Jammu & Kashmir High Court - Srinagar Bench
The Chief Engineer vs Karam Chand Thapar And Bros on 30 January, 2024
Author: Rajnesh Oswal
Bench: Rajnesh Oswal
HIGH COURT OF JAMMU, KASHMIR AND LADAKH
AT SRINAGAR
AA No. 17/2017(O&M) Reserved on : 19.10.2023
Pronounced on: 30.01.2024
1. The Chief Engineer, Upper .....Applicant(s)/Petitioner(s)
Sindh Hydle Project, Stage-II,
Kangan-191202, District
Srinagar(J&K)
2. The Superintending Engineer,
Upper Sindh Hydle Project,
Stage-II Project, Kangan
191202 (District Srinagar)
(J&K).
3. The Executive Engineer,
Sumbal Link Division-I, Upper
Sindh Hydle Project, Stage-II,
Kangan-191 202
(Distt. Srinagar J&K)
4. The State of Jammu and
Kashmir through Secretary to
Government, Power
Development Department,
Srinagar (J&K, State).
Through: Mr. M. A. Chashoo, Adv.
.
vs
1. Karam Chand Thapar and Bros ..... Respondent(s)
(Coal Sales) Ltd. TICIL Division,
KCT Blocks, Riwshyamook
Building 85-A Panchkulan Road
New Delhi-110001
Through: Mr. Pranav Kohli, Sr. Adv. with
Mr. Arun Dev Singh and Ms. Megina,
Advocates
Coram: HON'BLE MR. JUSTICE RAJNESH OSWAL, JUDGE
JUDGMENT
1. This application under section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') has been preferred by the applicants for setting aside 2 AA No. 17/2017 the award dated 25.03.2017, which includes the Majority Award issued by the Arbitrators, namely, Mr. Y. P. Singh and Mr. Sheikh Abdul Salam, as well as the Minority Award issued by Arbitrator, namely, Mr. Ali Mohd. Magray. Facts:
2. Brief facts necessary for the disposal of the present application are that a contract for construction of the Tunnel RD 640-M to 3060-M of Sumbal Power Link Channel USHP Kangan was initially awarded to M/S National Projects Construction Corporation Ltd. (NPCC) for an estimated cost of Rs. 3.70 crores but the NPCC could execute the work only to the extent of Rs. 120 lacs (approx.), as such, the balance work was allotted to the respondent (hereinafter to be referred as 'the claimant') in the year 1988 on the rates as well as the terms and conditions as indicated in the agreement dated 04.06.1988, for an amount of Rs. 421.00 lacs. The period of completion of work was 30 months i.e. w.e.f. 01.06.1988 (date of start of work) to 31.12.1990 (date of completion of work), but the said work was actually completed on 30.04.2002. The completion certificate was issued on 14.09.2002.
3. This is an admitted case of both the parties that there were disturbed conditions in the Valley, as a result of which, the work could not be executed within time and numerous extensions were granted to the claimant. It needs to be noted that both the applicants as well as the claimant have levelled allegations against each other for non-completion of work within the stipulated time. After the completion of work, the claimant raised the issue with the applicants in respect of losses suffered by the claimant on account of 3 AA No. 17/2017 delay in completion of the project. The claimant as such, lodged as many as 12 claims for an amount of Rs. 9.54 crores with the applicants, but the applicants rejected all the claims of the claimant. The claimant opted for arbitration and, as such, the matter was referred to the Arbitral Tribunal.
4. The claimant submitted 12 claims in total before the Arbitral Tribunal claiming Rs. 9,54,47,132.15/- along with interest at the rate of 24% per annum, whereas the applicants besides objecting the claims of the claimant, lodged counter-claim of Rs. 7,04,76,800/-. The claimant filed the rejoinder to the reply as well as the counter-claim filed by the applicants and denied the counter-claims of the applicants. On the basis of the claims as well as counter- claims submitted by the parties, the Arbitral Tribunal framed as many as 15 issues for its determination, the same are extracted as under:
(i) Whether the Claimants are entitled to compensation to the tune of Rs. 19,24,479.00 and Rs. 17,64,150.00 for suspension of work for different spells, between October, 1989 to December, 1990. If so how?
(ii) Whether the claimants are entitled to bonus for the reasons and on the ground mentioned under Claim 2 of the Statement of Claims, to the tune of Rs. 1,32,15,759.00. If so, how?
(iii) Whether the Claimants are entitled to the compensation on account of non-availability of electric power at site and/ or erratic supply of electric power and/or low voltage to the tune of various amounts claimed under Claim No. 3 in the Statement of Claim. If so, how?
(iv) Whether the claimants are entitled to the compensation on account of loss suffered by them due to floods tothe tune of Rs. 30,57,055.80. If so, how?
(v) Whether the claimants are entitled to the compensation on account of the fire at Ganiwon Colony to the tune of Rs. 10,69,744.00. If so, how?
(vi) Whether the claimants are entitled to the sum of Rs.
41,952.45 on account of soling access road to the intel portal. If so, how?
(vii) Whether the claimants are entitled to Rs. 11,000/- and Rs.
5,000/- on account of compensation due to stoppage of work, 4 AA No. 17/2017 because of blast conducted by ACC Limited, agents of the respondents, if so, how?
(viii) Whether the claimants suffered loss and are entitled to compensation as claimed under Claim No. 8 of the Statement of Claims on account of delay in the completion of the project attributable to the respondent. If so, how?
(ix) Whether the Claimants are entitled to the compensation to the tune of Rs. 6,24,000/- and Rs. 93,60,000/- on account of keeping the bank guarantee operative under the instructions of the respondents, between 1991 to 2003, where the claimants were not required to do so under the contract. If so, how?
(x) Whether the Claimants are entitled to the compensation to the tune of Rs. 6,48,242/- on account of insurance as claimed under Claim No. 10 in the Statement of Claim. If so, how?
(xi) Whether the respondents are justified in claiming interest on machinery and mobilization advance. If so, how?
(xii) Whether the claimants are entitled to claim No. 12 on the Statement of Claims on account of delay caused by the respondents in releasing payments due to claimants. If so, how?
(xiii) Whether the claimants are entitled to interest @24% on the total claimed amount from the date of cause of action till the date of payment. If so, how?
(xiv) Whether the claimants are entitled to the cost of arbitration. If so, how?
(xv) Whether the respondents are entitled to their counter-claim of Rs. 7,04,76,800/- for the reasons and on the ground mentioned in their Statement of Claims Annexure 'A' appended with the Reply submitted under covering letter No. SLD-96 dated 28-2-2000. If so, how?
5. The parties led the evidence in support of their respective claims and after evaluating the evidence and hearing the parties, the Arbitral Tribunal passed the award on 25.03.2017. The Arbitrators, namely, Mr. Sheikh Abdul Salam and Mr. Y. P. Singh allowed the Claim Nos. 1, 2, and 8 covered by the Issue Nos. 1, 2 and 8 respectively, whereas Arbitrator, namely, Mr. Ali Mohd. Magray rejected the Claim No. 2, however allowed the Claim No. 1 for an amount of Rs. 18.50 lacs along with simple interest vis-a-vis an amount of Rs. 17,81,706/- along with simple interest @ 12% awarded by the Majority 5 AA No. 17/2017 Award. Similarly, Claim No. 8 was allowed by the Majority Award to the extent of Rs. 1,95,92,794/-, but in terms of Minority Award, an amount of Rs. 85.99 lacs, was awarded to the claimant. Besides, the claim towards final bill raised by the claimant, an amount of Rs. 6,60,383/- along with simple rate of interest @12% per annum was allowed by all the Arbitrators. The Majority Award allowed the claim on account of bonus lodged by the claimant to an extent of Rs. 33,03,839/ along with interest @ 12% per annum but the Minority Award rejected the claim on account of bonus. Further the counter- claim raised by the applicants was allowed to an extent of Rs. 10.78 lacs along with simple interest at the rate of 12% per annum by all the Arbitrators.
6. The applicants have impugned both the awards i.e. the majority as well as the minority award on the following grounds:
(a) That the claim on account of suspension of work from October, 1989 to August, 1990 and from September, 1990 to December, 1990 for which the Majority Award granted compensation of Rs. 17,81,706/- and the Minority Award granted compensation of Rs. 18.50 lacs was not sustainable, as from the very beginning, the claimant raised these claims on account of force majeure conditions governed by Clause 32 of the Agreement executed between the parties and as per Clause 34.2 of the Agreement, neither of the parties was liable to other in respect of the loss or damages due to force majeure conditions. It is stated that various communications would demonstrate that during the period October, 1989 to December, 1990, inadequate arrangements were made by the claimant for the purpose of the execution of the work. It is further stated that as per the agreement, 6 AA No. 17/2017 the suspension period as per the force majeure clause has to be dealt in terms of clause(s) 34.1,34.2 and 35 of the agreement. The claim on account of suspension of work has to be regulated by the order of Engineer-in-
charge and in the instant case, the commensurate extension of completion time was duly granted by the Engineer-in-charge to compensate for the interruptions along with the escalation benefit. It is also stated that the amount claimed on account of the loss due to alleged suspension of work is not substantiated or authenticated by any documentary evidence.
(b) The second claim allowed by the Majority Award to the extent of Rs. 33,03,839/- but rejected by the Minority Award could never have been allowed as there was no express or implied clause in the Agreement for payment of any such bonus. The claimant raised this claim on the basis of inspection note prepared by then Managing Director of the Corporation and the said note had no sanctity or force, but was merely a recommendation which was referred to the committee for approval or otherwise. It is further stated that no formal orders in that behalf were ever issued by the Government as such, no claim could have been fastened upon the applicants on account of bonus. The claim of the claimant is otherwise not sustainable because he was adequately compensated by 97% increase in the rates provided under the old rates for the balance work and also granted the benefit of escalation, which the claimant has admitted in his claim petition. It is also stated that even the learned Arbitrator-Mr Ali Mohd. Magray in his award, while dealing with the said claim, has returned a finding that the enhanced rates retrospectively from 11/1989 for 7 AA No. 17/2017 calculating bonus is fundamentally wrong in so far as it does not take into account the escalation benefits availed by the claimant up to 3/1993.
(c) The Claim No. 8 allowed by both the awards i.e. Majority Award (Rs. 1,95,92,794/) and the Minority Award (Rs. 85,99,000/-) pertaining to the claim on account of delay is nothing but the repetition and recycling of already allowed Claim Nos. 1 and 2. The said claim was raised on account of delay due to idle manpower and machinery as well as on account of overhead and other expenses. The said claim overlaps with the claims raised on account of so called, suspension of work and bonus. It is further stated that total period of completion of work was 30 months starting from 01.06.1988 to 31.12.1990 and out of this period for 15 months, there was peace and normalcy in the Valley, which constituted 62% of the total time required for completion of the work, as such, the claimant cannot raise issue of loss because of inordinate delay due to the disturbed conditions.
(d) That the award is not sustainable because the Tribunal has granted the interest which is in conflict with the Act and as per the Act, interest can be granted to the maximum of 6%.
7. The claimant has filed the objections, thereby stating that the award is well founded based on due and proper appreciation of evidence both documentary as well as oral and under section 34 of the Act, the scope for interference with the award is very narrow, limited and restricted. It is further stated that the applicants have taken contradictory stands as on one hand, the applicants are placing reliance upon Clause No. 32 pertaining to Force Majeure Conditions and Clause No. 34.2 of the General Conditions of Contract and on the other 8 AA No. 17/2017 hand, the applicants have raised the issue that there was no complete suspension of the work. It is stated that for the application of Clause 35 of the Agreement, it is mandatory that the Engineer-in-charge must pass a formal order of suspension of work and in the instant case, the Engineer-in-charge under the contract, neither accepted existence of conditions in the nature of force majeure, nor passed any order in terms of Clause 35 of the General Conditions of Contract. It is stated that the expression 'force majeure' was not used by the claimant strictly in terms of Clause 32 of the Agreement, but in general manner demonstrating that the conditions were not conducive which prevented the completion of work within the stipulated period of time. The Engineer-in-charge accepted the circumstances which prevented the claimant to adhere to the time schedule and being satisfied granted extensions to the claimant from time to time. So far as Claim No. 2 lodged by the claimant is concerned, it is stated that the expression "bonus" used in the official correspondence is not, in fact a "bonus" under the Bonus Act, but the Managing Director of the Jammu and Kashmir Power Development Department in his note dated 12.04.1998 made a mention of the decision of the Empowered Committee and on the basis of said decision, instructed the processing the case of the claimant for grant of bonus. The provisions of the Agreement do not contemplate every conceivable situation which may arise during the execution of the contract and the Agreement does not prohibit grant of compensation on account of extra-ordinary situation, which had arisen at the relevant time. The Committee known as 'Madhvan Committee' was formed which submitted its recommendations and the recommendations were 9 AA No. 17/2017 considered by the Empowered Committee chaired by the Chief Secretary, of which, the Managing Director of the Corporation was also one of the members. The recommendations were agreed in principle. Each case was required to be examined independently and separately, it is for this reason that the Managing Director instructed that the case of the claimant to be processed. The claimant, as such, in view of the representations made by the official respondents i.e. the applicants herein, continued to work being satisfied that the claimant would be compensated for the loss which he had incurred. It is further stated that the rates were enhanced and made applicable after 01.04.1993 and the period covered by the Claim No. 2 is from November, 1989 to March, 1993. The claimant has denied that there was any substitution of any clause of the Agreement and the figure of Rs. 1,32,15,779/- was submitted before the Arbitrators with proper break up. The claimant has denied the finding returned in the Minority Award in respect of grant of escalation till March, 1993, as the claimant never received any escalation benefit up to March, 1993 as the rates were revised after 01.04.1993. The claimant has further denied that there is any overlapping of the claims. The claimant has denied that the claimant should have completed 62% of the work, as when the work was allotted in June, 1988, there was delay in handing over of site, clearance of impediments left over by previous contractor i.e. M/s NPCC Limited, non-availability of departmental supplies, i.e. cement, steel etc, power shutdown and non-maintenance of requisite voltage, reduction in working hours etc. In fact, the projection of the 62% of the work is only theoretical exercise undertaken by the applicants to defeat the legal claim of 10 AA No. 17/2017 the claimant. The claimant has stated that the Arbitrators have granted pendent-lite interest @ 12% from 28.09.2005 till the passing of the award i.e. 25.03.2017 and the applicants cannot question the jurisdiction of the Tribunal to award such interest because the claim of the claimant to the due amount had arisen before the amendment was made in the Act.
Arguments:
8. Mr. M. A. Chashoo, learned counsel for the applicants has vehemently argued that Claim No. 1 could not have been allowed because as per own admission of the respondent (claimant), there were force majeure conditions which prevented the claimant from completing the work within the time prescribed by the Agreement and once the claimant raised his claim on the basis of force majeure conditions, in terms of Clause 34.2 of the Agreement, none of the parties was responsible for any loss to the other party under such circumstances. He further argued that the Arbitrators in terms of the Majority Award have, in fact, modified the Agreement as the payment on account of bonus was never permissible under the Agreement and the applicants had already compensated the claimant by enhancing the rates with effect from the April, 1993. He further argued that the grant of bonus was never part of agreement and it was the unilateral decision by the Government and the modalities of the quantum of the bonus were yet to be determined. He also argued that the majority award has granted the enhancement of rates in lieu of bonus on their own without there being any justification for the same. Mr. Chashoo laid much stress that Issue No. 8 was nothing but the repetition of the earlier claims made by the claimant. Mr. Chashoo has relied upon the 11 AA No. 17/2017 decisions of the Hon'ble Apex Court in MSK Projects (I) (JV) Ltd. v State of Rajasthan and another, AIR 2011 SC 2979 and State of Orissa v Sudhakar Dass (Dead) by LRs, AIR 2000 SC 1294.
9. Per contra, Mr. Pranav Kohli, learned Senior Counsel, representing the claimant, has vehemently argued that none of the grounds raised by the applicants fall within the parameters laid down by section 34 of the Act for the purpose of showing interference with the well-reasoned award. Mr. Kohli has further submitted that the applicants are taking contradictory stands so far as Clauses 32, 34 and 35 are concerned. On one hand, the applicants are submitting that under force majeure conditions, none of the contracting parties was liable to the other party on account of any loss, whereas in the same breath, the applicants are submitting that the suspension of the work was required to be dealt with as per clause 35 of the agreement and further there was no complete suspension of work and the disruptions, if any, were only occasional. He has further argued that the bonus was agreed to be granted in principle by the Managing Director of the Corporation and the same was granted to the claimant from April, 1993 by revision of rates, but no revision of rates was granted to the claimant from November, 1989 when the force majeure conditions including the militancy resulting into the delay of the project, erupted. He further argued that the bonus sought to be paid to the contractor was agreed to be paid as they continued to work in the troubled situation in the Valley. He laid much stress that any claim which is not barred by the Agreement can be awarded by the Arbitrators and otherwise also, the award cannot be modified by this court. He also urged that the Claim No. 8 12 AA No. 17/2017 arose because of idling of men and machinery, overhead and other expenses, whereas the Claim Nos. 1 and 2 were made on entirely different grounds but still the tribunal has deducted the claim No.1 from the claim No.8. He has placed reliance upon the judgments of the Apex Court in "Delhi Airport Metro Express Pvt Ltd v. DMRS (2022)1SCC131, Konkan Railway Corporation Ltd. V. Chenab Bridge Project Undertaking (2023) SCC Online 1020, Datar Switchgear Ltd. (2018) 3 SCC, Swan Gold Mining Ltd. V. Hindustan Copper Ltd. (2015) 5 SCC 739, Sangyong Engineering (2019) 1 SCC 131 and S.V Samudram v. State of Karnataka &Anr.
2024INSC17.
10. Heard and perused the record.
Analysis:
11. Before this Court proceeds further to determine the controversy involved in the present application, it is apt to consider the scope of interference with the award under section 34 of the Act. Under section 34 of the Act, the Court can show indulgence and can interfere with the award only when the Court finds that the dispute was not capable of its settlement by arbitration under law for the time being in force or where the arbitral award is in conflict with the public policy of India. The explanation 1 and explanation 2 appended to section 34 of the Act, explains the concept of "Public Policy".
12. In Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131, the Hon'ble Supreme Court has held as under:
"28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by Courts while examining the validity of the arbitral awards. The limited grounds 13 AA No. 17/2017 available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality". Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality".What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression "patent illegality".
30. Section 34(2)(b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the 14 AA No. 17/2017 award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression "public policy of India" and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice."
(emphasis added)
13. In Konkan Railway Corpn. Ltd. v. Chenab Bridge Project, (2023) 9 SCC 85, the Hon'ble Apex Court has held as under:
"19. Therefore, the scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction. [UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116]. It is well- settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal. [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236] In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [(2019) 20 SCC 1] , this Court held :
"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
(emphasis added) 15 AA No. 17/2017
14. From the above-mentioned judicial pronouncements, it is clear that the Court cannot re-appreciate the evidence as the Court does not sit in an appeal against the arbitral award. The award cannot be interfered in a casual manner unless the Court comes to the conclusion that there is perversity in the award going to the roots of the matter and at the same time, the Court cannot interfere the award, even if, there is an error of fact or law, provided the Arbitrator has remained within the scope of reference.
15. Taking into consideration the above principles laid down by the Apex Court for considering an application under section 34 of the Act, throwing a challenge to the award, now this Court would consider the contentions of the applicants so as to determine as to whether the applicants have been able to bring their case within the parameters of section 34 of the Act, warranting interference by this Court.
Issue No. 1:
a) The Claim No. 1 which was covered by Issue No. 1 was raised by the claimant for grant of compensation for suspension of work for the period October, 1989 to August, 1990 and from September, 1990 to December, 1990.
So far compensation for October, 1989 to August, 1990 is concerned, the claimant had sought compensation due to force majeure conditions. The claimant has examined the witness, Mr. A. K. Aggrawal in support of its claim. In the award, the Arbitrators have returned a finding that the movement of personnel, material and logistical support was hindered due to frequent clamping of curfew in Srinagar and adjoining areas. The tribunal has referred to communications dated 12.04.90, 13.06.90 and 03.051990 to substantiate 16 AA No. 17/2017 their findings. The tribunal accepted the contention of the claimant that expression force majeure used by the claimant in its various representations was, in fact, a loosely used word and was not intended to be used in the context of Agreement.
b) The Clauses 32, and 34.2 are reproduced as under:
Clause 32:
32.1Civil Commotion (not insurable), war, invasion, act of war by foreign enemy, hostility, civil war, rebellion, revolution, insurrection, military power, nuclear fission, act of God, earthquake (above 7 magnitude on richter scale) lightening, unprecedented floods, fires not caused by contractor's negligence and other such causes over which the contractor has no control and are accepted as such by the Engineer-in-
charge, whose decision shall be final and binding . In the event either party being rendered unable by force majeure to perform any obligation required to be performed of the p[arty effected by such force majeure shall be treated as suspended for the period during which such force majeure cause lasts, provided the party alleging that it has been rendered unable as aforesaid, thereby shall notify with in ten days of alleged beginning and ending thereof giving full particulars and satisfactory evidence in support of such cause.
32.2 On occurrence of force majeure of the liability of either party shall be dealt with in accordance with the provisions of sub-clause 34.2. 32.3 Should there be request for extension of time arising out of Force Majeure the same shall be considered in accordance with clause 39. Clause 34:
34.2 Neither party to the contract shall be liable to the other in respect of any loss or damage which may occur or arise out of Fore Majeure to the works or part thereof or to any material or article at site but not incorporated in the works or to any person or anything or material whatsoever of either party provided such loss or damage could not have been foreseen or avoided by a prudent person and the either party shall bear losses and damages in respect of either respective men & material, As such liability of either parties shall include claims/compensations of the third party also.
Provided -----
c) Thus, it is evident that in order to avoid any liability under circumstances covered by clause 32, the conditions covered under clause 32 must be certified 17 AA No. 17/2017 by the Engineer In-charge and in the instant case, no such certification has been granted by the Engineer-In-charge pursuant to the communications of the claimant. Rather the extensions have been granted to the claimant time and again. Once the applicants have themselves not certified the conditions to be force majeure conditions under the agreement, then they cannot deny the claim of the claimant only because he lodged claim due to force majeure conditions. The Tribunal came to the conclusion that Clause 34.2 of the Agreement did not prohibit the grant of compensation for frequent suspensions of work or for loss of construction period even on account of force majeure clause.
d) The Arbitral Tribunal has considered only the wages payable by the claimant during the period of suspension of work and after taking into consideration the details submitted by the claimant, has awarded an amount of Rs. 6,28,898/-. Simultaneously, the Arbitral Tribunal directed that the said claim shall be adjusted against the Claim No. 8 for delay in completion of the work to avoid double payment for the same reason.
e) So far as claim for suspension of work for the period from September, 1990 to December, 1990 is concerned, the claimant sought the compensation as the work remained suspended and paralyzed due to strike by the employees of the respondent. By placing reliance upon the documentary evidence i.e. the communications dated 19.10.1990, 15.12.1990, 21.12.1990, the Arbitral Tribunal awarded an amount of Rs. 10,79,808/- and yet again the amount awarded was subject to adjustment in Claim No. 8.
18AA No. 17/2017
f) While awarding these amounts, the Tribunal has relied upon the various communications demonstrating the existence of disturbed situation in Kashmir Valley resulting into frequent stoppage/suspension of work and also the strike by the Government employees resulting into non availability of the cement till 04.12.1990.It needs to be noted that under both these claims, only the salary paid by the claimant to its workers/employees, has been awarded to the claimant. Needless to say that the Claim No. 1 is subject to adjustment in Claim No. 8 for delay in completion of work within the stipulated period. As such, this Court does not find any substance in the contention raised by the applicants that because of force majeure conditions as prescribed under Clause 32 of the Agreement, no claim could have been lodged by the claimant in terms of Clause 34.2 of the Agreement. The applicants are, in fact, taking contradictory stands as the applicants are disputing the Claim No. 1 of the claimant by asserting that due to force majeure conditions, the claimant was not entitled to any relief, but at the same time, the applicants are disputing the claim on the ground that there was no complete suspension of work as per the clause 35 Agreement. The tribunal has recorded the finding on facts after due appreciation of evidence and this court cannot re-appreciate the evidence.
g) In view of the above, this Court does not find that the finding of the Tribunal, while allowing Claim No. 1 of the claimant, is either perverse or patently illegal, which may warrant interference by this court. Issue No. 2
a) So far as Issue No. 2 is concerned as already noted above, the expression "bonus" is not to be considered as bonus defined under 'The Bonus Act'. In 19 AA No. 17/2017 fact, the bonus was sought as a compensation which was proposed to be paid to the contractors who worked during the turbulent conditions in the Valley. The claimant has relied upon the inspection note dated 13.04.1998 prepared by Mr. J. A. Shahmiri, Managing Director, Jammu and Kashmir Power Development Corporation, wherein it was observed that "as to why payment of bonus to such contractors, who continued to work during disturbed conditions in the Valley have not been processed so far, when it was agreed in the principle by the Empowered Committee". It was simultaneously observed that "all such cases should be processed quickly". The Tribunal, while placing reliance upon the statements of Abdul Rashid Bhat and Abdul Rashid Kochey, allowed the Claim No. 2 of the claimant which was in respect of claim from November, 1989 to March, 1993. Applicants witness, Abdul Rashid Bhat had stated that as per communication dated 13.04.1998, the claimant was entitled to bonus and Mr. Abdul Rashid Kochey other witness of the applicants had stated that issue in respect of bonus was pending with the Government. The applicants have stated that revision of rates was granted to the claimant with effect from 01.04.1993. It was vehemently argued by learned counsel for the applicants that the bonus was not provided in the Agreement and as such, the same was not payable.
b) The para-57 of the Majority Award is extracted as under:
"In the view of tribunal the parties being ad idem on the issue of payment of compensation for the period mentioned above, the respondents are estopped in law from denying the position or the plea that there is no provision to that effect in the agreement. The parties can always by their conduct and correspondence agree to matters which arise during the contract and which are not inconsistent with the express provisions of the contract. No provisions of the contract provides that the claimant cannot be compensated, more so when the respondent failed to create 20 AA No. 17/2017 conducive situation on spot/site to enable the claimant to execute the contract."
c) It would also be appropriate to note that the claimant while claiming compensation under the head bonus had specifically stated and pleaded that it in fact, was the compensation decided by the Empowered Committee payable to the contractors who did not run away and continued to work under hostile conditions. This claim in fact was based upon the decision of the Empowered Committee, which in its meeting held on 13.04.1993 took certain decisions including the one extracted as under:
"3. In case of agencies who continued to work during the disturbed conditions from 1/90 onwards it was agreed:
i that revised rates would be allowed to them also for the balance quantity with effect from 01.04.1993.
ii Details of the contracts where in there is no provision of escalation will be furnished by the project to the Empowered Committee for the final decision.
iii The detailed note regarding the bonus to be allowed would be furnished by the Project for the consideration of the Committee.
d) By placing reliance upon the decision of the Empowered Committee, the M.D of the Corporation on 13.04.1998 prepared the following note besides other:
"It is not clear why payment of bonus to such contractors who continued to work during disturbed conditions in the valley, has not been processed so far. This has been agreed in principle even by the Empowered Committee. All such cases be processed quickly"
e) From the above it is evident that no decision in respect of quantum of bonus payable to the contractors was arrived at either by the Empowered Committee or M.D in his inspection note. Only decision was to process the case and Government was to take the final call. It is the admitted case of the claimant that the revised rates were paid to the claimant w.e.f. 01.04.1993. Witness of the applicants Mr. Abdul Rshid Kuchay deposed in his cross-examination that 21 AA No. 17/2017 the issue in respect of the bonus was pending with the Government and no final decision was taken. The bonus, the quantum of which was not decided by the Government was not arising out of the contract but it was a sort of "ex gratia' to be paid to such contractors who remained in valley and did not leave the work. The "bonus" was not payable under any obligation(s) arising under the agreement but it was unilateral gratuitous act on the part of the Empowered Committee to award such contractors who worked during the hostile conditions and the quantum of the same was yet to be decided. More so, it was not claimant specific but a general benefit decided by the Empowered Committee which the Government could or not have approved. The parties may be having consensus ad idem in respect of payment of bonus but the parties never agreed that the same shall also be a part of contract and thus within the scope of reference to the arbitrators. Since the contract never provided for any payment of such bonus and also the quantum of the bonus payable was not determined by the Government, the arbitrators in terms of majority award could not have awarded the same as it amounted to re-writing of agreement. The reason/cause recorded by the arbitrators while awarding the claim No. 2 in the majority award as mentioned above, is that the applicants failed to provide conducive condition for the execution of work, which has also been the cause for the purpose of allowing claim No. 1 and 8 as well. The reasoning assigned by the arbitrators destroys the very foundation of the claim of bonus and if the reasoning of the arbitrator is accepted then the applicants are right in asserting that it is a recycled claim. Last but not the least, the arbitrators in Majority Award have awarded the bonus by revision of rates 22 AA No. 17/2017 when neither the Empowered Committee nor the Government itself had decided the mode for determining the bonus. The payment of the bonus was decided by the Empowered Committee and the projects were directed to process their case only. Learned senior counsel for the claimant tried to persuade this court that any claim arising between the parties can be decided by the arbitrator and he placed reliance upon the decision of the Hon'ble Apex Court in Irrigation Deptt., Govt. of Orissa v. G.C. Roy, (1992) 1 SCC 508, wherein it has held as under:
"43. The question still remains whether arbitrator has the power to award interest pendent lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth ThawardasPherumal v. Union of India, AIR 1955 SC 468] has not 23 AA No. 17/2017 been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [(1988) 1 SCC 418 : (1988) 1 SCR 253] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
(emphasis added)
f) From the above judicial pronouncement, it is evident that the arbitrator is the creature of agreement and it is open for the parties to confer upon arbitrator(s) such powers and procedure, so long as they are not opposed to law. The arbitrator must also act in accordance with law and agreement. This judgment does not lay down any proposition of law that the arbitrator can adjudicate an issue which does not have its roots in the agreement. If the claimant was entitled to any bonus in terms of the decision of the Government, which was not claimant specific but general, the claimant ought to have resorted to appropriate remedy under law to enforce such claim.
g) In MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573, the Hon'ble Supreme Court of India has held as under:
"17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award."
(emphasis added) 24 AA No. 17/2017
h) In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, the Hon'ble Apex Court has held as under:
"40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
68. A conspectus of the above authorities would show that where an Arbitral Tribunal has rendered an award which decides matters either beyond the scope of the arbitration agreement or beyond the disputes referred to the Arbitral Tribunal, as understood in Praveen Enterprises [State of Goa v. Praveen Enterprises, (2012) 12 SCC 581], the arbitral award could be said to have dealt with decisions on matters beyond the scope of submission to arbitration.
69. We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent "errors of jurisdiction", it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation (which would include going beyond the terms of the contract), could be said to have been fairly comprehended as "disputes" within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator is alleged to have wandered outside the contract and dealt with matters not allotted to him, this would be a jurisdictional error which could be corrected on the ground of "patent illegality", which, as we have seen, would not apply to international commercial arbitrations that are decided under Part II of the 1996 Act. To bring in by the backdoor grounds relatable to Section 28(3) of the 1996 Act to be matters beyond the scope of submission to arbitration under Section 34(2)(a)(iv) would not be permissible as this ground must be construed narrowly and so construed, must refer only to matters which are beyond the arbitration agreement or beyond the reference to the Arbitral Tribunal."
(emphasis added)
i) In PSA SICAL Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin, 2021 SCC OnLine SC 508, the Hon'ble Apex Court has held as under:
"89. It has been held that the role of the Arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.25 AA No. 17/2017
90. It will also be apposite to refer to the following observations of this Court in the case of Md. Army Welfare Housing Organization v. Sumangal Services (P) Ltd (2004) 9 SCC 619.
"43. An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference."
91. It has been held that an Arbitral Tribunal is not a Court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its powers ex debito justitiae. It has been held that the jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference."
(emphasis added)
j) The learned senior counsel also argued that the award cannot be modified. Of late, he submitted the judgment of the Hon'ble Apex Court in S. V Samudram v. State of Karnataka &Anr. 2024 INSC 17, where in the Hon'ble Apex Court after relying on its earlier decision in Hakim's case, has held as under:
"The position as to whether an arbitral award can be modified in the proceedings initiated under Sections 34/37 of the A&C Act is no longer res integra. While noting the provisions, more specifically, Section 34(4) of the A&C Act; the decisions rendered by this Court, including the principles of international law enunciated in several decisions recorded in the treatise "Redfern and Hunter on International Arbitration, 6th Edition", this Court in National Highways Authority of India v. M. Hakeen and Another (2021) 9 SCC 1, categorically held that any court under Section 34 would have no jurisdiction to modify the arbitral award, which at best, given the same to be in conflict with the grounds specified under Section 34 would be wholly unsustainable in law. The Court categorically observed that any attempt to "modify an award" under Section 34 would amount to "crossing the Lakshman Rekha"
(emphasis added)
k) The Hon'ble Supreme Court of India has no doubt held that the award cannot be modified but this court is of the considered view that the principle shall not apply in cases, when multiple claims are made and a particular claim found un-sustainable is not linked or connected to other sustainable claims and is 26 AA No. 17/2017 independent of other claims, as, then it will not amount to modification of award and the claim found unsustainable can be set aside. In J.G. Engineers (P) Ltd. v. Union of India, (2011) 5 SCC 758, the Apex Court has held as under:
"25. It is now well settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent. As the award on Items 2, 4, 6, 7, 8 and 9 was upheld by the civil court and as the High Court in appeal did not find any infirmity in regard to the award on those claims, the judgment of the High Court setting aside the award in regard to Claims 2, 4, 6, 7, 8 and 9 of the appellant, cannot be sustained. The judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claims 2, 4, 6, 7, 8 and 9."
l) The same principle has been followed by the High Court of Delhi in National Highways Authority of India v. Trichy Thanjavur Expressway Ltd., 2023 SCC OnLine Del 5183.
m) In view of above, this court is of the considered view that both the arbitrators acted beyond their jurisdiction by entertaining the claim which never had its origin in the agreement, of which they were the creation thereof and thereafter proceeded to decide the same by adopting the procedure devised by them on their own, when neither the Government nor the Empowered Committee had devised any mechanism to determine the quantum of bonus. The arbitrators acted beyond the scope of agreement and the award impugned to the extent of claim No.2 suffers from patent illegality.
Claim No. 8
a) The claimant had sought compensation for an amount of Rs. 4,36,14,227/- on account of delay in completion of work as the men and machinery of the claimant remained idle due to delay in the completion of the work. The 27 AA No. 17/2017 claimant also claimed an amount of Rs. 64,84,086/- as the compensation towards overhead cost due to delay in completion of work. This is an admitted fact that the project was to be completed within the period of 30 months with effect from 01.06.1988 to 31.12.1990 but the same was actually completed on 30.04.2002 i.e. there was delay of more than 4000 days. The claimant had lodged the claim on account of delay due to delay in handing over of the site by the applicants, impediments left over by previous contractor, disturbed conditions in the Valley, frequent curfews and strikes, erratic power supply by the applicants, wrong study of geological conditions i.e. underestimation of rock strata by the respondents, flooding at the inlet of the tunnel at the project site in the year, 1992, riot activities and burning down of Ganiwon colony, delayed supplies of material from the applicants and delayed payment of bills.
b) The claimant has placed on record various communications demonstrating the disturbed situation in the Valley and also the delay in supply of the detonators and gelatine for excavation through drill and blast method, cement and steel etc. The claimant also brought on record the communications demonstrating the bad strata of the site, which was admitted by the applicants vide communication dated 12.03.1994. The Tribunal after taking into consideration the various communications and the evidence of the claimant determined that there was delay in the completion of the project and the claimant has suffered a loss. The Tribunal also took note of the allegations and counter allegations of both the parties against each and other and determined an amount of Rs. 1,95,92,794/-as compensation on account of idling of men and machinery during the execution of the project after deducting claim No. 1. It needs to be 28 AA No. 17/2017 noted that no claim on account of overhead expenses and profit was allowed by the Tribunal. The Tribunal after due and proper calculation has arrived at an amount of Rs. 1,95,92,794/- on account of delay, as compensation payable to the claimant. The applicants have not able to demonstrate before this Court that the claim could not have been allowed under the terms and conditions of the Agreement.
16. The last ground raised by the applicants is in respect of interest awarded by the Arbitral Tribunal. The Arbitral Tribunal has awarded an interest at the rate of 12% per annum from 28.09.2005 when the arbitration proceedings commenced. The applicants were granted three months time for satisfying the award, failing which, interest at the rate of 18 % per annum with effect from the date of admission till its realization was directed to be paid to the claimant. The arbitration proceedings commenced on 28.09.2005, whereas section 31(7)(b) of the Act was amended on 23.10.2015. When the arbitration proceedings commenced, un-amended section 31(7)(b) of the Act was in force, which provided that a sum directed to be paid by an Arbitral award shall carry the interest at the rate of 18% per annum from the date of award to the date of payment unless otherwise directed. Thus, when the arbitration proceedings commenced, the Arbitrators could have awarded interest at the rate of 18% per annum from the date of award to the date of payment. The Arbitrators have not acted contrary to the provisions contained un-amended section 31(7)(b) of the Act, as such, this ground also fails.
17. After having gone through the award and for all what has been said and discussed above, this Court is of the considered view that the applicants have 29 AA No. 17/2017 miserably failed to bring their case within the circumstances/conditions provided by section 34 of the Act so far as claim Nos. 1 and 8 are concerned, which may warrant interference with the award passed by the Arbitrators. But so far as claim No.2 is concerned, the same cannot be sustained. Accordingly, the application under section 34 of the Act, is allowed to the extent of claim No: 2 only and the rest of the award in respect of claim Nos. 1 and 8 is upheld.
18. Disposed of.
(RAJNESH OSWAL) JUDGE Srinagar:
30.01.2024 Rakesh PS Whether the order is speaking: Yes/No Whether the order is reportable: Yes/No