Calcutta High Court
Sunirman Pvt. Ltd. ......Claimant vs Union Of India on 16 December, 2009
Author: Indira Banerjee
Bench: Indira Banerjee
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Order Sheet Serial No........
G.A. No. 437 of 2003
A.C. No.17 of 2002
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
In the matter of :
SUNIRMAN PVT. LTD. ......Claimant
Vs
UNION OF INDIA. ....Respondent/Petitioner
Before:
The Hon'ble Justice
INDIRA BANERJEE
Date: 16.12.2009
JUDGMENT
This application, filed by the Union of India, is for setting aside an award dated 18 th April, 2002 made and published by the learned Umpire, Sri Sujit Kumar Sinha, a retired Judge of this Court.
The respondent, a Private Limited Company incorporated under the provisions of the Companies Act, 1956 carries on business inter alia as Engineers and Contractors.
In response to a tender notice, inviting offers for construction of cubicles and other jobs at the Dum Dum Car Depot Complex of the Metro Railway, the respondent submitted its offer.
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According to the petitioner, the total contract price was 60.59 lakhs. The petitioner has alleged that the respondent failed and neglected to start work under the said contract on the scheduled date, as a result whereof, the project was delayed.
According to the petitioner, even 8 months after the contract was awarded to the respondents, the rate of progress was only 18% even though in terms of the contract, the contract job was to be completed in 15 months.
The petitioner has contended that in terms of clause 17(4) of the General Conditions of Contract, 1969, time was to be the essence of the contract. However, as work under the contract could not be completed within the original completion period, extension of time was granted to the respondent.
Mr. I.P. Mukerji, appearing on behalf of the petitioner submitted that the General Conditions of Contract, 1969 empowered the petitioner to determine and terminate the contract at any time. The petitioner exercised its right to terminate the contract, having regard to the breaches and lapses on the part of the respondent.
The respondent-claimant filed a petition in this Court being Special Suit No.70 of 1993 for reference of all disputes and/or claims specified in 3 its letter dated 14th October, 1997 to arbitration in terms of clause 64(1)(I) of the General Conditions of Contract.
The disputes that had arisen between the petitioner and the respondent were referred to Joint Arbitrators. The Joint Arbitrators entered into reference but could not appoint an Umpire.
By an order dated 2 nd November, 2000, His Lordship the Hon'ble Justice Alok Chakraborty (As His Lordship then was) appointed Sri Sujit Kr. Sinha, a retired Judge of this Court as Umpire with a direction on him to complete the reference within a period of 4 months from the date of communication of the said order. By an order dated 29th November, 2000, the Joint Arbitrators were directed to hand-over all papers to the Umpire.
The claims of the respondent were, in a nutshell, as follows:
"a) Claim No.1 On account of bill for the remaining work, not measured from June 1992 to October 1992 for Rs.3,43,500.00
b) Claim No.2 Escalation bill upto date for Rs.3,00,000.00
c) Claim No.3 Idle labour Rs.1,75,000.00
d) Claim No.4 Idle establishment Rs.1,55,000.00
e) Claim No.5 4 Loss of profit as on balance work Rs.4,65,335.00
f) Claim No.6 Security Deposit Rs.1,50,000.00 Total claim: Rs.15,88,835.00
g) Claim No.7 Interest on the said amount from May 4, 1992 till payment"
The petitioner inter alia contended that the respondent had not performed the contract in accordance with the terms and conditions thereof. Mobilization at the site was poor and the progress of work was very slow.
The petitioner further contended that the petitioner had made over the site to the respondent free from hindrances. Allegations to the contrary made by the respondent were denied as untrue.
The petitioner contended that the contract, as a whole, was rescinded after 48 hours notice issued on 7th September, 1992. There was thus no scope of doing work up to October, 1992 as claimed by the respondent.
The petitioner also contended that security deposit had rightly been withheld because of failure of the claimant to fulfil its contractual obligations.
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Reference was made to clause 16 of the General Conditions of Contract set out hereinbelow for convenience:
"16.(1) Earnest Money and Security Deposite:- "The Earnest Money deposited by the contractor with his tender will be retained by the Railways as part of security for the true and faithful fulfillment of the contract by the contractor. The balance to make up the security deposit, the rates for which are given below, may be by the contractor in cash or in the form of Government Securities or may be recovered by percentage deduction from the contractor's "on account". Provided also that in case of defaulting contractor the Railway may retain any amount due for payment of the contractor on the pending "on account bills" so that the amount so retained may not exceed 10% of the total value of the contract."
The petitioner further contended that as no amount was due and payable by the petitioner to the respondent, there was no question of payment of any interest.
On 18 th April, 2002, the learned Umpire, Sri Sujit Kr. Sinha, made and published a non-speaking award, awarding Rs.8,25,258/- to the claimant, as per the break up given hereinbelow:
"a) The respondent shall pay to the claimant Rs.27,758/-
with simple interest thereon at the rate of 12 per cent per annum from 2 nd December, 1992 and until payment;
b) The respondent shall pay to the claimant Rs.1,50,000/- on account of security deposit with simple interest thereon at the rate of 12 per cent per annum from 2 nd December, 1992 and until payment;
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c) The respondent shall pay to the claimant
Rs.5,47,500/- on account of loss of profit with
simple interest thereon at the rate of 12 per cent per annum from 2 nd December, 1992 and until payment;
d) In addition to the aforesaid, the respondent shall pay to the claimant the assessed cost of this reference in the sum of Rs.1,00,000.00."
On 4 th October, 2002, the petitioner received notice under Section 14(2) of the Arbitration Act, 1940 intimating the petitioner that the said award dated 18 th April, 2002 had been filed in Court on 26 th Sept, 2002 and that this Court would proceed to pronounce judgment on the said award on 14 th November, 2002.
On behalf of the respondent, it was submitted that even though the notice of filing of the award of this Court was admittedly received by the petitioner on 4 th October, 2002, the petitioner did not file any application for setting aside of the award till 31 st January, 2003. On 31 st January, 2003, His Lordship the Hon'ble Justice Asit Kumar Bisi (As His Lordship then was) pronounced judgment in terms of the award.
The order dated 31st January, 2003 has, however, subsequently been recalled by His Lordship, the Hon'ble Justice Sanjib Banerjee on 27 th September, 2007 on the terms and conditions stipulated in the order dated 27 th September, 2007.
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Mr. I.P. Mukerji, appearing on behalf of the petitioner submitted that the award had been made and published by the learned Umpire without application of mind.
Mr. Mukerji pointed out that the award of the Umpire on account of loss of profit was higher than the amount claimed by the respondent. Even though the respondent had claimed Rs.4,65,335/- on account of loss of profit, the Umpire had awarded Rs.5,47,500/- on account of loss of profit.
Mr. Mukerji further argued that the claims of the respondent on account of escalation and interest were barred under the contract. Mr. Mukerji referred to Clause 16(2) of the General Conditions of Contract of the Eastern Railway which provides as follows:
"No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but the Government Securities deposited in terms of sub-clause (1) of this clause will be repayable with interest accrued thereon".
Mr. Mukerji submitted that the learned Umpire was bound by the terms of the contract. The learned Umpire has misconducted the proceedings by ignoring the provisions of the contract. 8
Mr. Mitra appearing on behalf of the respondent rightly argued that there were no grounds for setting aside the award of the learned Umpire. The learned Umpire had proceeded in accordance with law after giving the parties adequate opportunity of hearing.
Mr. Mitra submitted and rightly that an award could not be set aside under Section 30 of the Arbitration Act, 1940 unless there was error either of law or of facts apparent on the face of the award which went to the root of the award.
Mr. Mitra argued that the award being non-speaking, there was no error apparent on the face of the award either factual or legal. Records of the arbitration proceedings have been forwarded to this Court. Reliance was placed on records including the minutes of proceedings before the learned Umpire, many of which have been annexed to the pleadings.
On a perusal of records it is patently clear that lengthy arguments were advanced before the learned Umpire. The Umpire made and published his award after giving the parties elaborate hearing and upon consideration of the submissions and the materials and evidence before him.
It is true that the respondent claimed Rs.4,65,335/- on account of loss of profit but the amount awarded on account of loss of profit is 9 Rs.5,47,500/-. The error is apparently obvious, inadvertent and perhaps typographical.
Records reveal that the claim for damages on account of loss of profit was calculated at 15% of the balance value of the work.
In M/s. A.T. Brijpaul Singh & Bros. Vs. State of Gujarat reported in AIR 1984 SC 1703, cited by Mr. Mitra, the Supreme Court held that a contractor was entitled to claim damages on the basis of expected profit on balance of works contract. Estimation of expected profit at 15% of the value of the balance work was held not to be unreasonable.
The error in the figure being obvious, this Court deems it appropriate to rectify the award on account of loss of profit by deleting Rs.5,47,500/- and inserting Rs.4,65,335/- in exercise of power conferred by Section 15 of the Arbitration Act, 1940.
The Umpire has power to interpret the various clauses of the contract including clauses relating to escalation and interest.
In Union of India vs. Pam Developments Ltd. reported in AIR 2005 Cal. 332 cited by Mr. Mitra, appearing on behalf of the respondent, the Division Bench held that the arbitrators could construe the various provisions of the 10 contract. The Division Bench found nothing wrong or illegal in the award of the arbitrator granting interest notwithstanding the provision of Clause 16(2) of the General Conditions of Contract, which, it was argued, prohibited grant of interest.
In Union of India vs. Budlani Engineering Pvt. Ltd. reported in (2008) 3 CHN 661, a Division Bench differed with the view taken in Pam Development (supra) and referred the question of whether the arbitrator could award interest notwithstanding Clause 16 (2) of the General Conditions of Contract, to a larger Bench.
The very fact that different Division Benches have on interpretation of Clause 16(2) upheld the power of the arbitrator to grant interest, in itself shows that the said clause is capable of being interpreted in different ways.
Where the arbitrator, on interpretation of the relevant provisions of the contract, takes the view that he is empowered to grant interest and accordingly grants interest, the award of interest cannot be set aside, unless the process of reasoning of the arbitrator is so patently arbitrary that it shocks the judicial conscience.
In the Board of Trustees for the Port of Calcutta vs. Engineers De Space Age reported in AIR 1996 SC 2853, an interest prohibition clause, 11 which read that no claim for interest could be entertained by the Commissioners, was construed to be binding on the Commissioners but not on the arbitrator.
In Union of India vs. Ajabul Biswas reported in 2008 (1) CHN 16, cited by Mr. Mitra, a Division Bench of this Court refused to interfere with the finding of the learned Single Judge, that if the arbitrator ultimately found that a sum due to one party, had wrongfully been withheld, the jurisdiction to award interest remained, notwithstanding the terms of the agreement to the contrary.
In Saraswat Trading Agency & Anr. vs. Union of India reported in 2007 CWN (111) 88 a Division Bench of this Court construed a similar clause in a contract, prohibiting interest, to operate as a bar between the parties but not the arbitrator, set aside the judgment of the learned Single Judge and upheld the award impugned on all counts including the award of interest.
It is a well-established principle that this Court does not, in proceedings under Section 30 read with Section 33 of the Arbitration Act, 1940 for setting aside of an award, sit in appeal over the award. 12
This Court is only to examine whether there is any such patent illegality in the award that would not permit the judicial conscience to let the award stand. The award which is a non-speaking award, does not suffer from any such infirmity to warrant interference of this Court.
The challenge to the award thus fails. The application is dismissed.
(Indira Banerjee, J.)