Gauhati High Court
N H P C Ltd & 2 Ors vs M/S Oriental Engineer & Anr on 1 April, 2016
Author: Suman Shyam
Bench: Suman Shyam
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM
AND ARUNACHAL PRADESH)
Arb. App. 21/2012
1. The NHPC Limited (formerly known as National
Hydroelectric Power Corporation Limited), a company
wholly owned by the Government of India, incorporated
under the Companies Act, 1956, having its registered
office at Sector-33, Faridabad-121 003, Haryana,
represented by its Deputy Manager (Mech), Subansiri
Lower Project, Assam.
2. The Chief Engineer (M), NHPC Limited, Subansiri Lower
H.E. Project, Gerukamukh via Gogamukh, District :
Dhemaji, Assam- 787 035.
3. The Senior Manager (M), NHPC Limited, Subansiri
Lower H.E. Project, Gerukamukh via Gogamukh, District
: Dhemaji, Assam- 787 035.
...........Appellants/ Applicants
-Versus -
1. M/s. Oriental Engineers, R.G. Baruah Road, Opposite
Ambika Service Station, 1st Floor, Trishant, Guwahati-
781024.
..........R espondents/ Defendants
For the Appellants : Mr. R.K.D. Choudhury, Adv.
For the Respondents : Mr. R. Hussain, Adv
BEFORE THE HON'BLE MR. JUSTICE SUMAN SHYAM Date of hearing : 08/03/2016 Date of judgement : 01/04/2016 Arb. App 21 of 2012 - CAV Page 1 of 26 Cases relied upon :-
(i) (1989) 2 SCC 38 (M/s. Sudarshan Trading Co. vs. Government of Kerala and another);
(ii) (2007) 2 SCC 453 (Ramanth International Construction (P) Ltd. Vs. Union of India);
(iii) (1999) 9 SCC 283 (Rajasthan State Mines & Minerals Ltd. Vs. Easter Engineering Enterprises and another);
(iv) (2003) 8 SCC 154 (Bharat Cooking Coal Ltd. Vs. Annapurna Construction) ;
(v) (2006) 1 SCC 86 (State of Rajasthan Vs. Nav Bharat Construction Co.)
(vi) (2010) 13 SCC 377 (Oil and Natural gas Corporation Vs. Wig Brothers Builders and Engineers Private Limited).
(vii) (2003) 5 SCC 705 ( Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd).
(viii) (2007) 13 SCC 544 (Food Corporation of India and others Vs. Vikash Majdoor Kamdar Sahkari Mandli Limied).
(ix) (2015) 5 SCC 739 ( Swan Gold Mining Limited Vs. Hindustan Copper Limited),
(x) 2014(5) RAJ 301(Del) (State Trading Corporation of India Ltd. Vs. M/s.
Toepfer International Asia Pte Ltd.),
(xi) (1989) 2 SCC 38 (M/s. Sudarshal Trading Co. Vs. Government of Kerala and another).
(xii) (1979) 2 SCC 70 (M/s. Hind Construction Contractors by its sole Proprietor Bhikamchand Mulchand Jain (Dead) by LRs Vs. State of Maharashtra).
(xiii) (2011) 5 SCC 758 (G.J. Engineers Pvt. Limited Vs. Union of India and another)
(xiv) (2009) 9 SCC 357 (K.V. Mohammed Zakir Vs. Regional Sports Centre),
(xv) Mc. Dermot International Inc vs.Burn Standard Co. Ltd (2006) 11 SCC 181 Arb. App 21 of 2012 - CAV Page 2 of 26 JUDGEMENT AND ORDER (CAV)
1. Heard Mr. R.K. D. Choudhury, learned counsel appearing for the appellant.
Also heard Mr. R. Husain, learned counsel representing the respondent/claimant.
2. This appeal has been preferred against the judgment and order dated 14/06/2012 passed by the learned District Judge, Kamrup, Guwahati in Misc. (Arb) Case No. 642/2008 dismissing the application filed by the present appellants under Section 34 of the Arbitration and Conciliation Act, 1996 praying for setting aside the arbitral award dated 29/09/2008 passed by the sole arbitrator. In order to appreciate the contentions of both the parties in this appeal, it would be apposite to briefly state the factual back ground of the case set out by the respective parties before the learned sole Arbitrator.
3. The respondent No 1 was the claimant. The case of the respondent No1/ Claimant before the Sole Arbitrator, in brief , is that it is a proprietorship concern represented by its proprietor Shri Kangkan Dutta and carries on business of Builders, Architect, Engineer and Designers under the name and Style of M/s Oriental Engineers. Pursuant to a tender floated by the appellants, the work of earth filling for the Railway siding at Senchoa was awarded to the claimant for an amount of Rs. 1,37,61,881/-,. Accordingly, an Award Letter dated 28/06/2004 was issued to the claimant whereafter, a contract agreement was also signed by and between the parties on 06/07/2004.
4. As per the terms and conditions of the contract, the claimant /contractor was required to commence the work within 10(ten) days from the date of receipt of the award letter and thereafter complete the same within three months i.e. on or before 07/10/2004. However, despite the fact that the claimant had Arb. App 21 of 2012 - CAV Page 3 of 26 mobilized all resources to start the work yet, due to inclement weather conditions , the work could not be commenced on time as the "borrow pit"
from where the earth was required to be extracted as well as the dumping grounds were completely submerged under water due to heavy rainfall. It is also the case of the claimant that the progress of the work was hampered due to poor weather conditions, which was a factor totally beyond the control of the claimant. That apart, due to water logging of the borrow pits the claimant was also compelled to carry earth from a lead (distance ) upto 16 kms thereby, incurring additional expenditure not contemplated under the contract agreement. As per the schedule appended to the Award Letter, rates for lead of upto 7 kms only was provided. However, since the claimant had to carry earth from a distance beyond 7 kms hence, the claimant had claimed extra rate for the quantity of earth carried from the additional distance.
5. It was the further case of the claimant that taking note of the factors that had delayed the progress of the work, the departmental authorities had extended the validity period of the contract from time to time and eventually, by issuing the letter dated 24/06/2005, the claimant was allowed to complete the work by 20/07/2005. The claimant had asserted that it had completed the work in the month of September, 2005 where after joint measurement of the work was also carried out in October , 2005. Therefore, the claimant had requested for payment of the work done. Notwithstanding the same, department had denied such claim of the claimant and on the contrary stated that 17451.08 cum of earth work was still incomplete. By issuing the letter dated 17/11/2005 the authorities had fixed 24/11/2005 for carrying out joint measurement of the work so as to assess the balance quantity of work that, according to the respondents, still remained to be executed by the claimant. By the letter Arb. App 21 of 2012 - CAV Page 4 of 26 dated 05/12/2006, the claimant had requested the departmental authorities to prepare the final bill and to make payment by taking into account the 20,000 cum (approx) of earth which had been taken on loan by other contractors as per the direction of the Site Engineer. However, instead of doing so, by the letter dated 06/02/2006, the appellants/departmental authorities had fixed 07/02/2006 for joint measurement of the work. Thereafter, by issuing a letter dated 13/02/2006 the department had claimed that that approximately 17,451.08 Cum of earth work has still remained incomplete and, therefore, asked the claimant to complete the said work by 20/02/2006, failing which the contract was to be treated as terminated with effect from 21/02/2006 and the balance work would be completed at the risk and cost of the claimant. In the said letter it was also mentioned that this was to be treated as "final notice".
6. On 27/02/2006, the respondent No.1/claimant had sent a reply denying that 17,451.08 Cum of earth work had remained incomplete by the claimant . Although the claimant had denied such claim of the department and on the contrary demanded payment for the work already executed by it, instead of making payment due to the claimant, the departmental authorities had issued another final notice of termination of contract dated 04/03/2006 fixing 13/03/2006 for joint measurement. Eventually, by the letter dated 27/03/2006, the departmental authorities had terminated the contract and forfeited the security deposit.
7. It was the case of the claimant that the departmental authorities have not paid the amount due and payable to the claimant on account of the earth work executed by it as per the award letter and have also not paid the additional expenditure incurred by the claimant for carrying earth from a lead of nearly 16 Kms. Due to non-payment of the outstanding dues of the Arb. App 21 of 2012 - CAV Page 5 of 26 claimant, a dispute arose by and between the parties which was referred to Arbitration. Before, the learned Sole Arbitrator, the following claims were made by the claimant :-
Claim No.1 Rs. 10,50,000.00 Payment for work already done final bill Claim No. 2 Rs. 45,00,000.00 The cost of extra lead made against the earth executed from march, 2005 to September, 2005.
Claim No. 3 Rs. 2,40,000.00 Being the cost extra lead for earth work executed during November and December 2004 as the water was logged as the nearest borrow pit (from where the contractor in support to carry earth as per terms of agreement of 7 k.m. But in the starting period petitioner have executed earth work in the interest of work and with prior information from direction of 9 k.m.
Claim No.4 Nil Earth work executed between January to March from nearest borrow pit since the season was dry at the time at C.A. rate quantity executed was 60,000 M3.
Claim No. 5 Rs. 31,80,000.00 Claim on account of earth stacked at the side but utilised by officers and not taken in to account during April to October, 2005, 20,000 M3 Approx.
Claim No. 6 Rs. 6,88,095.00 Refund of security deposit __________________ Rs. 97,58,095.00 Claim No. 7 Interest @ 18% per annum from date of claim till payment.
Claim No. 8 Arb. App 21 of 2012 - CAV Page 6 of 26 A declaration to the effect that so called termination of contract is illegal, arbitrary and unjustified (details of claim are given in Annexure-A).
8. Resisting the claim petition the appellants ( respondents before the Arbitrator) herein had filed their written statement contending inter -alia that as per the condition No.2 of the Special Conditions of Contract (SCC), the bidder was required to visit the site before tendering to make himself aware about the cost and availability of various inputs like earth, labour, transportation, working conditions and climate etc. and make himself familiar with various factors which may affect the execution of the work. As such, it was obvious that the claimant having assessed the overall situation had entered into the contract agreement wherein, the quantity of work, the time schedule as well as the rate has been clearly spelt out. Despite the same, the claimant did not start the work as per the terms of the contract but the work was commenced only 27/09/2004 after a notice was issued by the departmental authorities asking the contractor to expedite the work failing which action would be taken. It is also the stand of the appellants that despite repeated requests made by the department, the claimant could not show satisfactory progress in the work as a result of which extension of time had to be granted to the claimant on as many as 6 (six) occasions finally extending the contract upto 20/09/2005 . It had also been stated that extension was granted to the claimant on six occasions with a view to keep the contract alive and the same was done without prejudice to the rights and interest of the NHPC to levy penalty on account of delay in progress of the work. The Appellants had also claimed that earlier the claimant had also requested for granting additional time for completion of the work and on consideration of such request, extension of Arb. App 21 of 2012 - CAV Page 7 of 26 time was granted upto 20/09/2005 by the letter dated 22/07/2005 issued by the department.
9. It is the pleaded stand of the department in their written statement that the claimant did not complete the work even after the 6th extension of time granted upto 20/09/2005 and instead the claimant had completely stopped the work in the month of December, 2005, when the claimant was asked to remain present for joint measurement of the work to be taken on 24/11/2005 as per clause No. 44.4 of the GCC by issuing the letter dated 17/11/2005 the same was also not responded to by the claimant. The departmental authorities have denied the statement made by the claimant that the earth work was completed towards the end of September, 2005 in all respect and that joint measurement was taken in the month of October, 2005. It has also been denied in the written statement that 20,000 Cum of earth was taken as loan by the other contractors as per the direction of the site in-charge.
10. As regards the claims made in the claim petition filed by the claimant, the appellants/departmental authorities have denied the claim no.1 on the ground that the same was without any basis. That apart, the claim Nos. 2 and 3 of the claimant contractor were also denied on the ground that the same was beyond the terms and conditions of the contract. The rest of the claims have also been repudiated by the departmental authorities in their written statement.
11. The respondent no.1/claimant had filed a rejoinder affidavit reiterating the stand taken in the statement of claim.
12. During the proceedings before the sole Arbitrator, both the parties had adduced evidence. After hearing the learned counsel for the parties and on a meticulous examination of the evidence available on record, the learned sole Arb. App 21 of 2012 - CAV Page 8 of 26 Arbitrator had passed the Arbitral award dated 29/08/2008 allowing the claim Nos. 1, 2 and 7 while rejecting the remaining claims.
13. Being aggrieved by the impugned arbitral award dated 29/08/2008, the appellants as applicants had filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after referred to as the Act of 1996) for setting aside the arbitral award dated 29/08/2008 which was numbered and registered as Misc (Arb) case No. 642/2008. Upon hearing the learned counsel for the parties, the learned District Judge, Kamrup had passed the judgment and order dated 14/06/2012 in Misc. (Arb) case No. 642/2008 dismissing the said application inter- alia holding that the appellants/applicants had failed to make out any ground for interfering with the arbitral award.
14. Being aggrieved by the aforesaid judgment and order dated 14/06/2012, the applicants as appellants have preferred the instant appeal under the provisions of Section 37 of the Act of 1996.
15. At the outset, Mr. R.K.D. Choudhury, learned counsel for the appellant submits that the appellants are not disputing the entitlement of the respondent No. 1/claimant in respect of claim No. 1 and, therefore, are not challenging the award of Rs. 10,50,000/- made by the learned sole Arbitrator in favour of the respondent No. 1/claimant against the claim No.1. The learned counsel, however, submits that the amount of Rs. 45 lakhs awarded under claim No. 2 is contrary to the terms and conditions of the contract and as such the same is liable to be set aside since the said amount has been awarded by the learned sole Arbitrator by travelling beyond the contract agreement. Mr. Choudhury submits that it is settled law that the Arbitrator would not have the authority or jurisdiction to pass an award entertaining a claim which is either contrary to the terms and conditions of the contract or when the same is beyond the Arb. App 21 of 2012 - CAV Page 9 of 26 scope and ambit of the contract agreement. The learned counsel submits that in the present case, as per the schedule appended to the award letter dated 28/06/2004 rates up to 7 km lead was only fixed under the contract agreement and as such the Arbitrator could not have awarded any amount for carriage cost beyond the 7 km lead since the same would be beyond the scope of the contract agreement. In support of his aforesaid argument, Mr. Choudhury has relied upon the decisions of the Hon'ble Supreme Court reported in (1989) 2 SCC 38 (M/s. Sudarshan Trading Co. vs. Government of Kerala and another); (2007) 2 SCC 453 (Ramanth International Construction (P) Ltd. Vs. Union of India); (1999) 9 SCC 283 (Rajasthan State Mines & Minerals Ltd. Vs. Easter Engineering Enterprises and another); (2003) 8 SCC 154 (Bharat Cooking Coal Ltd. Vs. Annapurna Construction) ; (2006) 1 SCC 86 (State of Rajasthan Vs. Nav Bharat Construction Co.) and (2010) 13 SCC 377 (Oil and Natural gas Corporation Vs. Wig Brothers Builders and Engineers Private Limited).
16. By referring to the observations made by the learned sole Arbitrator in the arbitral award while rejecting the claim Nos. 3 and 5, the learned counsel for the appellant submits that the claim Nos. 3 and 5 were also on account of additional payment for earth work executed from extra 'Lead' and was identical with claim No. 2 with the only exception that the period covered by claim No. 3 and 5 were for the months of November and December, 2004. The reasons which were cited by the learned sole Arbitrator for rejecting the said claims, according to the learned counsel, are squarely applicable even in case of claim No.2. However, notwithstanding the same , claim No. 2 was allowed while rejecting the similar claim Nos. 3 and 5 .
Arb. App 21 of 2012 - CAV Page 10 of 26
17. That apart, submits Mr. Choudhury, the learned sole Arbitrator has displayed bias against the appellant which was evident on the face of the record, inasmuch as, the claim No. 2 was awarded by the Arbitrator entirely on the basis of photocopies of documents regarding measurement of the work which did not even bear the signature of the authorities. However, the photocopies of the measurement book produced by the appellants was not taken on record on the ground that the originals were not produced .Mr. Choudhury contends that the impugned Arbitral Award is not only patently illegal but the same is also liable to be set aside for being in conflict with the Public Policy in India. The learned counsel for the appellants, therefore, submits that the learned District Judge had failed to appreciate the aforesaid aspect of the matter and thereby erroneously rejected the application filed by the appellant for setting aside the arbitral award. In support of his aforesaid contention, Mr. Choudhury has relied upon the decision of the Hon'ble Supreme Court reported in (2003) 5 SCC 705 ( Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd).
18. Mr. R. Hussain, learned counsel for the respondent No.1/claimant, on the other hand, submits that as regards the claim No. 2, the respondent's witness (RW-
1) himself had admitted that the measurement included in Ext. 2(2) were correct and authentic. The learned sole Arbitrator has taken note of such oral evidence adduced by the RW-1 while appreciating the photocopies of the measurement books produced by the claimant contractor in support of his claim. Mr. Hussain further submits that the stand of the appellant/respondents is that the claim No. 2 was contrary to the terms and conditions of the contractor although it is nowhere being denied or disputed by the appellants/ respondents the authenticity of the claim made by the claimant/ contractor that he had actually carried the aforesaid quantity of earth work from a lead Arb. App 21 of 2012 - CAV Page 11 of 26 up to 16 Kms due to the prevailing conditions. The contractor had executed the said work with due intimation to the departmental authorities. Since the work was not done for gratuitous purposes, hence, submits Mr. Hussain, the claimant was entitled to recover the compensation for the additional expenditure incurred by him and the claim has been rightly awarded by the Sole Arbitrator by applying the principles of quantum meruit. In support of his argument, the learned counsel has relied upon a decision of the Apex Court reported in (2007) 13 SCC 544 (Food Corporation of India and others Vs. Vikash Majdoor Kamdar Sahkari Mandli Limied).
19. By relying upon the decision of the Hon'ble Supreme Court in the case of (2015) 5 SCC 739 ( Swan Gold Mining Limited Vs. Hindustan Copper Limited) as well as a decision of the Delhi High Court reported in 2014(5) RAJ 301(Del) (State Trading Corporation of India Ltd. Vs. M/s. Toepfer International Asia Pte Ltd.),, Mr. Hussain submits that the scope of interference with an arbitral award under Section 34 of the Act of 1996 is very limited and an arbitral award may be set aside only if any of the conditions specified in Section 34 of the Act of 1996 is satisfied . Mere erroneous or wrong finding of fact by the arbitral Tribunal, even if based on erroneous interpretation of evidence , would be non-interferable under Section 34 of the Act of 1996.
20. Mr. Hussain further submits that there is no provision in the contract agreement prohibiting the Arbitrator from entertaining any claim for payment of compensation for earth work carried out beyond the lead of 7 Kms if the facts and circumstances justify the same. Therefore, present is not a case where the Arbitrator has acted contrary to the terms and conditions of the contract in awarding the claim No. 2 in favour of the claimant. Since it is not a Arb. App 21 of 2012 - CAV Page 12 of 26 case of exercise of jurisdiction by the Arbitrator beyond the contractual limits, hence, the Court will ordinarily not sit on appeal over the decision of the Arbitrator. In support of is aforesaid argument, Mr. Hussain placed reliance on the Apex Court decision reported in (1989) 2 SCC 38 (M/s. Sudarshal Trading Co. Vs. Government of Kerala and another).
21. By referring to the observations made by the learned sole Arbitrator to the effect that time was not the essence of the contract, Mr. Hussain submits that on a number of occasions, the departmental authorities have unilaterally extended the time for performance of the contract, even after the execution of the work was complete. As such, it is within the understanding of both the parties that the time was not the essence of the contract and hence, the findings recorded by the learned sole Arbitrator does not suffer from any infirmity. To bolster his argument, Mr. Hussain has relied upon the decision of the Hon'ble Apex Court reported in (1979) 2 SCC 70 (M/s. Hind Construction Contractors by its sole Proprietor Bhikamchand Mulchand Jain (Dead) by LRs Vs. State of Maharashtra).
22. I have considered the submission made by the learned counsel for the parties and have also gone through the materials available on records.
23. In the factual backdrop of the case as noted above, let me now deal with the arguments advanced by the learned counsels for the parties. Since the learned counsel for the appellants has fairly conceded that he is not assailing the award made in respect of claim No.1, hence, this Court need not go into the question of validity of the award made under the claim No. 1 in this appeal.
24. Coming to the question of legality of the award made under claim No.2, as has been indicated hereinbefore, the basic argument of the appellants is that Arb. App 21 of 2012 - CAV Page 13 of 26 the Arbitrator has acted without jurisdiction and has travelled beyond the contract agreement in awarding the aforesaid amount. Such argument is apparently based on the contents of Schedule 'A' of the award letter whereby the rates for carriage of earth had been fixed for 2 (two) slots i.e. from 0 Km to 3 Kms and from 4 Kms to 7 Kms . It is, therefore, the contention of the appellants that since the contract agreement did not provide for payment on account of carriage of earth from a lead beyond 7 Kms, hence, the Arbitrator had committed serious error in awarding the amount of Rs 45 lakhs against the claim No. 2 by going beyond the terms of the contract agreement. Conversely, it is also the argument that since the contract agreement did not envisage payment of rate for a lead beyond 7 Kms, hence, by necessary implications, the same was barred under the contract agreement. To answer the aforesaid question raised by the appellants, it would be necessary to first take a look at the arbitration clause contained in the Special Conditions of Contract (SCC). The Arbitration Clause is quoted herein below for ready reference :-
"17. In case of any dispute between the contractor and NHPC, the same shall be referred to the General Manager, Subansiri Lower Project, NHPC Ltd. Gerukamukh, the arbitrator and his decision in this regard shall be final, binding and conclusive upon both the parties".
25. What can be seen from a bare reading of the arbitration clause, the Arbitrator was authorized to entertain any dispute between the contractor and NHPC and his decision in this regard shall be final and binding and conclusive on both the parties. The uses of the expression "any dispute" makes it apparent that the Arbitrator had been conferred with very wide jurisdiction authorizing him to entertain all disputes between the parties covered under the contract or in respects of matters incidental thereto.
Arb. App 21 of 2012 - CAV Page 14 of 26
26. In the award dated 29/08/2008, the sole Arbitrator had observed that :-
"On careful consideration of the materials on record the following facts emerge. The work in question relates to earth filling. The letter of award was issued on 28.6.2004 (document) the contract was signed on 6.7.2004. As per the letter of award the date of start of work was to be reckoned within 10(ten) days after issue of the letter of award dated 28.6.2004 and was to be completed in all respects within the stipulated period of 3 (three) months from the date of the start. Materials evidence on record however indicated that the work could be started in the month of November, 2004. Since the same could not be started due to rain and flood the respondents witness also indicated that the filling up of earth was done during the dry season and dry season in North East starts from October and ends in March. Evidence disclosed that the claimant from time to time prayed for extension of time and the same was granted. The respondents asserted in their written statement that after duly considering the prayer of the claimant for granting additional time for completing the work it issued the letter dated 22.7.2005 (document No. 14 of the respondent) extending time upto 20.9.2005. So far there is no dispute. Dispute starts only as to whether a joint measurement was taken on 25.10.2005 as asserted by the claimant or as to whether measurement was carried by the respondents alone on 5th to 7th February, 2006 after notices to the parties. As alluded earlier the claimant referred and relied upon the Ext. 2(2) namely the copy of the field level book and asserted that the work was completed by the complainant and joint measurement was taken to that effect on 25.10.2005 vide Ext. 2(2). Ext. Ext. 2(2) series was not seriously disputed by the respondent. On the other hand, R.W. 1 in his evidence admitted that the entries thereto were made by Rakesh Roshan one of the Junior Engineers of the NHPC. No contrary evidence were forthcoming from the respondents in support of his assertion through the measurement book which was in Arb. App 21 of 2012 - CAV Page 15 of 26 their possession. The respondents also failed to prove and establish its pleaded case by proving that the alleged incomplete work/left over work was completed by some one else. In this context, it would be proper to refer to the additional written statement submitted by the respondents wherein it was pleaded that the work order dated 25.3.2006 to M/S Northern Gases also covered certain areas of earth filling done by the claimant. This assertion was however not proved and established by any evidence by the respondents. On the other hand, respondent-witness No.1 in his cross examination stated that the contract was awarded to M/S Northern Gases did not include quantity of work said to be left over by the claimant. He also in his cross examination expressed his inability to point out to any documentary evidence as to whether any incomplete work left by the claimant was completed by some other contractor. The respondent also failed to show as to whether it suffered any loss from the contract. The substratum of the evidence of the claimant remained un-impeached. On proper consideration of the evidence on record it can be held that the claimant completed and executed the contract as per contractual stipulation."
27. Based on the evidence on record the Learned Arbitrator had recorded a finding of fact that the claimant contractor had completed the work and had also carried earth from the distance of upto 16 Kms as claimed under claim No 2. It had also been held that the plea of the department that the balance portion of the work had been completed through another contractor viz. M/s North Eastern gases could not be established by the appellants.
28. By interpreting clauses 39 and 40 contained in the GCC read with other materials available on record, the learned sole Arbitrator had also held that the contract in question cannot be said to be one where time was the essence. In other words, the learned sole Arbitrator was of the opinion that time was not the essence of the contract and hence, the termination of the contract was Arb. App 21 of 2012 - CAV Page 16 of 26 held to be unlawful. On the basis of the above observations, the learned sole Arbitrator had passed the arbitral award dated 29/08/2008 awarding an amount of Rs. 10,50,000/- (Rupees ten lakhs fifty thousand ) towards payment of unpaid bills for the work already executed by the contractor as included in claim No.1 and an amount of Rs. 45 lakhs (Rupees forty five lakhs) only towards additional cost incurred by the claimant in respect of the extra lead against the earth work executed from the month of March, 2005 to September, 2005 was awarded by the learned Sole Arbitrator under claim No.2 as per the calculation sheet provided in Annexure 'A' of the statement of claim. The amount so awarded was to carry interest @ 12% per annum for the period from 224/08/2007 till the date of the award. Besides, interest at the statutory rate of 18% per annum was also awarded from the date of the award till payment.
29. It would be pertinent to mention herein that as per the schedule 'A' appended to the award letter dated 28/06/2004, the total quantity of earth work under the contract agreement was fixed at 1,49,585.66 Cum and the price was fixed at Rs. 68/- per Cum within the carriage distance of 3 Kms lead. For extra lead by truck or cart, carriage for ordinary soil beyond the initial lead of 3 Kms i.e. from 4 to 7 KMs, the price was to be increased @ Rs. 24/- for 3 Kms. Since the respondent No.1/claimant was compelled to carry earth from places such as Raha/Kajari, which were located at a distance of more than 16 Kms from the work site, hence, the claim for additional amount was raised by the claimant after notifying the department about the same by issuing letter dated 27/06/2005 .
30. A minute scrutiny of the schedule of quantity and rates included in the schedule 'A' of the award letter goes to show that the same envisages earth Arb. App 21 of 2012 - CAV Page 17 of 26 work to be executed only up to a lead of 7 Kms. However, nothing is indicated as to what would be the rate fixed or applicable in case the contractor is required to carry earth from a lead beyond 7 Kms. There is also nothing on record to show that the claimant/contractor was prohibited from carrying earth from a lead beyond 7 Kms should the need arise for doing so. Materials available on record, more particularly, the letter dated 27/06/2005 goes to show that the claimant contractor had duly informed the departmental authorities that earth would be carried from a lead beyond 7 Kms up to 16 Kms due to the prevailing circumstances entailing extra expenditure.
31. It is settled law that in a case where the contract agreement does not specifically provided for compensating reasonably for the work done by the contractor, the principles of quantum meruit would be applicable. As has been indicated herein before, the award letter did not contain any clause providing for the payment terms for earth carried from beyond the lead of 7 Kms. What would be significant to note here in that there is no dispute between the parties as regard the quantity of earth carried by the contractor from a lead upto 16 kms as per the claim No 2.
32. In the case of Food Corporation of India and others (Supra), the Hon'ble Supreme Court has observed as follows :-
"19. The principle of quantum meruit is often applied where for some technical reason a contract is held to be invalid. Under such circumstances an implied contract is assumed, by which the person for whom the work is to be done contracts to pay reasonably for the work done, to the person who does the work. The provisions of the Contract Act admit of a more liberal interpretation; the principle of the section being wider than the principle of quantum meruit. The principle has no application where there is a specific agreement in operation. A person who does work or who supplies goods under a contract, Arb. App 21 of 2012 - CAV Page 18 of 26 if no price is fixed, is entitled to be paid a reasonable sum for his labour and the goods supplied. If the work is outside the contract, the terms of the contract can have no application; and the contractor is entitled to be paid a reasonable price for such work as was done by him.
20. If a party to a contract has done additional construction for another not intending to do it gratuitously and such other has obtained benefit, the former is entitled to compensation for the additional work not covered by the contract. If an oral agreement is pleaded, which is not proved, he will be entitled to compensation under Section 70. Payment under this section can also be claimed for work done beyond the terms of the contract, when the benefit of the work has been availed of by the defendant.
21.The term "extra" is generally used in relation to the works, which are not expressly or impliedly included in the original contract price, provided the work is within the framework of the original contract. The question whether a particular work is extra will depend upon the terms and conditions of the contract, and other documents connected therewith."
33. From a perusal of the Arbitral Award, it is evident that the learned sole Arbitrator had applied the principles of quantum meruit by taking the rate of Rs. 8/- per Km in terms of the representation made in schedule 'A' to the letter of award and thereafter, applied the said rate on the quantity of work which had been found to have been executed by the claimant during the rainy season i.e. from March to September, 2005 from a lead of 16 Kms. The quantity of earth carried from excess lead not being in dispute, the amount was worked out by the Arbitrator by applying the aforementioned principles. The computation accepted by the Sole Arbitrator while awarding the compensation under the Claim No 2 also appears to be based on proper appreciation of evidence available on record. Admittedly, there is no provision Arb. App 21 of 2012 - CAV Page 19 of 26 in the contract agreement for payment of earth work beyond the lead of 7 Kms. Since the contract agreement did not have any provision for determining the price of earth carried beyond the lead of 7 Kms, hence by applying the principles of quantum meruit the learned sole Arbitrator had awarded the amount of Rs. 45 lakhs under claim No. 2 on the basis of sum total of the evidence available on record. In view of the provisions of Section 70 of Indian Contract Act, 1872, such recourse is permissible under the law .
34. As regards the plea of the appellants pertaining to the ground for the rejection of claim Nos. 3and 5 not being uniformly applied in case of Claim No 2, what can be seen from the record is that the learned sole arbitrator had rejected the aforesaid claims on the ground that the same relate to the period November and December, 2005 and the learned arbitrator was of the view that the months November and December, 2015 not being rainy session, there was no occasion for the claimant contractor to carry earth from a lead beyond 7 Kms. The differentia applied by the Arbitrator appears to be sound and logical. The impugned Arbitral Award is a well reasoned one and the conclusions drawn by the Sole Arbitrator also appears to be based on cogent materials available on record. Under the circumstances, it is not possible for this Court to accept the argument made by the learned counsel for the appellant that by entertaining the claim No.2, the learned sole arbitrator has travelled beyond the scope and ambit of the contract agreement nor can it be held that impugned award is in conflict with the public policy of India.
35. In the case of G.J. Engineers Pvt. Limited Vs. Union of India and another reported in (2011) 5 SCC 758, the Hon'ble Apex Court has observed as follows :-
"10. A civil court examining the validity of an arbitral award under Section 34 of the Act exercises supervisory and not Arb. App 21 of 2012 - CAV Page 20 of 26 appellate jurisdiction over the awards of an Arbitral Tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in Section 34(20(a)(i) to (v) or Sections 34 (2) (b) (i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34 (2)(b) (ii) of the Act, are made out. An award adjudicating claims which are "expected matters" excluded from the scope of arbitration, would violate Sections 34(2)(a)(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate section 34(2)(b)(ii) read with section 28(3) of the Act."
36. In (2009) 9 SCC 357 (K.V. Mohammed Zakir Vs. Regional Sports Centre), the Hon'ble Apex Court has held as follows :-
"6. It is equally well settled, where the arbitrator acts within jurisdiction, "the reasonableness of the reasons" given by the arbitrator is not open to scrutiny by courts. However, if the reasons are such as no person of ordinary prudence can ever approve of them or if the reasons are so "outrageous in their defiance of logic" that they shock the conscience of the court, then it is a different situation. And in an appropriate case the court may interfere. However, the degree of such unreasonableness must be greater than the standard in a certiorari proceeding."
37. While referring to the interpretation given to the term " Public Policy" in the case of Renusagar Power Co. Ltd Vs General Electric Co. 1994 Supp(1) SCC 644, the Supreme Court has held in the case of ONGC vs Saw Pipes reported in (2003) 5 SCC 705 that an Arbitral Award can be set aside by the court if it is contrary to (i) the fundamental policy of Indian law, or (ii) the interest of India, or (iii) justice or morality, or (iv) if it is patently illegal. However, such illegality should not be of trivial nature but must be one that goes to the root Arb. App 21 of 2012 - CAV Page 21 of 26 of the matter. As has been indicated here-in-before, the impugned Arbitral Award does not fall in any of the aforementioned categories so as to enable this court to declare the same as illegal.
38. Coming to the question of validity of the construction of the contract given by the Arbitrator, it would be relevant to mention here in the observation of the Apex Court in the case of Mc. Dermot International Inc vs. Burn Standard Co. Ltd reported in (2006) 11 SCC 181 wherein it has held that the interpretation of the contract agreement is within the domain of the Arbitrator. The observations made by the Apex Court in the aforesaid decision are quoted here in below :-
"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. vs. Oil & Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma vs. Union of India (2004) 5 SCC 325].
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the Arb. App 21 of 2012 - CAV Page 22 of 26 court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award. "
39. In the case of State Trading Corporation of India Ltd. (Supra), the Delhi High Court, after discussing a number of judicial pronouncements on the issue, had observed that an arbitral award cannot be challenged on the ground that the Arbitrator has reached a wrong conclusion. The observations made by the Delhi High Court are as follows :-
"17. The Supreme Court in Rashtriya Ispat Nigam Ltd. Vs. Dewan Chand Ram Saran (2012) 5 SCC 306 refused to set aside an arbitral award, under the 1996 Act on the ground that the view taken by the Arbitral Tribunal was against the terms of the contract and held that it could not be said that the Arbitral Tribunal had travelled outside its jurisdiction and the Court could not substitute its view in place of the interpretation accepted by the Arbitral Tribunal. It was reiterated that the Arbitral Tribunal is legitimately entitled to take the view which it holds to be correct one after considering the material before it and after interpreting the provisions of the Agreement and if the Arbitral Tribunal does so, its decision has to be accepted as final and binding. Reliance in this regard was placed on Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd. (2010) 11 SCC 296 and on Kwality MFG. Corporation Vs. Central Warehousing Corporation (2009) 5 SCC 142. Similarly, in P.R. Shah, Shares & Stock Broker (P) Ltd. V. B.H.H. Securities (P) Ltd. (2012) 1 SCC 594 it was held that a Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re- appreciating evidence and an award can be challenged only under the FAO(OS) 242/2014 Page 15 of 16 grounds mentioned in Section 34(2) and in the absence of any such ground it is not possible to re-examine the facts to find out whether a different decision can be arrived at. A Division Bench of this Court also recently in National Highways Authority of India Vs. M/s. Lanco Infratech Ltd. MANU/DE/0609/2014 held Arb. App 21 of 2012 - CAV Page 23 of 26 that an interpretation placed on the contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact within jurisdiction, which cannot be re-appreciated by the Court under Section 34 of the Act. The Supreme Court in Steel Authority of India Ltd. Vs. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63 even while dealing with a challenge to an arbitral award under the 1940 Act reiterated that an error by the Arbitrator relatable to interpretation of contract is an error within his jurisdiction and is not an error on the face of the award and is not amenable to correction by the Courts. It was further held that the legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to challenge on the ground that Arbitrator has reached at a wrong conclusion."
40. What crystallizes from the aforesaid judicial pronouncement is that an arbitral award can be interfered with only if the same contravenes the grounds set out in Section 34 of the Act of 1996 or when the same is found to be patently illegal or in conflict with the public policy of India. The award can also be set aside if the Arbitrator travels beyond the jurisdiction and entertains a claim contrary to the Contract agreement . However, once it is found that the Arbitrator had acted within the jurisdiction, the civil court cannot sit in appeal over the conclusions drawn by the Arbitrator on a finding of fact based on appreciation of evidence even if the Arbitrator has reached a wrong conclusion. The construction of a contract agreement would be within the jurisdiction of the Arbitrator and it would also not be permissible for the court to adopt a different interpretation of the contract agreement even if two views are possible in the matter.
41. From an examination of the pleadings contained in the application filed by the appellants under Section 34 of the Act of 1996 it can be seen that none of Arb. App 21 of 2012 - CAV Page 24 of 26 the grounds mentioned in Section 34 of the act of 1996 had been taken in the application for setting aside the arbitral award. Taking note of the aforesaid fact, the learned District Judge had made the following observations in the impugned judgment and order dated 14/06/2012 while rejecting the application :-
"18. It is a settled principle of law that award passed by the arbitrator cannot be lightly interfered with as the arbitrator is a Judge appointed by the party and the award can be set aside only on the provisions made u/s. 34 of the Arbitration and Conciliation Act, 1996. When the arbitrator has applied his mind on the pleadings and evidence, adduced before him and the terms of the agreement, there is no scope for the Court to reappraise the matter as if it is an appeal.
19. Needless to mention that the appraisal and appreciation of the evidence on record is entirely within the wisdom of the arbitrator and the court is not to sit as a court of appeal for re-evaluation or re-assessment of the evidence nor does it to interfere with the finding of the arbitrator unless the award is contrary to the substantive provisions of law or against the terms of the contract. If the view taken by the arbitrator is a plausible view, it is not permissible for the court to interfere with the arbitrator's analysis merely because another view of the matter is possible.
20. There is no materials placed before this court that the impugned award is against the contractual clause of contrary to the fundamental policy of Indian law. That being so, the impugned award not being against the contractual clause or contrary to fundamental policy of Indian law and there being no material to conclude that Arb. App 21 of 2012 - CAV Page 25 of 26 there is any violation of principles of natural justice and morality or that the award passed by the arbitrator is patently illegal or arbitrary, the impugned award is not liable to be interfered in exercise of jurisdiction u/s. 34 of the Arbitration and Conciliation Act, 1996.
21. Under the circumstances, the applicants have not been able to make out a case for interference with the award, and accordingly, the petition stands dismissed. No order as to costs."
42. In view of the binding precedent laid down by the authoritative pronouncements of the Apex Court on the issues noted above, I am of the considered opinion that by the impugned judgment and order dated 14/06/2012, the learned District Judge had rightly rejected the application filed by the appellants under section 34 of the Act of 1996 on a correct appreciation of law.
43. For the reasons and discussions made in the foregoing paragraphs, I do not find any valid reason to interfere with the impugned order dated 14/06/2012. In the result, this appeal held to be devoid of any merit and the same is accordingly dismissed. However, having regard to the facts and circumstances of the case, there shall be no order as to costs.
Send back the LCR.
JUDGE Sukhamay Arb. App 21 of 2012 - CAV Page 26 of 26