Madhya Pradesh High Court
Mintoolal Brijmohandas vs State Of Madhya Pradesh on 16 December, 2004
Equivalent citations: AIR2005MP205, 2006(1)ARBLR623(MP), AIR 2005 MADHYA PRADESH 205, (2006) 1 ARBILR 623
Bench: Dipak Misra, U.C. Maheshwari
ORDER
1. In this Civil Revision preferred under Section 19 of the M.P. Madhyastham Adhikaran Act, 1983 (for brevity "the Act") the State of M.P. and its functionaries have called in question the pregnability and penetrability of the award passed by the M.P. Arbitration Tribunal (in short 'the Tribunal') in reference case of 55/91 where by the respondents has been awarded a sum of Rs. 91,306/- and interest (r) 12% p.a. on the sum of Rs. 51,300/- from the date of award till the realization of the amount.
2. The respondent entered into a contract vide agreement No. 5 of 1979-80 dated 22-2-1980 for construction of R.C.C. Box for C.D. work at Ch. 134 of Pipariya Branch Canal along with Nallah training. The estimated cost of the tender was 2 lacs and tender costs of the works contract was 2.90 lacs. The period stipulated for completion of the contract was six months, including rainy season. The work order was issued on 22-2-1980 as per Exhibit P-l. Hence, the stipulated date for completion was 21-8-1980.
3. After receiving the work order the respondent contractor mobilised his resources, engaged sufficient labourers and started excavation of the foundation of the cross-drainage work. Vide letter dated 18-3-1980, Exhibit P-2, he informed the Executive Engineer that the foundation is likely to be ready by 25-3-1980 and therefore 1000 bags of cement and approximately 28 MT of steel be issued to him, but the respondents failed to supply quantity of steel till the expiry of the contract period i.e. 20-8-1980. Correspondences were made by the contractor that as the cement and steel were not supplied to him and he was incurring additional costs for which department would be liable to compensate him as market prices for the aforesaid articles were getting escalated day by day as a consequence of which he had been sustaining heavy loss. On 10-12-1980 the Executive Engineer as per his letter Exhibit P-5 informed the petitioner to take delivery of the steel for bottom raft and walls and steel for slab will be arranged after the consumption of the steel. The contractor informed the Executive Engineer vide P-6 dated 15 1-1981 that the S. D. O. had not stocks of 10 MM/12MM bars required for bottom raft and wall stirrups and he has only stocks of 16MM/18MM bars which would not be used without stirrups. While asking for second extension as per 25-3-1981 the petitioner informed that the work at standstill from June, 1980 for want of M. S. Bars and if the steel was supplied immediately he would be able to complete the work by 30-6-1981. Only fifteen days before the Monsoon of the year 1981 steel was supplied to him. He had also stated that the work was likely to be complete by 15-1-1982 and prayed for extension as per letter No. 4-2-1982, Exhibit P-9. The petitioner also informed that due to opening of canal in Nov. 81, earth work on canal banks would not be done. Thereafter, he withdrew his labourer and asked the department to take measurement of the work done and excluding the earth work and prepared the final bill.
4. Before the Tribunal claimant/respondents put forth eight claims claiming a sum of Rs. 2,01,613.00. He also stated that due to prolongation of contract for 17 months he had suffered damage in the form of additional establishment expenditure, loss of earning, idle wage and price rise. He had submitted claim to the Executive Engineer, with copy to the Superintending Engineer as per Exhibit P-10 dated 5-2-1982. The Executive Engineer rejected his claim on the ground of Clause 2.1.22 of the agreement. The Superintending Engineer addressed to the objection raised by the petitioner and vide Exhibit P-13 rejected his claim. However, request was also negatived. Thereafter, the petitioner submitted an application on 16-10-1984 vide Annexure P-24 before the Secretary, Irrigation Department, Bhopal for referring the dispute to Arbitration to decide his claim. He also sent reminder on 13-1-1985. As Arbitration proceeding was not initiated by the Secretary, Irrigation Department he filed an application under Sections 8 and 20 of the Arbitration Act, 1940 before the District Judge, Hoshangabad and direction (sic) the petitioner to present his claims in competent Court and return the plaint on 29-1-1987. Thereafter, he submitted his claims petition on 15-4-1991 before the Tribunal and prayed that his claim for the aforesaid sum has been indicated herein above.
5. The claim put forth by the claimant respondent was resisted by the present petitioner on the foundation that at the time of accepting of final bill, petitioner had not raised any dispute regarding the claims submitted before the Tribunal, thus there was no dispute between the parties and hence claimant petitioner was not tenable. It is put forth that the claimant has violated the terms and conditions of the agreement and he was not entitled to claim any amount. Denying the claim item No. 1 respondent has pleaded that as per Clause 2.1.22 of the agreement even if there was delay in supply of material the petitioner is not entitled to claim any compensation on account of prolongation of the contract. It was also put. forth that the petitioner himself was negligent and careless in starting the work. The claims for expenditure and additional cost was rejected by the respondent as. it was against the terms of contract Clause 2.1.22. It is also pleaded that the Executive Engineer has warned the petitioner to complete the work, failing which as per the agreement the balance work would be got completed by debitable agency under Clause 3,3.3.(b) and extra cost would be recovered from the petitioner. Despite the aforesaid letter the petitioner failed to complete the work as a consequence of which owner was forced to get the work done by a debitable agency.
6. The Tribunal after stating the facts dealt with various claims. Claim Item No. 1 was for 98,570/- which was for overheads and profit, escalation and idle wages and loss of productivity. While dealing with the aforesaid claims the Tribunal deferred to the Clause 2.2.22 of the contract and in para- graph 5.7 the Chairman of the Tribunal who was writing for himself and other three members in paragraph 5.7 noted the facts as under:-
"Petitioner submitted third extension application on 14.1, 1.81 reiterating that only a fortnight back before the onset of monsoon MS (Sic) were supplied to him, he has made all effort and completed RCC bottom slab wall of upstream, (Sic) and downstream portion and RCC top slab of the center portion. He also informed that from 15th of September he has commenced the work to complete top stabs on stream side and downstream side with embankment work also. But still he has to complete nallah training arid other protection works and expressed the hope to complete the same by 15.1.1982. From the attached performa, it is evident that S.D.O. also admitted that there was acute shortage of steel up to June, 81 steel could be supplied after processing from Housing Board and that was the reason of delay. Vide letter p. 9 the petitioner requested the Executive Engineer to finalise the contract and to prepare the final bill. He also informed him that he could have completed this work also, had the canal system not opened for testing and irrigation form 18/19th November, 1981. Due to constant flow of canal water through the structure, earth work could not be done. As canal water was still flowing and was likely to continue for another two months, he found it practically impossible to retain the labourers without any work. Hence finding no other alternative, he disbanded the establishment."
7. We have reproduced the aforesaid paragraph which deals with facts as the same was not disputed by the owner. Thereafter the Tribunal proceeded to deal with arbitration of the aforesaid dispute and eventually came to hold after referring to certain judgments and various Clauses of the contract came to hold that the respondents are guilty of committing fundamental breach of contract and therefore, the claimant contractor was entitled to claim over head charges, escalation and loss of profit from the respondents. The Tribunal has given its reasons in paras 5.31 and 5.32 of the order. It is worth noting here that while determining the quantum of claim for item No. 11 the Tribunal as stated as under :
11. Work done during extended period 2, 79, 179-1. 38, 039 (Amount of final bill) Rs. 143, 150/-.
8. We have referred to the same as that would be extremely relevant in what we are going to state at a latter stage. Eventually, in claim Item No, 1 the Tribunal awarded a sum of Rs. 9,200/-. In respect of item No. 2 which related to payment for removing silt from the bed of the structure during October, 1980 and October, 1981. The Tribunal rejected the claim. In respect of claim item No. 3 which related to amount withheld in final bill for carrying out the balance work of earth work granted Rs. 5000/-. After granting Rs. 5000/- the Tribunal has taken note of the fact that Rs. 5,000/- was not paid to the claimant. It has also expressed the view that the respondents had not produced any documents to show any order passed by the competent authority for recovery of this amount from the petitioner order that they engaged any debitable agency to complete the balance work. As far as the Claim item No. 4 is concerned it relates to amount withheld in final bill for hire charges of truck. That have been negatived by the Tribunal having not been proved. Similar is the fate of item No. 5. In respect of Claim No. 6 which relates to pitching of masonry stone 20 Cumlying at the site. The claim on that score is Rs. 1760/-. The Tribunal has also rejected the said claim. Item claim No. 7 relates to extra amount for excavation of foundation 1 mtr. below. The contract does not include the claim of dewatering etc. Therefore, the Tribunal has expressed the view that the said claim being against the terms of contract was not acceptable and accordingly rejected. As far as Item No. 8 if concerned it pertains to interest @12% p.a. over the amount of all his claims from the date of final bill from January, 1983 to date of submission of application before the Tribunal. On that contractor claim Rs. 75,000/-. The Tribunal in paragraph 12 of the award had passed the following :
"Clause 2.1.22 does not infringe Article 14 of the Constitution of India and there is no such challenged to Clause 2.1.22. It is questionable that whether this Tribunal is competent to exercise constitutional power by quashing any clause in the works contract and providing relief to the contractor against the provision of any clause. In view of the express provision in the Clause 2.1.22, it can not be held that respondents have made a fundamental breach".
9. We have quoted the aforesaid paragraph as it has cogently, appropriately and coercively dealt with the factors in toto. The Tribunal granted a sum of Rs. 51,300/- from the date of award till realization with cost of Rs. 2,000/-,
10. It is noteworthy to mention here that the Chairperson with Vice Chairman and three other members agreed but one member differed and rejected the claim of the petitioner on the ground that the petitioner has committed breach of the contract.
11. We have heard Mr. Om Namdeo, learned Government Advocate for the applicant and Mr. R.C. Shobhani, learned Counsel appearing for the respondents. Learned Counsel for the parties fairly agreed before us that if Clause 2.1.22 is interpreted to bar the claim of the claimant they have not case. Mr. Om Namdev, learned Government Advocate also submitted if interpreted in favour of the claimant the amount which has been granted is allowable. We appreciate the aforesaid submission inasmuch as the Tribunal has negatived the number of claims and has allowed only two claims and granted interest. Both the claims have nexus with the Clause 2.1.22.
12. To appreciate the basic feature of the lis it is appropriate and apposite to refer to Clause 2.1.22 in the Contract. It reads as under:
"If the materials are not supplied in time, the contractor will not be allowed any claim for any loss which may be caused to him, but only extension of time will be given at the discretion of the Executive Engineer and Superintending Engineer if applied for by the Contractor before the expiry of the contract."
13. Submission of Mr. Namdeo is that it put forth any claim for any loss which might have been caused to him but he was only entitled to interest. Per contra Mr. Sobhani submitted that he has discussed at length that this was a onerous application and hence the claim can be exonerated from the same as the claimant did not have appropriate bargaining power. Instead of entering deep into that score, whether the clause in the agreement was adhesive clause of totally unreasonable and can be permitted to be liberally construed or totally ignored in controverting the matter. We think seemly to deal with the matter from a different, aspect. In this context we have profitably referred to the decision rendered by the Apex Court in the case of General Manager, Northern Railway v. Sarvesh Chopra, expressed their Lordships expressed their view as under
"In Hudsons building and Engineering contracts (11th Edn. Pp. 1098-99) There is reference to, "no damage" clauses, an American expression, used for describing a clause which classically grants extension of time for completion for variously defined delays including some for which as breaches of contract on his part, the owner would prima facie be contractually responsible, but then proceeds to provide that the extension of time so granted is to be the only right to remedy of the compensation are not to be recoverable therefore. These damages clauses appear to have been primarily designed to protect the owner from late start or coordination claims due to other contractor delay, which would otherwise arise. Such clauses (originated in the federal Government, contracts but are now adopted by private owners and expanded to cover wider categories of breaches of contract by the owner institution which it would be difficult to regard as other than oppressive and unreasonable. American jurisprudence developed so as to avoid the effect of such clause and permitted the contract to claim in four situations namely (i) where the delay is of a different kind from that contemplated by the clause, including extreme delay, (ii) where the delay amounts to abandonment (ii) where the delay is a result of positive acts of interference by the owner, and (iv) bad faith. The first, of the said four exceptions have received considerable support from judicial pronouncement in England and commonwealth. Not dissimilar principles have enabled some commonwealth Court to avoid the effect of no damage clauses.
15. In our country question of delay in performance of the contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it. may frustrate the contract and then the innocent party need not perform the contract. So also, if time is the essence of the contract, failure of the employer to perform a mutual obligation would enable the contract to avoid the contract as the contract become voidable at his option where time is of essence of an obligation. Chitty on contract (28th Edn. 199 at p 1106 para 22.015) states :
"a failure to perform by stipulated time will entitle the innocent party to (a) terminate performance of the contract and thereby put an end to all the primary obligations of both parties remaining unperformed; and (b) claim damages from the contract breaker on the basis that he has committed a fundamental breach of the contract (a breach going to the root of the contract) depriving the innocent party of the benefit of the contract.
If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party i.e. the contract, cannot claim compensation for any loss occasioned by the non-performance of the reciprocal promise by the employer at the time agreed, unless at. the time of such acceptance, he gives notice to the promisor of his intention to do so. Thus it appears that under the Indian law in spite of there being a contract between the parties where under the contractor had undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertainable in one of the following situations: (i) if the contractor repudiates the contract exercising his right to do so under Section 55 of the contract Act. (ii) the employer given an extension of time either by entering into supplemental agreement, or by making it clear that escalation of rates or compensation for delay would be permissible, (ii) if the contractor makes it clear that the escalation of rates or compensation for delay shall have to be made by the employer and the employer, accepts performance by the contractor in spite of delay and such notice by the contractor putting the Employer on terms."
In paragraph 16 their Lordships have further held as under :
"Thus, it may be open to prefer a claim touching an apparently excepted matter subject to a clear case having been made out for excepting or excluding the claim form within the four corner of expected matters. While dealing with a petition under Section 20 of the Arbitration Act, the Court will look at the nature of the claim as preferred and decide whether it falls within the category of excepted matters. If so the claim preferred would be a difference to which the arbitration agreement does not apply and there-fore the Court shall not refer to the same to the arbitrary. On the pleading the applicant may succeed in making out a case for reference, still the arbitrator may on the material produced before him arrive at a finding that the claim was covered by excepted matters. The claim shall have to be disallowed. If the arbitration allows a claim covered by an excepted matter the award would not be legal merely because the claim was referred by the Court to arbitration. The award would be liable to be set aside on the ground of error apparent on the face of the reward or vitiated by legal misconduct of the arbitrator."
14. From the aforesaid it is clear as day that their Lordships have carved three categories and that the case of the petitioner as submitted by Mr. Sobhani would fall in the third category. It is contended by him at the time of grant of extension the contractor had expressed his mind and being aware of its terms and conditions and that apart employer had formed by the contractor in spite of delay as asked has been included in the final bill. Mr. Namdeo has submitted the owner has not accepted the terms and conditions. To appreciate the aforesaid rivalised stand it would be appropriate to refer to certain correspondences that have been made between the parties. Vide Annexure P-7 the claimant was granted extension of time and in that letter the following lines were included:
"You will please appreciate that the market rates of building material, transport, wages etc. has increased steeply and shall incur the increased working cost. We shall submit the details of additional expenditure borne by us to you on completion of work for compensation."
15. Vide Annexure P-8 while making a prayer for extension following paragraph was incorporated :
"You are therefore kindly requested to grant us an extension of time upto 15-1-1982 and oblige. We shall however submit our claim for losses sustained during the extended period on completion of the work for your consideration, as the delay was cause exclusively on account of departments.
16. Vide Exhibit P-9 the contractor acknowledging the letter issued by the Department contractor had incorporated the following:
"We would have completed this work also and the canal system not opened for testing and Irrigation from 18/19 Nov. 1981. You will please appreciate the Earth work could not be done due to constant flow of canal water through the structure and we had no other alternative but to disband the establishment.
The canal waters is still flowing and likely to continue for another 2 months and it is practically impossible to retain the labourers without any work.
We had requested for grant of extension upto 15-1-1982 and are not interested for any further extension of time. You are requested to finalise the contract and prepare our final (sic) failure is not allowing us to do the work upto 15-1-1982 by opening the canal earlier. We cannot wait for indefinite period to complete the work. In the past we have already suffered huge losses due to such stoppage".
17. Vide Exhibit P-10, the compensation was also demanded. Vide Exhibit P-11, dated 18-3-1982 the Executive Engineer quoted Clause 2.1.22 and indicated that no claim of delayed supply of material would be entertained. Vide Exhibit P-13, the Superintendent Engineer mentioned that the Department would not be responsible for any loss sustained by the Contractor. At this Juncture we would also like to refer to Exhibit P-14 by which the Executive Engineer had written to the Superintendent Engineer. The two paragraphs which are relevant for the present purpose are as under :
"Your kind attention is invited to our letter dated 10-4-1982 wherein we had requested for your decision to our claims submitted by us vide our letter dated 5-2-1982.
You will please appreciate that our huge amount is blocked and we shall be very much thankful if you will please decide the same early."
18. There was recommendation vide Exhibit P-15, by the Executive Engineer. The question that arises for consideration is whether there has been performance by the contractor. We have referred to this document to show that the claimant had imposed terms and conditions but there has been no explanation by the owner. The owner allowed the claimant, to carry on with the work. It is perceptible that the final bill inasmuch as he has been permitted to do the work. As performance has been accepted we are disposed to think the claim would be covered under the third para of Clause 2.1.22 would not be a impediment for entertaining his claim,
19. In view of the aforesaid, we are inclined to hold that the Tribunal would have entertained the claim. We may hasten to add though the Tribunal had not appreciated the matter from this angle or different spectrum but we concur with the view because of the aforesaid analysis.
20. In view of the aforesaid premises the award passed by the Tribunal need not be interfered with inasmuch the Tribunal has analyzed every claim in proper perspective and had quantified that on basis of material in record. There is no perversity of the approach. The main contention urged before us about the arbitrability of the claims. We are inclined to hold that the claims are based on the materials on record and there is no jurisdiction to interfere in this Civil Revision.
21. Consequently, the Civil Revision, being sans merit, stands dismissed. How ever, in the facts and circumstances of the case there shall be no order as to costs.