Calcutta High Court
The Indian Iron & Steel Co. Ltd vs M/S.J.G. Engineers Pvt. Ltd on 10 June, 2013
ORDER SHEET
APO NO.59 OF 2013
AP NO.317 OF 2005
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
THE INDIAN IRON & STEEL CO. LTD.
Versus
M/S.J.G. ENGINEERS PVT. LTD.
BEFORE:
The Hon'ble JUSTICE BANERJEE
The Hon'ble JUSTICE DR.MRINAL KANTI CHAUDHURI
Date : 10th June, 2013.
Mr.Pradip Kumar Ghose, Senior Advocate
Mr.Lakshmi Kanta Pal, Advocate
for the appellant.
Mr.Ashis Chakraborty, Advocate
Mr.U.S. Menon, Advocate
Mr.Rahul Ginodia, Advocate
for the respondent.
The Court : The parties entered into a work contract. Admittedly, the job was done. The dispute arose with regard to settlement of the final bill as the contractor being the respondent, raised various claims that according to the appellant, could not be covered by the contract. The matter was referred to the arbitration of a former Judge of the Apex Court. The Arbitrator, upon hearing the parties, ultimately came to conclusion, the appellant was responsible for delay. The Arbitrator allowed modified 2 claim as would appear from the award. The Arbitrator also rejected the counter-claim made by the appellant.
Being aggrieved, the appellant filed an application for setting aside. The learned single Judge dismissed the same. While doing so, His Lordship interpreted the relevant provisions of the General Conditions of Contract including Clause 17.1 that would debar the contractor to get any escalation of price. Hence, this appeal before us.
We have heard Mr.Pradip Kumar Ghose, learned senior Counsel appearing for the appellant and Mr.Ashis Chakraborty, learned Counsel appearing for the respondent.
Mr.Ghose would contend, once there was a specific bar as contained in the contract despite being found, the appellant was at fault, the Arbitrator exceeded his jurisdiction to award escalation on account of idle labour charges as well as increase of price of materials. Mr.Ghose would draw our attention to the contract to show, the principal items being the steel and cement were supplied by the appellant. Hence, question of escalation would not arise at all. With regard to idle labour charges, he would refer to Clause 18.5 to show, it was specifically prohibited under the contract. Mr.Ghose would draw our attention to various clauses of the contract including Clause 4.4.1(g) that would debar the contractor to make any claim whatsoever for any compensation on account of delay or default 3 in supply of materials by the company. Clause 18.5 would provide, no idle labour, idle equipment charges for any cause whatsoever would be payable.
Mr.Ghose would contend, it is well-settled principle of law, the Arbitrator cannot travel beyond the scope of the contract. Once the contract specifically debarred the contractor to make any claim on account of idle labour charges or idle equipment or any escalation, the Arbitrator erred in awarding so.
Per contra, Mr.Chakraborty, learned Counsel appearing for the contractor/respondent would contend, the appellant did not raise the issues that are raised before us for the first time. According to him, the appellant raised the issue of interpretation of Clause 17.1, the learned Judge interpreted the same following the well-settled proposition of law as settled as of date. Mr.Chakraborty would further contend, the clear finding of the Arbitrator to the extent, the job was delayed due to the solitary fault on the part of the appellant, could not be successfully confronted by the appellant. In such event, the claims so awarded by the Arbitrator could not be faulted.
He relies on the decision of the Division Bench of this Court in the case of State of West Bengal & Anr. Vs. M/s. N.Bhakat & Co. & Anr., reported in AIR 2013 Cal.45 that followed the age old decision of the Apex 4 Court in the case of P.M. Paul Vs. Union of India, reported in AIR 1989 SC 1034.
Mr. Chakraborty would also rely upon a later decision of the Apex Court in the case of K. N. Sathyapalan (Dead) by Lrs vs. State of Kerala & Anr. reported in (2007) 13 SCC 43. Paragraphs 31 and 32 of this decision being relevant herein are quoted below:-
"31. The question which we are called upon to answer in the instant appeal is whether in the absence of any price escalation clause in the original agreement and a specific prohibition to the contrary in the supplemental agreement, the appellant could have made any claim on account of escalation of costs and whether the arbitrator exceeded his jurisdiction in allowing such claims as had been found by the High Court.
32. Ordinarily, the parties would be bound by the terms agreed upon in the contract, but in the event one of the parties to the contract is unable to fulfil its obligations under the contract which has a direct bearing on the work to be executed by the other party, the arbitrator is vested with the authority to compensate the second party for the extra costs incurred by him as a result of the failure of the first party to live up to its obligations. That is the distinguishing feature of cases of this nature and Alopi Parshad case and also Paten Engg. Case. As was pointed out by Mr. Dave, the said principle was recognized by this Court in P. M. Paul where a reference was made to a retired Judge of this Court to fix responsibility for the delay in construction of the building and the repercussions of such delay. Based on the findings of the learned Judge, this Court gave its approval to the excess amount awarded by the arbitrator on 5 account of increase in price of materials and costs of labour and transport during the extended period of the contract, even in the absence of any escalation clause. The said principle was reiterated by this Court in T.P. George case."
He has also relied upon paragraph 9 wherein the Apex Court considered the fact that there was subsequent modification of the agreement.
Mr. Ghosh, while distinguishing this decision, has relied upon paragraph 6 wherein the Apex Court considered the issue on compensation in case of any loss caused to the party that suffered the delay.
We have considered the rival contentions. We have carefully examined the award. The scope of an application under section 34 is very much limited. The Division Bench in case of State of West Bengal (supra) would look at it in the following manner :-
"On a close examination of the award, we find the basic answers are in the negative that would keep us at bay to interfere with the award.
• Have we found it absurd?-No.
• Did the award shock our conscience? No.
• Was the award based on no evidence?-No.
• Did the reasons assigned by the Arbitrator have a direct conflict
with the laws of the land?-No.
15. Since the answer of all the above questions are in the negative, we do not have competence to interfere."6
In the present case the Arbitrator held, the appellant was at fault and caused the delay. The Arbitrator then proceeded to deal with each and every claim. We are not competent to sit in appeal over such decision on merits.
With regard to interest, we find that the Arbitrator awarded interest for the post reference period. We do not find any scope of interference save and except the rate, in our view, should be prevalent market rate. The Arbitrator awarded interest @ 13 % p.a. that should be reduced to 9% p.a. The award stands modified accordingly.
The awarded sum excluding the interest has already been deposited with the Registrar, Original Side. The respondents would be at liberty to withdraw the sum along with interest thereon and claim the balance, if any, from the appellant.
The appeal is disposed of without any order as to costs.
(BANERJEE, J.) (DR.MRINAL KANTI CHAUDHURI, J.) sd/dg