Calcutta High Court (Appellete Side)
M/S. National Highways Authorities Of ... vs Hindustan Construction Company ... on 22 September, 2011
Author: K. J. Sengupta
Bench: Kalyan Jyoti Sengupta
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In The High Court At Calcutta
Civil Appellate Jurisdiction
Appellate Side
Present:
The Hon'ble Justice Kalyan Jyoti Sengupta
And
The Hon'ble Justice Syamal Kanti Chakrabarti
F.M.A.T. 1649 of 2010
M/s. National Highways Authorities of India
.....appellant
Vs.
Hindustan Construction Company Limited
......respondent
For the Appellants: Mr. Jaydeep Kar,
Mr. Anirban Bose,
Mr. Suvadeep Sen,
Mr. Abhik Chakraborty.
For the Respondent: Mr. Jayanta Kumar Mitra,
Mr. P. K. Ghosh,
Mr. O. P. Jhunjhunwala,
Mr. K. Chakraborty.
Judgment on: 22.09.2011.
K.J. Sengupta, J:-
This is an appeal against the judgment and order dated 16th August, 2010 passed by the learned District Judge, Purba Medinipur at Tamluk by which the 2 application of the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 has been dismissed. By the application as above the appellant herein challenged three awards all dated 29th September, 2008 passed by the learned Arbitral Tribunal. The said learned Arbitral Tribunal admittedly comprised of three experts on road engineering. Two of them were nominated by each of the parties, and one was chosen as being third Arbitrator by both the learned Arbitrators as nominated by the parties. The said learned Arbitral Tribunal was constituted indisputably under Clause 67.3 of conditions of particular applications.
The short fact leading to making and publishing award and ultimately preferring instant appeal is stated hereunder:-
By and under written agreement dated 13th December, 2000 the appellant herein entrusted to the respondent with the works for widening of four to six lanes and also strengthening existing two lanes carriage way of 'National Highway
- 6' from 72 k.m. to 136 k.m. stretching over from the point of Kolaghat to Kharagpur in the State of West Bengal. One M/s. Intercontinental Consultants and Technocrat Private Limited was appointed consultant under the contract. The said contract contains a large number of conditions which are described General Condition of Contract and the same was modified in certain places to suit mutual requirements. The modified conditions are termed as the conditions of particular application. The aggregate contract price was Rs.391,60,98,917/-. 3 In terms of the contract works were to be completed within 36 months from the date of commencement, 15th January, 2004. However, the same could not be completed for various reasons as such admittedly extension was granted by the respondent without any dispute. Ultimately, the works were completed on 28th April, 2005. In fact there is no dues and claims in relation to the works covered by the contractual terms, the claim was put forward for extra works outside terms of works schedule but incidental to the contract including escalation of cost and additional cost incurred for the delay in project for various reasons. In spite of demands the appellant refused to make such payment. Hence the dispute reached to the hands of the learned Arbitral Tribunal.
The disputes and differences arose between the parties for deciding the following claims and counter claims:-
(a) Claim No.1 put forward by the respondent/claimant, relates to losses incurred on account of site development work in and around the office and residential buildings executed @ Rs.850/ square meter under BOQ (Bill of Quantity) item No.10.12. The said work comprises of providing infrastructural facilities like water supply, internal roads and lighting etc. An estimated area of 31,300 sq.m. was provided under the said item and to be constructed at chainage. Total claim on this head made by the respondent is Rs.13,95,771/-.
In this connection the appellant herein also made a counter claim to the 4 extent of Rs.1,49,09,152.42/-. Both the claim and counter claim as against claim No.1 were rejected.
(b) Claim No.2 is on account of payment of certain additional works for construction of Toll Plaza with necessary infrastructural facilities under BOQ item No.10.13. In the award the learned Arbitral Tribunal rejected the counter claim however allowed the claim of the respondent. As against claim No.2 the learned Arbitral Tribunal has awarded a sum of Rs.13,95,771/- on account of principal for the additional works executed over and above works contemplated under BOQ item No.10.13 together with interest at the rate of 10% compounded monthly from 31st January 2005 till the date of this award and also awarded future simple interest at the rate of 15% per annum from the date of the award till the date of payment.
By the first award the aforesaid two claims were adjudicated, dealt with and decided.
By the second award the learned Arbitral Tribunal dealt with and decided three claims namely claim Nos. 3, 4 and 5.
(c) Claim No.3 relates to balance payment due for subgrade construction under BOQ item No.2.03,
(d) Claim No.4 relates to balance payment due for embankment construction at Panskura By Pass under item 12.03
(e) Claim No.5 relates to balance payment due for granular (sand) blanket 500 mm thick over ground improvement area under BOQ item No.2.08. 5 By this award the learned Arbitral Tribunal awarded a sum of Rs.22,77,738/- as against claim No.3, as principal claim and a sum of Rs.3,10,846/- on account of price escalation. A sum of Rs.3,92,350/- as against claim No.4 and a sum of Rs.70,848/- on account of escalation was awarded on this claim. In relation to claim No.5 a sum of Rs.74,25,600/- on account of principal amount and a sum of Rs.11,50,151/- on account of escalation in relation therewith, interest at the rate of 10% compounded monthly from the date of entitlement till the dates of the award as per terms of the agreement was awarded. In addition thereto the learned Tribunal awarded additional future interest at the rate of 15% in relation to the aforesaid three claims.
By the third award the learned Tribunal has adjudicated and decided the claim No.6 under the heading Additional costs consisting of eight sub heads out of nine sub heads claimed, on account of extension of period of contract for two phases viz. one from 1st January 2004 till 31st December 2004 and then from 1st January 2005 till 20th April 2005. An aggregate sum of Rs.6,767.81/- lacs has been awarded on account of principal and interest thereon @ 10% compounded monthly from the date of completion of works i.e. 20th April 2005 upto the date of award viz. 29th September 2008 and also future interest @ 15% per annum from the date of award till the date of actual payment.
It appears that the learned Trial Judge after noting the submission of both the sides accepted the said award holding in substance that since the award was 6 passed by the expert persons on consideration of all the materials it is not for the Court to interfere with the same. It is also held that the award does not suffer from any illegality and infirmity. On reading of entire judgment we are constrained to observe that the method of dealing with the application was absolutely perfunctory and mechanical. Why the award was acceptable to him is not spelt out with his own language, similarly why the award should stand to the test within the four corners of Section 34 of the said Act was not worded. At one point of time we felt that as no decision was rendered by the learned District Judge in real sense dealing with each and every relevant point specifically the matter should be remitted back for fresh hearing and decision. However in course of hearing we thought when all the materials are before us we would examine whether such a conclusion is possible on examining the points and contention raised by both the parties. Thus instead of remanding we decide by ourselves as it requires to be done under the law.
Mr. Jaydeep Kar, learned counsel appearing for the appellant contends broadly that the learned Judge did not advert to the points raised before him which are stated hereunder:-
Claims allowed by the learned Arbitral Tribunal are contrary to the terms of the contract between the parties. In other words, award was beyond the terms of the contract.7
The award is also contrary to the substantive provision of law and thus it is patently illegal and opposed to public policy.
Mr. Kar contends in relation to claim No.2 namely construction of Toll Plaza that the contract was for lump sum amount of Rs.3,99,04,940/- covered by BOQ item No.10.13 (contract page 0052). This clause does not provide for payment of any extra amount. The learned Tribunal in breach of this term has allowed claim of Rs.13,95,771/- wrongly relying on letter dated 31st January, 2005 of the official of the respondent and ignoring written admission of the claimant to accept a sum of Rs.4,72,404/- contained in letter dated 6th December 2005. Actually this claim was awarded basing on principle of non-traversal because of non reply to letter of claimant and such principle of non-traversal has been wrongfully applied for proof which is applicable in case of pleading in Civil Suit. This mistake is not legally acceptable as it has been laid down by the Supreme Court in its decision reported in (2005) 5 SCC 160. The learned Tribunal also overlooked further admission of claimant that the Engineer of respondent acted upon pursuant to earlier letter dated 6th December 2005, recording settlement of the claim at Rs.4,72,404/- in letter dated 31st January 2005. Therefore this award is in excess of jurisdiction, and is untenable.
While assailing the award as against claim No.3 regarding balance payment of subgrade construction Mr. Kar contends the learned Tribunal in breach of the terms has allowed rate of BOQ item No. 2.02(b) being Rs.210/- per cum without 8 supply of its own material. While awarding this claim the learned Tribunal in fact has directed the appellant to pay for its own material used in the works contrary to clause in the contract. It did not consider written document recorded and certified accord and satisfaction of the contract by the appellant.
Mr. Kar submits that the award in relation to the claim No.4 has been passed without taking note of Section 70 of the Contract Act as the materials supplied by appellant was not intended to do so gratuitously and cost of the materials should have been asked to be paid.
He urges that the award as against the claim No.5 was awarded without considering the principle of finality and accord of satisfaction.
His further contention was that the award against claim No.6 should not have been passed as it is contrary to the Clause 70.2 of the Contract which clearly spells that escalation will not be allowed.
He further submits that the award under the heading escalation as well as profit is unjust enrichment. He urges on the question of interest that said rate of interest at the rate of 10 per cent per annum compounded monthly under Clause 60.8 under the agreement will not be applicable in the present case as it has restricted application as mentioned in the said clause. 9
He complains that the claim of the respondent was not entertainable as it was not decided by in-house mechanism and the learned Arbitrator has wrongly held that the parties were prevented from resorting to this mechanism. Moreover, there has been no evidence to support awarded claims.
Mr. Jayanta Kumar Mitra, Senior Advocate with Mr. Pradip Kumar Ghosh, Senior Advocate for the respondent/claimant submits that the Arbitral Tribunal considering the submission both oral and documentary and evidence received, found that the claim made by the respondent/claimant before it under claim No.2 was sustainable on fact and in law in terms of clause 2.2 of the contract. After having recorded the claim and contention of both the parties and after having analyzed and appreciated the evidence the learned Tribunal awarded the claim made in relation to claim No.2 with interest.
He submits that learned Tribunal is the only fact finding authority having competence to interpret the terms and conditions of the contract and once it is done and the same is not found to be absurd, the Court cannot interfere with the same. According to him appraisement of evidence by learned Tribunal is never a matter the Court questions and considers. The chosen forum of the parties must be conceded the power of appraisement of evidence and is the sole judge of the quality and quantity of evidence. In support of the above contentions he has relied on following Supreme Court decisions reported in 10 (1) AIR 1981 SC 2085, (2) AIR 1989 SC 890 and (3) 2005 (6) SCC 462. He submits that the award in relation to claim Nos. 3, 4 and 5 were rendered by the learned Arbitral Tribunal after having considered the arguments of the claimants/respondents and the appellant and analyzing the material placed before it. It has considered the various relevant clauses of the General Condition of Contract and interpreted the same.
He contends with the support of the Supreme Court decisions; reported in (1992) 4 SCC 217, (1999) 4 SCC 214 and (2007) 67 Arb LR 508, that the interpretation of the contract is within the jurisdiction of the learned Arbitrator and Court cannot sit in appeal over such interpretation even if its views are different from that of the learned Arbitrator.
He then would contend that the learned Tribunal consisted of three experts in the field of road construction and highly experienced Engineers. The construction of contract BOQ items ought not to be interfered with unless there are compelling reasons therefor. They have decided after giving both parties full opportunity of hearing, the issue whether laying of granular drainage layer was part of the work of embankment or not.
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He submits in a case like this the Court shall not interfere with the discretion of the Arbitral Tribunal and for this legal proposition he seeks support of the following authorities:
1948 (2) All ER 106 and AIR 1987 SC 2316.
Mr. Mitra then contends in support of the award as against the claim No.6 which was made on account of additional costs incurred during the extended period of contract of 16th January, 2004 to 20th April, 2005.
He submits that the learned Arbitral Tribunal has analyzed terms of the agreement made by both the sides in details in various paragraphs of the works order.
He urges that alleged undertaking given by the respondent/claimant dated 30th March, 2004 and 5th May, 2005 have been duly considered by the learned Tribunal. Those undertakings has been held by the learned Tribunal, not bar in awarding the said claim. On fact it has been found by the learned Tribunal under compelling circumstances and situation the aforesaid undertakings were extracted from the respondent/claimant. Apart from considering above fact it has also taken note of the various decisions of the Supreme Court on this point. It has considered factual aspect that even Engineer of the respondent has certified admitted amount to the extent of Rs.22.85 crores, and therefore the fact of delay 12 due to the fault of the respondent and the additional costs incurred by the claimant on account thereof had been admitted by the respondent. Even before learned Tribunal the appellant herein declined to make any submission on the merit of the claim No.6 covering all the sub-heads but advanced argument on admissibility thereof in terms of the contract. According to him if it is held that the aforesaid claim is admissible under the law upon considering evidence and fact and also applying law of the land it is no longer open for the appellant to challenge the merit of the claim under this heading. In support of this contention following authorities were produced before the learned Arbitral Tribunal:-
(i) (2004) 2 SCC 663, (ii) (2006) 13 SCC 475, (iii) (2009) 1 SCC 267 and (iv) (2011) 2 SCC 400.
On the question of the loss of profit he submits that this point was never raised earlier, even in the application under Section 34. Under this circumstances at this stage the appellant is precluded from taking this point at hearing.
He submits that profit element has been excluded from the concept of cost because it is included in the contract prices. What have been claimed under Claim No. 6 is additional costs incurred during the extended period of works under the contract. Hence concept of profit would automatically be included in the additional costs incurred due to overstay, since loss of profit incurred during 13 such period will be an additional element for assessment of damage. In any event the learned Arbitral Tribunal has construed contract after giving hearing to the parties. Such interpretation of the contract is plausible one and this Hon'ble Court would be pleased not to interfere with such finding as according to him the decision of the Supreme Court in a case reported in (2010) 11 SCC 311 rules such exercise by the Court is not permissible. On the question of interest he stated that learned Tribunal has awarded interest at the contractual rate at the rate of 10 per cent per annum compounded monthly from the date of completion of the respective works. This is an agreed rate; under the provision of Arbitration and Conciliation Act, 1996. viz Section 31(7)(a) which rather obligates the learned Tribunal to grant interest at the rates agreed upon by the parties. This position has been clearly explained by the Supreme Court in a case reported in AIR 2010 SC 1511.
After hearing the learned counsel for the parties, and considering their argument, we therefore have decided to examine the case of statement of claim and counter statement of fact and claim, and also the award by ourselves as we have already noted that the learned Trial Judge has not discussed in detail, nor really recorded his own reason and findings how the award is acceptable. We have gone through the award minutely. It appears that learned Tribunal has dealt with all the heads of claim, which include various subheads by three separate awards. First award has dealt with claim No.1 and claim No.2, second 14 award covers three heads of claim being Nos. 3, 4, 5, while third award has exhaustively dealt with claim No.6.
As we have already noted that claim No.1 has been rejected it is not required to be decided. While deciding the claim No.2 we notice that the learned Arbitral Tribunal have set out the claims and contentions and rival claim and contentions, and also examined the documentary evidence, and heard the parties and discussed in details, thereafter it has come to the conclusion as follows:-
" i) The Claimant has executed certain additional works which he could not have foreseen at the time he submitted his bid and the lump sum rate for the work of Toll Plaza.
ii) As far as the execution of the additional quantities is concerned, they have not been disputed by the Engineer of the respondent. On the contrary, the Engineer has conceded that these additional quantities were found to be technically required for construction.
iii) The Review of C-590, 592, 593, 600 etc. would also establish that, there has been agreement and acceptance on the variations made to the original proposal.
iv) A sum of Rs.4,72,404.61 towards the additional cost for foundations was agreed between the Engineer and the Claimant while finalizing the statement at completion.15
v) The Engineer was obliged under the terms of the Contract to verify the details submitted by the Claimant without necessarily admitting the liability of the respondent. In absence of such verification, the Tribunal is constrained to adopt the details submitted by the Claimant to be true and correct."
Thereafter the learned Arbitral Tribunal has quantified the claim considering Exhibit C - ,-C11/2 amounting to Rs.13,95,771/-.
The learned Tribunal while awarding interest on the aforesaid amount has relied on the sub Clause 60.8 of the Contract which provides payment of interest on the amounts due and this contractual rate has been awarded from the respective due dates of entitlement. Therefore the argument of Mr. Kar that the learned Tribunal has exceeded its jurisdiction by awarding the aforesaid heads of claim is not tenable in view of the aforesaid fact finding. As it has been rightly pointed out by Mr. Mitra when the learned Arbitrator has considered, discussed and dealt with the claims and contention on fact and further interpreted terms of the contract which do not appear to be absurd one, the Court cannot act as forum of Appeal over the judgment. The learned Trial Judge has merely noted this general principle of law. It has been settled by the decision of the Supreme Court consistently that appraisement of evidence by the Arbitral Tribunal is never a matter Court questions and considers. It is also settled position of law that the selected forum of the parties must have power of appraisement of the evidence, and is the sole judge of the quality and quantity of evidence. This legal 16 position could be found in the decision of the Supreme Court in case of M/s. Sudarsan Trading Co...appellant -vs.- The Government of Kerala & another reported in AIR 1989 SC 890. Ideally words of the Supreme Court in paragraph 29 of the said report may appropriately be reproduced which amongst other is as follows:-
"29. ...............Furthermore, in any event, reasonableness of the reasons given by the Arbitrator cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a judge on the evidence before the arbitrator."
In the case of Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd reported in (2005) 6 SCC 462 the same principle was followed and in paragraph 35 Supreme Court disapproved the appraisement of evidence by the Court in case of Arbitral Tribunal where it has been done by the learned Arbitrator. In paragraph 35 of the report the Supreme Court has noted as follows:-
"35. In our opinion, however, the learned counsel for BOL is justified in submitting that really it was in the realm of appreciation and reappreciation of evidence. At the most all those letters go to show that HCL has some complaint against BOL and it had also disclosed its intention to purchase oxygen gas from other sources but as observed by the arbitrator, it was not proved that HCL has in fact purchased oxygen from other sources under clause 10.4. If in the light of such evidence, the arbitrator did not think it fit to allow counterclaim, it could 17 not be said to be a case of misconduct covered by Section 30 of the Act. The learned Single Judge as also the Division Bench were, therefore, not justified in setting aside the award passed by the arbitrator dismissing the counterclaim and hence the order of the learned Single Judge as confirmed by the Division Bench deserves to be set aside by restoring dismissal of counterclaim of HCL by the arbitrator."
Here we have noted the learned Tribunal has expressed its mind to the issues involved and decided the matter upon their own interpretation. When reasons are assigned which do not appear to be patently absurd the Court howsoever having best wisdom cannot substitute the same with its own.
Mr. Kar criticized that the learned Tribunal has committed legal error while relying on letter written on 31st January, 2005. We are of the view that what would be the best evidence is the sole decision of the learned Tribunal. It is not bound by the provision of the Code of Civil Procedure unless it adopts of its own. None-the-less as correctly pointed out by Mr. Mitra that there is serious legal implication if any letter which has bearing and clinching factor in deciding an issue, is not replied to. It would be appropriate to take note of the Supreme Court decision cited by Mr. Mitra in case of Ramji Dayawala & Sons (P) Ltd v. Invest Import reported in AIR 1981 SC 2085. In paragraph 16 of this decision of the said repot the Supreme Court observed as follows:-
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"16. .................Once the receipt of the letter and the cable are admitted or proved coupled with the fact that even after the dispute arose and before the suit was filed, in the correspondence that ensued between the parties, the respondent did not make any overt or covert reference to the arbitration agreement and utter failure of the respondent to reply to the letter and the cable controverting the averments made therein would unmistakably establish the truth of the averments made in the letter. What is the effect of averments is a different question altogether but the averments contained in the letter and the cable are satisfactorily proved."
Thus it emerges from the aforesaid pronouncement of the Apex Court that if a letter is admitted and proved and the correctness of the contents of the same are not controverted either replying to the same by a contemporaneous documents nor cited any witness to deny the correctness of the same, the contents of the said letter have to be accepted by true and correct. It is not that the said letter was issued after the arbitration proceeding was initiated and long before the matter referred to learned Arbitrator the said letter was issued. Therefore contention with reference to admission urged by Mr. Kar in relation to the said letter is hardly of any relevance as has been elaborately dealt with by the learned Tribunal in paragraphs 9.7.6 and 9.7.8 of the award.
The Claim no.3 relates to the balance payment due for subgrade construction under BOQ item No.2.03. The issue before the learned Tribunal was whether claimant/respondent was not entitled to the aforesaid claim. We have 19 examined this contention, we think accepting contention of Mr. Mitra that the learned Tribunal dealt with the argument of the claimant and the respondents (appellant herein) appropriately. After considering contention and rival contention the learned Tribunal on interpretation of the contractual rights and obligations has held that even if there was non-compliance of Clauses 53.1 and 53.3 the escape route is Clause 53.4. Thereafter the learned Tribunal construed both BOQ item 2.02 (b) and 2.03 and then relied upon the Engineers' representative letter dated 30th May 2005. It was of the view that certification of the subgrade could not be done under item No.2.02(b) and held that the claimant was entitled to payment in terms of BOQ item No.2.03. The fact findings on interpretation of clauses of the contract and reading the document could be found in paragraph 9.6.24 of the award. Thereafter, the learned Tribunal specifically held that under Clause 9.7.2 the rate for subgrade works is to be Rs.210/- under BOQ item No.2.03 after adjusting the payment made at the rate of Rs.100/- the balance amount was worked out to Rs.22,77,738/-. When this exercise has been done by the learned Tribunal on detailed discussion and consideration of the contention and rival contention upon interpretation of contractual agreement the Court cannot interfere with the same and the learned Trial Judge has rightly done so. Any argument to upset this portion of the award would be so to say gross injustice.
We however, are unable to accept or uphold the award of the escalation amount of Rs.3,10,846/-. We fail to understand how this award of escalation 20 could be given on the ground of delayed payment as the entitlement of the claim has been crystallized at the time of passing of the award. Moreso when we notice that the learned Tribunal has awarded interest, if this amount of escalation is upheld and at the same time the payment of interest is also retained this amounts to unjust enrichment which is impermissible not only under law of land but also under public policy. Hence this award of Rs.3,10,846/- is deleted.
Claim No.4 has arisen for the payment of balance amount of construction of embankment at Panskura Bypass under BOQ item No.12.03. Like claim No.3 this claim has also been asserted by the claimant/respondent and countered by the appellant herein. In this claim issue before the learned Arbitral Tribunal was whether this should fall within item No.2.02 clause (a) of BOQ or is under BOQ item No.12.
The learned Arbitral Tribunal considered cases of both the sides with great details and with utmost care, and meticulously, and thereafter having construed the terms of the contract came to conclusion that BOQ item No.12.03 is applicable, not BOQ item No.2.02 (a). This could be found in paragraphs 9.9.4 to 10.2.2 of the award. We have gone through and found the reasoning arrived at basing on the discussion and construction of the terms of the contract, we do not find any improbability or irrationality. Under these circumstances we feel that Court cannot interfere with the same as per pronouncement of the law consistently by the Hon'ble Apex Court and High Court as quoted above and is 21 noted hereinafter also. It appears that the learned Tribunal thereafter quantified the claim after adjusting the payment already made at Rs.3,92,350/-.
We however do not find any logic or rationality to award the escalation amount of Rs.70,848/- for the same reason as we have recorded in relation to claim No.3. Hence this amount is deleted from the award.
Claim No.5: This claim has been made on account of balance payment due for the works of providing Granular layer 500 mm thick over ground improvement area. Upon reading of the pleading of both the sides as narrated in the award we notice that the issue before the learned Tribunal was that whether this claim is admissible under item No.2.02(a) of BOQ or under item No.2.08 of BOQ. Learned Tribunal in paragraphs 10.3.2 to 10.6.2 has found after discussing the argument and on construction of the agreement of the parties, and considering the terms thereof that the provisions of BOQ item No.2.02(a) would be applicable for this claim, and not under item No.2.08.
Hence the argument of Mr. Joydip Kar that the learned Tribunal has exceeded jurisdiction by applying the wrong terms of the agreement is not convincing to the Court as the personnel of the learned Tribunal are Experts on this road construction engineering. When the experts people are chosen by the parties and their decision is invited and the decision of the non-expert on highly technical subject cannot substitute their decision. This concept is not unknown 22 in legal field for an English Court as discussed little later, albeit it cannot be binding precedent, has recognized this principle. This decision of course has greatly persuasive value and indeed our Courts almost in all cases accept such principle of law brushing aside geographical and political boundaries. In this English decision reported in (1948) 2 AER 186 at page 188 it is observed as follows:-
"It is well known in the experience of the courts that many trades have their own tribunals of arbitration - the Corn Trade, the Produce Brokers' Association, the Oil and Fat Trades Association are instances - and no one has doubted - certainly not in modern times - that it is open to an arbitrator skilled in the trade to use his own knowledge and experience on many matters, such as quality, without having witnesses called before him. One of the reasons why commercial men like to go to arbitration before arbitrators of this description is because it saves the expense of calling witnesses and having the conflicting views of experts thrashed out and decided on. The parties are content and intend to accept the judgment of a man in their own trade on whose judgment they know they can rely."
The above principle has well been accepted by our Supreme Court in the case of Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar & anr. reported in AIR 1987 SC 2316. In paragraph 4 portion of above judgment of 23 English Court has been quoted with approval and this portion is reiterated hereunder:-
"A man in the trade who is selected for his experience would be likely to know and indeed to be expected to know the fluctuations of the market and would have plenty of means of informing himself or refreshing his memory on any point on which he might find it necessary so to do. In this case according to the affidavit of sellers they did take the point before the Arbitrator that the Southern African market has slumped. Whether the buyers contested that statement does not appear but an experienced Arbitrator would know or have the means of knowing whether that was so or not and to what extent and I see no reason why in principle he should be required to have evidence on this point any more than on any other question relating to a particular trade. It must be taken I think that in fixing the amount that he has, he has acted on his own knowledge and experience. The day has long gone by when the Courts looked with jealousy on the jurisdiction of the Arbitrators. The modern tendency is in my opinion more especially in commercial arbitrations, to endeavour to uphold awards of the skilled persons that the parties themselves have selected to decide the questions at issue between them. If an arbitrator has acted within the terms of his submission and has not violated any rules of what is so often called natural justice the Courts should be slow indeed to set aside his award."
Thence Supreme Court has concluded as follows:
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"This is in our opinion is an appropriate attitude."
It seems to us this legitimate latitude to the authority of the Arbitral Tribunal comprising of experts is akin to what is called "judicial notice" in ordinary course of events, under the Rule of evidence, taken by the law Court where no proof is required to prove or disprove any fact in issue.
Under those circumstances we are unable to accept the argument of Mr. Kar that the learned Tribunal has applied incorrect clause. As far as the contention as regards principle of finality/accord or satisfaction is concerned or non-existence of the dispute this would be dealt with little later.
Claim No.6 relates to payment of additional cost for extended period of contract. Admittedly extension was granted because of various failure and lapses on part of the appellant. In this claim bone of contention as it appears from the pleading of both the parties before learned Tribunal was whether after giving undertaking that claimant shall not able to claim anything extra other than provision of contract any claim is entertainable or maintainable or not. This issue was raised before the learned Tribunal and it has considered this aspect in great details in the award. We could see that learned Tribunal has construed the wording of the undertaking contained in letters dated 30th March 2004 and 5th May 2005 of the claimant sought to be asserted as an undertaking not to claim 25 anything extra other than provision in contract. After construing and reading the same the learned Tribunal came to the conclusion that the aforesaid undertaking did not preclude the claimant from claiming additional cost in terms of Clauses 6.4, 12.2 and 4.2.2. The learned Tribunal has come to fact finding that those undertaking was given under compelling circumstances. In view of the aforesaid fact findings this Court would not move further to examine whether this is admissible or not. There is one good reason for ignoring above undertaking, as the learned Tribunal took note of the fact that the Engineer of the respondent had certified and admitted an amount to the extent of Rs.22.85 crores therefore, the fact of delay due to lapse of the respondent consequently additional cost incurred by the claimant had been admitted by the respondent. Even learned Tribunal has noted further fact on merit of this claim there was no contest and in fact the learned lawyer for the respondent refused to make any submission with regard to the basis of the claim and amounts claimed. This finding could be found in paragraph 9.1.2 Clause (c) of the second award. In view of the aforesaid fact finding it is impossible for the Court to accept the argument of Mr. Kar that the said claim is impermissible under the law. The Court cannot do so simply as the law is firmly settled by following judicial pronouncement:-
(2004) 2 SCC 663 (Chairman and M.D., N.T.P.C. Ltd. v. Reshmi Constructions, Builders and Contractors) the then Chief Justice Khare after reviewing of all the earlier decisions of the Supreme Court on the subject came to conclusion in paragraph 27 as follows:-26
"27. Even when rights and obligations of the parties are worked out, the contract does not come to an end inter alia for the purpose of determination of the disputes arising thereunder, and, thus, the arbitration agreement can be invoked. Although it may not be strictly in place but we cannot shut our eyes to the ground reality that in a case where a contractor has made huge investment, he cannot afford not to take from the employer the amount under the bills, for various reasons which may include discharge of his liability towards the banks, financial institutions and other persons. In such a situation, the public sector undertakings would have an upper hand. They would not ordinarily release the money unless a "No-Demand Certificate" is signed. Each case, therefore, is required to be considered on its own facts."
It is apt to quote also the paragraph 28 of the said decision which is as follows:-
"28. Further, necessitas non habet legem is an age-old maxim which means necessity knows no law. A person may sometimes have to succumb to the pressure of the other party to the bargain who is in a stronger position."
The subsequent pronouncement of the Supreme Court in cases reported in (2006) 13 SCC 475, 2009 (1) SCC 267 have taken the same view consistently. Though on different sets of facts that no claim certificate or undertaking given by 27 the contractor/claimant, will not be an absolute bar for the learned Arbitral Tribunal to examine claims arising out of contract. We think one of the latest pronouncement of the Supreme Court in case of R.L. Kalathia & Company v. State of Gujarat reported in (2011) 2 SCC 400 has summarized exhaustively as far as possible what should be the approach of the Court if the learned Arbitral Tribunal decides on this aspect. Paragraph 13 of the said report reads as follows:-
"13. From the above conclusions of this Court, the following principles emerge:
(i) Merely because the contractor has issued "no-dues certificate", if there is an acceptable claim, the court cannot reject the same on the ground of issuance of "no-dues certificate".
(ii) Inasmuch as it is common that unless a discharge certificate is given in advance by the contractor, payment of bills are generally delayed, hence such a clause in the contract would not be an absolute bar to a contractor raising claims which are genuine at a later date even after submission of such "no-claim certificate".
(iii) Even after execution of full and final discharge voucher/receipt by one of the parties, if the said party is able to establish that he is entitled to further amount for which he is having adequate materials, he is not barred from claiming such amount merely because of 28 acceptance of the final bill by mentioning "without prejudice" or by issuing "no-dues certificate"."
We, therefore, hold that the learned Tribunal has proceeded to decide the claim on the strength of the high authorities as quoted above and we also accept the same. Under the circumstances contention of Mr. Kar that learned Arbitrators having acted without jurisdiction is of no substance.
We notice that the learned Tribunal thereafter worked out in the third award the additional cost for extended period of contract. The learned Tribunal has found that period was extended because of the lapses on part of the respondent. The claims under this heading consists of as many as following nine sub heads:-
(i) Additional overhead expenses in the extended stay period of Contract,
(ii) Additional expenses on account of the extended stay of plant and equipment at site,
(iii) Additional expenses incurred on account of the use of POL in the extended period,
(iv) Additional expenditure by way of financing charges (interest) on account of the delayed recovery of the component of overhead and profits, 29
(v) Additional expenditure incurred on account of the use of Bitumen during extended stay period of the Project,
(vi) Additional labour costs incurred in the extended period of the contract,
(vii) Additional expenditure on account of the loss of opportunity and profits on account of the extended period of contract,
(viii) Additional expenditure on account of the loss of opportunity and profit on account of extended period of Contract,
(ix) Loss of Bonus due to delays by the respondent.
On the subhead of additional overhead cost for extended period the learned Tribunal awarded a sum of Rs.1954.64 lakhs as against claimed amount of Rs.2453.80 lakhs considering nature of the costs actually incurred. It awarded a sum of Rs.1770.49 lakhs on account of the claim under subhead additional costs because of detention of plant and equipment for extended period at site. A sum of Rs.430.02 lakhs has been awarded under subheading additional cost towards use of POL during the extended period and this has been awarded on analysis and appreciation of fact and evidence and, also applying their experience and expertise in their professional life. This award on this sub head is legally and equitably justified. We fail to appreciate the submission of Mr. Kar that this claim is hit by the "No dues and claim certificate". We have already held this sort of certificate is no bar to make lawful claim. Section 55 read with Section 70 of the 30 Contract Act, which have been referred by the learned Tribunal, permit to sustain this claim as time is not the essence of the contract.
As far as the claim under the subhead additional costs by way of financing charges (interest) on account of delayed recovery of the overhead and profit is concerned we think that the learned Tribunal howsoever expert in the field ought not to have awarded this amount. It is true because of extended period the respondent had to spend extra amount and for which it is entitled to reimbursement otherwise it will be injustice if they are asked to incur their additional expenses for the extended period. Still this claim from equitable point of view cannot be entertained, as the learned Tribunal has already awarded interest in relation to claims Nos.2, 3, 4 & 5. This will work as unjust enrichment to the respondent and it is impermissible under laws of contract of our country. It is true fact finding of the learned Arbitrator is not interfered with by the Court but when it is noticed such finding on fact is patently contrary to law of land, it is rather incumbent upon the Court to intervene and not to allow infraction of law. It ought to be borne in mind that this claim under this sub- heading entertained by the learned Tribunal is not based on any terms and conditions of the contract but as an equitable measure which in our view must be balanced in such a way that equity is dispensed to both the parties. This award under this subhead of additional expenditure by way of financing charges amounting to Rs.311.59 lakhs is deleted.
31
The award under the subhead of additional cost towards use of bitumen during the extended period is concerned we find the learned Tribunal after considering contention and rival contention of the parties has adjudicated the dispute and assessed this amount. We do not think claim is legally impermissible, hence we do not have any reason to interfere with the same. Similarly this Court maintains the same view as far as the award under subhead of additional labour costs incurred during extended period is concerned.
This Court cannot accept the award with regard to the subhead of additional claim towards loss of opportunity and profits on account of the extended period of contract and the same is deleted. According to us when the claimant/respondent accepted the extension of period of Contract it has done realizing all future consequences that it could not undertake any other job. Accepting extension on one hand and claiming damages by way loss of profit for future profit amount to approbate and reprobate. Moreover the claimant has been adequately compensated for this extended period. For once under the Contract Act time factor is given go by mutually by the parties, damages in any form cannot be claimed, otherwise than mentioned in the Section 55.
In our view second part of Section 55 of the Contract Act 1872 has been applied by the learned Tribunal wrongly on the facts and circumstances of case so much so it leads to absurdity. All the claims under the heading claim No.6 are directly relatable to the claims Nos.2, 3, 4, 5, covered by two other awards by 32 which the learned Tribunal awarded interest at contractual rate from the dates of entitlement which are from the dates anterior to the commencing date of extension, till the date of realization, thus covering not only the extended period but subsequent period also. Then where is the question of loss of profit? Indeed in our opinion hypothetical loss of profit has been taken care of by award of interest. It appears that learned Tribunal has relied on Hudson's Building and Engineering Contract. We are of the view that opinion of the author howsoever eminent or renowned, of any text book cannot be accepted if it is found contrary to the laws of land. This view of the author, Hudson cannot override the laws of contract enforceable in India namely unjust enrichment (Section 70) nor the same partake the character of law. Therefore we think the loss of profit cannot be awarded in all cases, we feel this could be awarded when there has been breach of terms of the contract or in case of partial or complete repudiation of the contract and such repudiation has been accepted without prejudice to or waiving right to recover damages by way of loss of future profit. The respondent/claimant had chosen to remain with the contract and to continue to do the work and thought it fit that existing contract would be more profitable than another one and accordingly they have already made a claim for overhead expenses and other expenses for the extended period therefore, what profit would have been fetched during the period of execution of other works in the facts and circumstances of this case cannot be a basis for passing this portion of award. 33
The award of subhead of additional expenses on account of maintenance of site office and residential accommodation for employee, Engineer, during extended period of contract is also not justified and learned Tribunal has wrongly awarded as this claim is covered by subhead claim of Additional overhead expenses during the extended stay period of the Contract. Now coming to the question of interest in this case we find that learned Tribunal has awarded interest at the contractual rate. We think that the contractual rate being Clause 60.8 in this heading of claim consisting of various subheads cannot be applied as the claims do not relate to delay in release of the amounts due for works done as per certification of Engineer. It is made on the basis of equitable principle hence, the rate agreed upon in the contract cannot be applied. Therefore it shall be presumed that there is no agreed provision for awarding interest on claim of this nature. It would be clear case of discretion of the learned Arbitrator to award interest. Accordingly the rate of interest award from 20th of April 2005 upto 29th September 2008 cannot be applied on this head of claim. We find learned Arbitral Tribunal while exercising discretion has awarded interest @ 15 per cent per annum for the future interest on total amount including the interest from the date of award till the date of actual payment. We think this rate of 15 per cent should be appropriate for the period commencing from 20th April 2005 upto the date of the award 29th September 2008 also. Therefore this amount of interest award on this claim No.6 is modified accordingly this should be calculated afresh and we award the amounts of interest based on fresh calculation. 34
In view of the aforesaid discussion and reasoning recorded above we allowed the appeal partly as indicated above, and rest of the award is accepted by this Court.
Mr. Kar appearing for the Government prays for stay of operation of this judgment and order.
Accordingly, stay is granted for a period of one week after puja vacation.
(K. J. Sengupta, J.) I agree.
(Syamal Kanti Chakrabarti, J.)