bill was prepared and as per the State appellant, it was paid.
57. But the claimant-respondent has submitted claim on 02.09.2005 against the work of construction of Ajoy Barrage from 0 to 11 bay and its head regulator along with the additional work as per the supplementary agreement dated 18.12.1998.
58. We have considered the submission of fresh claim before the Executive Engineer which was forwarded by the concerned Executive Engineer vide letter dated 10.01.2005 Page 26 of 39 Commercial Appeal No.08 of 2020 (Ext. C-31) to the Superintending Engineer, Irrigation Circle, Madhupur appending therein all the claims.
59. The Superintending Engineer, vide covering letter dated 02.09.2005 has communicated the same to the Chief Engineer (Ext.C-34).
60. The question which has been raised on behalf of the appellant that the period to count to invoke the Clause for settlement of disputed is to be counted from 09.05.1998 the day when the rejection report was issued by the office of the Superintending Engineer (Ext.C-16) but the arbitration clause was invoked on 27.09.2005.
61. This Court is to consider :-
Whether the claim which was said to be rejected on 09.05.1998 is to be considered for the purpose of counting the period of 30 days or it be counted from the date of fresh order dated 02.09.2005?
62. This Court, in order to answer the said issue, deems it fit and proper to scrutinize the report dated 09.05.1998 (Ext.C-16) with the report dated 02.09.2005 (Ext. C-34) to come to the conclusion as to whether the report is with respect to the same work in entirety or the subsequent consideration is only with respect to the work pertaining to the supplementary agreement dated 18.12.1998.
63. If the fresh report is only with respect to the work executed by virtue of supplementary agreement dated Page 27 of 39 Commercial Appeal No.08 of 2020 18.12.1998 then what is being contended on behalf of the appellant will be said to be correct but contrary to the same, if again the claim having been agitated by the claimant by raising all the claims which had been rejected vide Ext. C-16 dated 09.05.1998 has been considered afresh by taking fresh decision on 02.09.2005 (Ext.C-34), then the period of 30 days is to be counted from 02.09.2005 and in that circumstances, what has been contended on behalf of the claimant will be said to be correct.
64. This Court, on scrutiny of the rejection report dated 09.05.1998 as available on record, by way of Ext.C-16, has found that altogether 19 claims have been taken note of which are being referred hereunder as :-
Claim No.1 - Claim for payment of Dewatering on extra Item of work for carriage of cement and Rod including cost escalation Rs.3,84,670.75.
Claim No.2 - Payment for carriage cost of departmental materials such as (a) cement (b) M.S. Rod (c) boulders (d) Stone Metal € Stone Chips (F) Stone sprawls which were issued by the department at departmental godowns or departmental stock yard and the same were carried by us by mechanical transport up to work site Rs.13,07,786.02. Page 28 of 39
Commercial Appeal No.08 of 2020 Claim No.3 - Claim for refund of excess recovery made for the cost of departmental materials amounting to Rs.9,93,585.72.
Claim No.4 - Payment for price escalation on value of work paid as per terms and conditions to the agreement Rs.3,02,77,528.00.
Claim No.5 - Payment for shuttering, centering, staging and placing reinforcement for construction of R.C. beam of Road Bridge of Ajoy Barrage in bay No.1 and 2 as well as for losses due to flood in River on 09.10.94 amounting to Rs.17,73,893.92.
Claim No.7 - Payment for supplying, fitting then removing from site to godown 12 Nos. of elastomeric bearing plates of size (500 x 360 x 99) mm for road bridge of Ajoy Barrage as per specification and direction of E/I Rs.1,54,057.30. Claim No.8 - Payment for 2000M2 20 MM thick salitex board procured by us for use in the expansion joint of Ajoy Barrage which was not used due to a decision by Chief Engineer amounting Rs.4,86,322.60.
Claim No.9 - Payment for fitting, fixing and laying in position of first stage embedded parts in gate grooves of Ajoy Barrage amounting to Rs.7,48,680.00. Claim No.10 - Claim for construction (5 times in 5 season after flood) of road across river Ajoy in U/s side of Barrage linking the village Road of Sikatia and Murgabani for Page 29 of 39 Commercial Appeal No.08 of 2020 carriage of construction materials such as Boulders, stone metal and stone chips from quarry in the right side of river amounting to Rs.20,91,879.76.
Claim No.11 - Payment for repair of road from Sarath to Sikatia amounting to Rs.11,23,574.64. Claim No.12 - Payment for rent of Godown in industrial area of Jasidih and at Deoghar in which departmental cement was stored for which rent was paid by us - Rs.92,769.78.
Claim No.13 - Payment for loss of profit and extra establishment due to delay of work by the department amounting to Rs.7,35,38,658.71.
Claim No.14 - Payment for labours engaged by us in guarding departmental material stored in stockyard at Ajoy Barrage site amounting to Rs.19,98,000.00. Claim No.15 - Payment for construction of extra number of cross coffer dam in river portion due to construction period prolonged on account of failure of department to supply departmental materials etc. in time amounting to Rs.1,60,97,550.22.
Claim No.16 - Payment for removal of the quantity of coffer dam after stoppage of work of Ajoy Barrage amounting to Rs.1,69,66,102.39.
Claim No.17 - Payment for (A) losses and (B) extra work done due to (i) flood in river Ajoy and (ii) failure of Page 30 of 39 Commercial Appeal No.08 of 2020 department in supplying required quantity of departmental materials like cement and M.S. Rod amounting to Rs.32,34,997.50.
Claim No.18 - Payment of Claim for idle labour, machineries and transport vehicle including their operator during closure period of work due to departmental failure in supplying cement and M.S. Rod etc. amounting to Rs.1,25,97,021.60.
Claim No.19 - Payment for cost of dewatering of working area for recommencement of work after closure due to failure of department to supply of departmental materials like cement and M.S. Rod etc. amounting to Rs.85,68,000.0
65. The consideration of claim dated 02.09.2005 is also with respect to the some claims which were subject matter of report dated 09.05.1998 (Ext. C-16), for ready reference the same is being referred hereunder as :-
Claim Item No. 1: Claim for Payment of the dewatering on extra item of work for carriage of cement and rods including cost of escalation there on amounting Rs.4,81,916.71.
Claim Item No. 2: Payment for price escalation ÖN VALUE OF WORK PAID" as per terms and conditions of the agreement amounting to Rs.9,90,31,117-00.
Claim Item No. 3: Payment for shuttering, centering, staging and placing reinforcement for construction of RCC Page 31 of 39 Commercial Appeal No.08 of 2020 beam of road bridge of Ajay Barrage in bay No. 1 and 2 as well as for losses due to flood in River on 09/10/94 amount to Rs.20,85,182.22 Claim Item No. 4: Claim for construction (5 times in 5 seasons after flood) of road across river Ajay in U/S side of Barage linking in village road of sikatia and Murgabani for carriage of construction materials such as boulders, stone metal and stone chips from quarry in right side of River amounting to Rs.20,91,879.76 Claim Item No. 5: Payment of repair of road from Sarath to Sikatia amounting Rs.14,99,063.43 Claim Item No. 6: Payment for rent of godown in industrial area of Jasidih and and Deoghar in which departmental cement was stored for which rent was paid by us amounting to Rs.1,51,875.18 Claim Item No. 7: Payment for loss and profit and for extra establishment due to delay of work by department amounting to Rs.9,41,53,015.45 Claim Item No. 8: Payment for labour engaged by us in guarding of departmental materials stored in stock yard at Ajay Barrage site amounting to Rs.28,62,000.00 Claim Item No. 9: Payment for construction of extra No. of cross coffer dam in river portion due to prolonging of construction period on account of failure of department to Page 32 of 39 Commercial Appeal No.08 of 2020 supply departmental materials and payment etc. in time accounting to Rs.21,26,302.49 Claim Item No. 10: Payment for removal the quantity of coffer dam after stoppage of work of Ajay Barrage amounting to Rs.2,15,73,398.65 Claim Item No. 11: Payment for (a) losses and (b) Extra work due to (i) flood in river Ajay and (ii) failure of department in supplying required quantity of departmental materials like cement and M/S Rod amounting to Rs.32,34,997-50 Claim Item No. 12: Payment of claim for non-utilization of labour, machineries and transport vehicles including their operator during closure period of work due to departmental failure in maintaining construction of progress of work amounting to Rs.1,56,47,089.18 Claim Item No. 13: Payment for loss of dewatering of working area for recommencement of work after closure due to failure of department to supply departmental materials like cement of and M/S rod etc. amounting to Rs.8,56,800.00 Claim Item No. 14: Claim for payment of Rs.1,13,17,725.92 on account of interest on amount of 32 nd on A/C bill and also escalation due to keeping the payment pending by the department.Page 33 of 39
Commercial Appeal No.08 of 2020
66. It is, thus, evident that the claims which were said to be rejected by virtue of report as per Ext.C-16 dated 09.05.1998, has again been considered but again some of the claims were rejected vide Ext.C-34 dated 02.09.2005.
67. The day when it was rejected for the first time vide Ext.C-16, there was no occasion for the respondent to invoke the arbitration clause, reason being that, immediately after the same, the appellant State has entered into a supplementary agreement which was executed on 18.12.1998 for completion of remaining work + additional work up to June, 2000.
68. The work in entirety, as per the original agreement dated 01.01.1990 and the supplementary agreement dated 18.12.1998 have been completed and the claimant thereafter has again raised the claim and the same was again considered by the Superintending Engineer and sent to the Chief Engineer.
Conclusion
69. This Court, therefore, is of the view that since the Executive Engineer or the Superintending Engineer, exercising the jurisdiction as per the condition stipulated under Clause 52 of the contract, has taken decision on 02.09.2005 in supersession to the decision dated 09.05.1998, hence, the cut of date to count the period of 30 days will be from 02.09.2005.
Page 34 of 39
Commercial Appeal No.08 of 2020
70. As has been referred hereinabove, if the claim which was rejected vide Ext.C-16 on 09.05.1998 would not have been made part of the reconsideration in the report dated 02.09.2005 (Ext.C-34), then what is being contended on behalf of the appellant will be said to be correct and in that circumstances the request for resolution of dispute which was required to be filed by the claimant within 30 days only with respect to the work executed by virtue of the supplementary agreement.
71. But the same cannot be said to be an occasion in the facts of the present case, reason being that when the supplementary agreement was executed extending the work for completion of remaining work + additional work up to June, 2000 and after submission of bills when it was not being paid, in that circumstances the claim has again been re-agitated but not finally decided vide Ext.C-34, as such, the occasion has come for the claimant to invoke the arbitration clause as under Clause 53 of the GCC.
72. Herein, the arbitration clause has been invoked on 27.09.2005 (Ext.C-35) which is within the period of 30 days. Hence, the argument which has been advanced that the Sole Arbitrator has exceeded its jurisdiction in deciding the dispute appears to be incorrect.
73. This Court, having discussed the aforesaid factual aspect, has considered the finding so recorded by the Page 35 of 39 Commercial Appeal No.08 of 2020 learned Sole Arbitrator on the issue and has found that the same has well been taken into consideration by giving a reason after thoughtful consideration thereof that the rejection report dated 09.05.1998 cannot be said to attain finality and nor was exclusive in terms of Clause 52 of the GCC to constitute a bar on the claimant to refer the dispute under Clause 53 of the GCC nor does the same take away the jurisdiction of the present Arbitral Tribunal to adjudicate the claims of the claimant.
74. Such conclusive finding based upon the discussion made hereinabove, according to our considered view, cannot be said to suffer from an error.
75. The said issue has also been taken into consideration by the concerned court while exercising the power under Section 34 of the Arbitration and Conciliation Act, 1996 while answering the Issue No.2 and 4, the entire factual aspect has been taken note of and the learned court has approved the finding so recorded by the learned Sole Arbitrator holding therein that, based upon the factual aspect and taking the 30 days from 02.09.2005, the learned Sole Arbitrator was well within his jurisdiction to decide the issue.
76. The learned Advocate General has advanced his argument that while passing the Award, the learned Sole Arbitrator has considered Clause 52 and 53 of the GCC Page 36 of 39 Commercial Appeal No.08 of 2020 independent to each other and to demonstrate his argument, he has relied upon the judgment rendered by Hon'ble Apex Court in the case of P.Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation and Others (Supra).
77. We have gone through the said judgment rendered in the case of P.Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation and Others (Supra) and found that the pari materia condition is there as under Clause 54 and 55. The Hon'ble Apex Court has been pleased to hold that condition stipulated under Clause 52 and 53 are dependent to each other.
78. But, herein, adverting to the factual aspect of the present case and as per the discussion made hereinabove, the learned Sole Arbitrator has not gone into the premise by considering the condition stipulated under Clause 52 and 53 by segregating both the conditions, rather, based upon the factual aspect, i.e., reconsideration given by the competent authority as per the contract and rejecting the same again on 02.09.2005, the period of 30 days has been considered from the said date.
79. Hence, this Court is also of the view by going through Clause 52 and 53 that the same cannot be said to be independent to each other.
Page 37 of 39
Commercial Appeal No.08 of 2020
80. But herein, neither the Sole Arbitrator nor the court exercising the power under Section 34 of the Arbitration and Conciliation Act, 1996 has considered both the conditions as under Clause 52 and 53 of the contract independent to each other, rather, the cut-off date has been counted from 02.09.2005 discarding the cut-off date which, as per the appellant was to be counted from 09.05.1998, the first report, which we have already dealt with herein but at the risk of repetition, the same is again referred herein that the claim was again re-agitated after execution of supplementary agreement on 18.12.1998. The opinion was given by the Executive Engineer to the Superintending Engineer vide covering letter dated 10.01.2005 and the Superintending Engineer vide covering letter dated 02.09.2005 has sent the same to the Chief Engineer, Water Resource Department, Deoghar.
81. As such, the cut-off date for counting the period of 30 days as has been counted by learned Sole Arbitrator, having been accepted by the court exercising the power under Section 34 of the Arbitration and Conciliation Act, 1996.
82. This Court, since is exercising the power of appeal as per the provision made under Section 13 of the Commercial Courts Act, 2015 and as per the ratio laid Page 38 of 39 Commercial Appeal No.08 of 2020 down by Hon'ble Apex Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd., (Supra) by which it has been propounded that the court exercising the aforesaid power is having very limited jurisdiction and the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality.
83. This Court, based upon the discussion made hereinabove and the material available on record, is of the view that no such ground is available herein.
84. Accordingly, this Court is of the view that the instant appeal deserves to be dismissed.
85. Accordingly, the instant appeal fails and is dismissed.
86. Pending interlocutory application, if any, also stands disposed of.
(Sujit Narayan Prasad, J.) I agree (Arun Kumar Rai, J.) (Arun Kumar Rai, J.) Birendra/ A.F.R. Page 39 of 39 Commercial Appeal No.08 of 2020