Karnataka High Court
M/S Sahayam Constructions P Ltd vs The Bharath Earth Movers Ltd on 8 October, 2009
Bench: N.Kumar, C.R.Kumaraswamy
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Dated this the em day aim-what" ;, 2099?
PRESENT
THE HON'BLE MR. JI;sT1--eE
AND___ . T _ _ .
THE I-ION'BLE MR. JtJ'sfr1x;E C"RV_Ku1'V\iAR;4gswAMY
MISCELLANE.0Us:§1RsT"2§:§1飀.AI;"'Nn.. 471 2"of200o {AA}
BETVVEEN2
M/s. Sahayam' '€;'._cI11stt1,1ctic--ris ('}.?}"L--£d.,,_____7
A R€giSt€I:€-d"3?Fi*?Vf:}t.€ Lirnitegi C.ea1n'pany
Under the Companies Aeitveoi' S,{--56=_
Havingéits fegi'ste1fe_d Qffice at.
# 15, :11 cross;.11 Bii§¢ck.'11:'-stag,e"""
Basa*qeshwaVra"n3.ga;* b _ __ -- -
Bangaiorew 5e0'o'_79n'
Represented by"its"'Man.a~ging Director
Mr. _S M Saha'ya:n--. ...Appe11ant
'V[B--3?------S'ri G Subba Rao, Advocate}
" me' Bnaféijflf' Earth Movers Ltd.,
(23:-.G0y*ii§ efindia undertaking) having its
Regi~.steg'ed Office at "
.. 'VBEML Soudha'
" V Sétmpangirama Nagar
Baengaiore -- 560 027
Represented by its
Managing Director ...Respondents
(By Sri Sundaraswarny Rarndas, Senior Counsel for M/s. Sundaraswarny Ramdas Anand, Advocates] This MFA filed under section 173 (1) of 1\/I3/1A'ctr_'a.gainst the judgment and award dated 30~9--2000 passed in"Arbitra__tion Case No.32/1996 on the file of the VI Addi'tion.al,(Vfiity'e» Judge, Bangalore City, partly allowing the" "petition fork setting aside the award etc., 1 .. or This MFA coming on foji'"A~ "?day,."' N. KUMAR J1. delivered the fQ11owin§--.? [V 1 Jvndfigggafd This appeal is order passed by the em Addl. City own J1idge,_ :i3ati%§ga1gt¥g«;r¢p\*--giiggtang the application filed under Act. 1940 by the respondents' the award in respect of c1airn7l_1\Eos.l.AlV} the award a rule of the Court, in so far asclaim No.35 is "concerned.
The 'appellant was awarded a contract by the ' .V.respo'nde_nts'''for construction of residential quarters at their attached to Railcoach Division at Bangalore. Accordingls/, the agreement dated 16.11.1987 came to be executed between the parties. The respondent issued work diorder on 16.07.1987, even before the execution of the formal K/at agreement. The work was to be completed on or before 15.10.1988. Admittedly, the work was not completed, within the stipulated time. It was completed only on_'44i'i«989. After the completion of the work, the bill. Accordingly, payment was if was received by the appellant if such satisfaction of the the put forth Certain claims beforevthe resp'o'r1d::ents',..yvhich turned down. Therefore, he sought to the arbitration in terms of in the agreement dated also turned down.
TherefoI'e..th'eT 96 for appointment of an arbitrator': dispute to arbitration. The said arbitrationucase " The arbitrator was appointed. arbi'trator,'--i.afL_¢; entering on reference, called upon the ' ;'parties"io«pniit__forth their claims. Accordingly, the appellant put '-- consisting of 15 items, in all, amounting to The respondents filed statement of " objections contesting the claim and denying their liability to any portion of the said claim. The arbitrator conducted an .1;
4. The learned City Civil Judge. after carefully going through the award passed by the arbitrator and the"-material which was placed before him. by a detailed the misconduct alleged against the arbitratorlis fproved,l_"i findings are contrary to the ter*n'1s'loi"'tl'ieA_ o.ontrao'tl._entered'"into between the parties and thereforelgeitcept the_-.yclaim irlrespect of item No.15, in all other aspects, the'aWa.rdv_:oi"»the"arbitrator was set aside. Aggrieved by" the 'said order-A passed by the learned City Civil Judge; isbefore this Court.
5. H Sdbba 'Rao; tihexlleariried Counsel appearing for the appellant, assa,illiri'gi:the irripugned order passed by the learned :tIiidge'~«lcontends that the order passed by the I learned judge'isllliable--to"'be set aside on the short ground of jurisdictional error, iiiasmuoh as he has exercised the power as 'an lllaippellate Court reappreeiating the entire evidence on V' "r_ecord:an'dll his own reasons for coming to the conclusion the order of the Civil Court is liable to be set aside. whlicheis rrotllcontemplated in law and therefore he submits that in/"C
6. Per contra, Sri. Rarndas, learned Senior Counsel appearing for the respondents contends that mere1y"'*--because the learned Civil Judge looked into the record and has passed a detailed order as that is no reason to set aside the order p_ that the reason for setting aside is it misconduct alleged against tlierarbitratorl when the arbitrator passes awardincontrary tol"the"V§terms of the agreement entered into and the error is apparent on:_t«iie ifaceiggot in law, constitutes misconduct,Judgetcannot be found fault with. no" for interference is made out.
7. l' facts and rival contentions, the point that'-arises for'ouriconsideration is:
A' «.i.__'_'_W7l1ether the order passed by the learned Civil Judge do callfor interference by 8:7. i ll Under the Arbitration Act, 1940, the Arbitrator was i at not expected to give any reasons for arriving at any conclusion l Kjlaiid passing an award. In other words, he was not expected to E//_i pass a speaking award. As it was one of the terms of the contract that if the claim exceeds Rs.50,000/--. he has to give reasons for the Award. Therefore, on consideration» of the material evidence on record, the Arbitrator a speaking award giving reasons for his conc1usio:ris.V award passed by an Arbitrator is-ta"
speaking award, when said award Court on the ground that itV»is.:Vpf$"fi1iifc1tedV' by and that too when the Civil Court is sndchvanpaward, it has to give reasons, as theuédsiaid Aiappealabie order before this Court. ro _i'iii.ii1 the Civil Court has passed' the case of the parties, the evidence" of the agreement between the parties the findings recorded by the Avrbitratorgi iticanifiotvbe criticised as an order passed by the ' ;court..vi1'1,it.s"'appei1ate jurisdiction, Therefore, the contention . has treated this matter as an appeal and has written an elaborate order giving reasons for disagreeing , A' the Arbitrators conclusions, would not render the order of i/ 8 the Civil Court illegal as contended by the learned counsel for the appellant.
9. The said order of the Civil Court is lsuiqjpect to appeal before this Court. Therefore, in order contention, we have gone through the II1E1l.I'3.Fl_&l.l*.Qi1~.:l'€C01"d"al'lCl',_ we are satisfied that the order pa-ssed_:hyjj.the lC..ou:rtl suffer from any legal infirmity' whichicalls this Court for the following V V V it
10. The claim ior payment of supply and fixing of ballyalves The argument was the appel.lantl prope'1~ly..v'understand the term of the contract" atItem-~..No..éE"2.._:la'n_dhtherefore, while calculating the price, hed_idv.noi._take»i:r'§'to consideration the value of the ball valvevas accordingtc. them, that was a separate item at Item ' ;VI"o.7'2_as 'wfeil__as 96. It is that contention which was accepted '-- on the evidence adduced and has allowed the clairnin When in a contract, there are three independent " iite_rnsl,ll it is not possible to accept the argument that in performing the obligation under Item 65, not only the appellant has to be paid the cost as calculated in the said item but also the cost calculated under any other Item supplyingand fixing high level flushing cisterns includes fixing which the flush cisterns cannot function. W circumstances, the interpretation" placed 'by patently erroneous, contrary to the was justified in setting aside ..5aid."awarcl notlsee any reason to interfere in theAlsaid,_:crd'er of the'Civil Court.
11. Thesecond. claim of payment for micro l_e,of_:tir,1el by the agreed items. The the 'contract was entered into for no agreement to level the ground before over. Levelling was done. It is a separate item rand' therefore, the appellant is entitled to the said ,;i:n{iun*:. "If the micro levelling item is outside the contract as appellant, he is not entitled to any amount for an,-item Avvhich is not the subject matter of the contract as righltlyhheld by the Court. Otherwise, it is difficult to believe if a construction activity is entrusted, after finishing the work any separate amount has to be paid for levelling the 1 0 ground and the contractor is entitled to any additional benefit. Unfortunately, the Arbitrator has accepted such a contention and has awarded the amount which is rightly set aside by the Civil Court and we do not see any error in this regavrdljspp
12. The third claim pertains to amount recovered towards cost of C¢.H}'3vIl'L'._vSL1:.13plit?C'1" =f.0rV.__ manufacture of hollow blocks termedas penal4.recover.y.V 0 per '_j the terms of the contract,' the res.p;on.dents'u*bA llsuspply cement for construction of house-. was no obligation on their ._ce_ment manufacture of hollow blocks: The procure cement, manufactulrevj[hollow and then construct the building. As the"appellaiit\«ias0 unable to procure the requisite cement, a request was to respondents to supply 1500 bags of which vifaslllsvupplied. The appellant was expected to sail} 1500 bags of cement. The respondents have de_ducted cost of 1500 bags of cement at the rate of Rs.1",:355/M. According to the appellant, there is an excess '.rec'oveIy of Rs.95,920/-- which they were not entitled to. The respondents had agreed to supply cement for the purpose of \g// "-4 construction at the rate of Rs.1,2'?O/-- per tonne. As they had no obligation to supply cement for the purpose of manufacture of hollow blocks, but still they supplied as far as..tl1at' is concerned, they had claimed the cost at Under these circumstances, the q"Ld1estIon_of any_le::cess- amount it being recovered from the appel1antg'fi.r»_'r($'Ui_1'd 7{10\t'ca;/p1se.A, the claim is very bald. How thve'arnounthl'of.. arriyed at, which is the subject..rnatt.e'r"oiVt_t~lai1nflNo.5 'isunot forthcoming from the claim i"_'A':f1»'\i1erefore, when the respondents cost of 1500 bags of are entitled to the cost of said deduction cannot be found--._fa':ilt committed a serious error in directing é a sum of Rs.88,875/-- under the aforesaid award any basis.
g .
' " 4"' claim pertains to the difference in rate of 8 for 5.6 MT at Rs.7,500/-- per MT amounting to Rs.42V,__AG()0/--. The said claim was allowed by the Arbitrator it vunpinindful of Clause 9{e} of the terms of the contract which reads as under: -- vi] "The weight of steel / bars shall __be calculated from the weight conservation given.._in._p the relevant ISI and the sections for conversions is not available in the ISI do'uble::the V' actual weight conversion of s_u.C.h_'f
14. In spite of the aforefsaidffcla1,rse,'p" thee. it claimed a sum of Rs.42,600f/'-{on the."basisV_lof weightrof the steel used by him. in respondents calculated the cost reference to the 'ISI Table which papprlicable. feircumstances, the leamed J}"d<%3._ the Award of the Arbitra.tQr_'i1nféie;r--: as it was contrary to the express c'o'ntract. -'
15. 'pin No.5 is concerned, an amount of
-- w'as_c_lain1ed as the value for providing primer coat » lforpVcenIent:p~a.int. Item 55 of the contract provided for cement H provide for primer coat at all. It is not in that there is no contract to the said effect. In spite of V "the same, on the pretext that the appellant had provided '7.p'ri"rner coat, the Arbitrator awarded this amount which is lj rightly set aside by the Court as the said claim was beyond the terms of the contract.
16. Claim No.6 relates to extra work for providing Cement concrete for fixing the holdfasts for doors and "windows. The cost of fixing the holdfasts for doors and job which the appellant undertook to perform. -'af_"the contract. Therefore, he was notggggentitled"to:liianjrdiarldltiotiallflg amount under the aforesaid heacl; Still Arhitrator .1 the said amount without anv basis land" it waslvrightly ssetlhaslde by the Civil Court.
17', """ . }'~Io;'7.V>pelrtaii1s~toV the cost of water utilised for constructigon. the contract provided for the term regarciingvvater lwhich" reads as under: ,,_"'Whillemcompany shall make all endeavours _ " water to the Contractors on a chargeable 'V Contractors should examine the possribility of making their own arrangements for C' tlie water required for construction activities. It is suggested the Contractors could drill required number of borewells from where available water could be used by them by pumping the same for \/ the construction activities. In such a case, the bore well sunk by the contractors shall remain the property of the company. After completion of work, the Contractor will not be chargecl~iforVV.the.1' water which he consumes from the borewells V"
18. The contention is the;lresl}:3A'ond'i3nts water as attempts to grill a _borewellWi.n the f':BtElv'E°L prevniises failed. The Contractor had tolpriocure watelr ifronljrigthe village at a considerable cost an:d*~thereiiolre;':"respondents are liable to pay the cost of the water. the aforesaid clause makes it cle;ar"exfen the --:res'pond'ents:lVfwere to provide water, the ContréJ1ctor*lj1fias:"'to ipvagrglliorvlligitlliLlfiithey do not supply water, they:'ha{re'-- other sources. Under no circ1iriistances,l :'1v'!3'.l'__'3KV'p,,(:):'1'V}..Ci€1'1'tS were expected to pay any money towards water" consumed in construction work. [}Y':Ifl:fO1';:-1él.r1E1tC1y.'x'i3'i""S'plf,C of such a clause, the Arbitrator has V of the appellant which is rightly set aside by l' the 'Civil iC'o1:i'rt.
.. 3,9. " Claim No.8 is regarding recoveries made on lflp-ayiment made towards BS1 contribution in respect of the workers engaged in the construction work; by the contractor \/ amounting to Rs.60,281/--. The argument is the construction activity was not carried out within the factory preriiises and there was no statutory obligation to pay ESI which contention was accepted by the Arbitrator, Pmbitrator ignored the express ter:nAof'th.e as under: It V T A I V in t " Construction sjA and type B quarters_.___u{:tt.__ B.qng0tlore__'CVoh1plex, Bangalore and Loo~}:'_ksi--_ are considered asPqrtthefa€t°T§;..'f
20. express provisions, the respondent iilleugvtalitylr in deducting the E81 bills and appellant is not entitled to the V Claim No.9 was rejected by the Arbitrator himself. \ No.10 pertains to escalation in cost of steel Ap.r_ocuretil'a1nounting to Rs.3,27,747/--. It has been allowed by the Aijbitrator ignoring the express term of the contract which 2 v _r_6é!;ds as under:
E6 "Contractor shall agree not to petition for refund of rates tendered for by him under any circumstances at any stage of the work _e.iti~":er~._ either during execution or when the final _,_V"
settled." 2 it
23. Notwithstanding the a"fore:s'aidl'express' contract, on the ground that therehwlas escalatiorr in steel price, the arbitrator committe'd:a» serioiixs illegality allowing the claim which is rightly set" CiVil°Co11rt.
24. Claim of the workable rate for all the 10.88 onwards. The thevdlpcohstmction was not completed the period was extended.
Admittedlywhile period, no penalty was imposed as4.;jco11.ternplate_d Vlunder Clause 20. When no such penalty is A wimposeid and time is extended, it means, it is the respondent who 'was__a€;,l.l'fault and cause for delay. Once the respondent was the caulse for delay in completing the work, they are bound .o to pay 'cost of escalation notwithstanding the express term as C' c-oritained in Clause 5.
25. 17 The contract had to be competed on or before 15.10.88. On 23.09.88, the appellant addressed a letter to the respondent as per Ex.R2 giving reasons for not complebting the work within the stipulated time. The reasons gixren ., la}
(b) {6} {CU 26'. p Firstly, water is not available; M H Secondly, while excavating j.tlie ':,_fo'anCl granite blocks. _ Thirdly, concreteVlV8"i'3.'rarne not ready because Ofnon availabjilityof water;
Fourthly, Lvat_e'r there. There was problem with * fli;ve'idin_.g. '.T.hlere were heavy rains. 8' ' ~ 1-Wtere'fVi1)as' 'labour problem " _The_"entru.sted with the road work had = clugout Atheiand making it impossible to access the Steel was not available.
All these were expected to be procured by the " appelllant. If he was not able to procure the requisite material
-- construction and consequently, he was not able to complete l8 the construction within the stipulated time. certainly the respondents had a right to impose penalty as per Clause 20. However, they were generous enough in not only extending the period for completion of work, they also did not impose-.penalty. Taking advantage of this gesture, it is now the penalty is not imposed, that means, respondent' therefore, the respondent has tojplayescalationl"cosy;._f{ril"fact;. on the very same day, one more aVle_tte_rA. appears to l""i-avevbeen written as contended by the--v..a"p.pellant..protestingvlllagainst the action of the respondent in not releasing thepayrnent in time, it has hampered the that document was objected'eto_flas a2Eiocu'nien.t created for the purpose of the case. The tenorélof :twod"d_ocurnents make it clear there is some substance._in.wha_t A"thei.respondents contend. At any rate, the material on record_____clearly establishes it is the appellant who ' ,coIn1nitted..,Vlthe breach of the contract, did not complete the stipulated period, sought for extension which was 2 granted and merely because penalty was not imposed, it " cannot be said the respondents were at fault and therefore, have to pay escalation in the cost of construction. In fact, it/' E9 Clause 5 squarely applies and the appellant is not entitled to any escalation in the cost of construction. Unfortunately, the Arbitrator, ignoring the specific provision Ex.R2, the1l:e'tter, has recorded a finding contrary to the legal record which was rightly set aside by the Civil Cou_1jt_.p ' C"
27. Claim No.12 deals tax on work contract paid to.' the Department. The argument the "challenged the imposition of tax ._a*n'order In respect of the same, the respondents the tax payabie on works C0ntraC4t\}f.Ihich:lis i'lle§al"*vsfhic'h.contention is accepted by the fi:irbitrator,--. _it:n¥is dispute the Apex Court has upheld the irnposition t:a::b'On:'.Wo'rks contract and there is statutory oblyigationlléonftheApart ofsthe contractor to pay the said amount if and etitie respondevntsvwere justified in withholding the amount "'f;«3:r1 4an:d_j..making payment and therefore, the Civil Court was }usi,ifi:ed:'in setting aside the said award. AA 28. if 1 Claim No.13 is rejected by the Arbitrator himself. 20
29. Claim 14 is regarding payment of unproductive additional overhead charges of 15% on the entire value of the work done amounting to Rs.l8,53,l28/--. Thevppgllggygnd for raising that claim was cause of the delay in contract work and the consequent additional overhead was born by for.
not completing the contractyin'_stipu--lated Viifippellauntllarid at the instance of the appellafit;extensioilliisjhV-granted, therelis no obligation on bear the overhead charges andwtflhat by the appellant only. Therefoi'e..yg:y1'the{Court in setting aside the award"p'assxe'd.lby:the A.rybi_tratoriu1'ilcler that ground.
30. A"1"h_erefore.,_.l' :,d1"'t:.fvlisiiclear from the aforesaid facts notwithstanding'"express terms of the contract. the Arbitrator allowed the of the appellant on the basis of the oral igri~ori;ng the express terms of the contract and thus misdirected himself. In those circumstances, a duty is cast on the "Court to carefully consider the material on record and '.interfere with such unjust awards which are contrary to law and patently illegal and passed without any basis whatsoever. |\.) In that View of the matter, We do not see any merit in this appeal. Accordingly, this appeal is dismissed. Pariiés,Tt0 bear their own Costs.
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