Madras High Court
The Superintending Engineer, Tamil ... vs M. Paramasivam And C. Srinivasa Rao, ... on 11 March, 2003
Equivalent citations: 2003(2)ARBLR546(MADRAS), (2003)2MLJ393
Author: K. Raviraja Pandian
Bench: K. Raviraja Pandian
JUDGMENT S. Jagadeesan, J.
1. These appeals are arising out of Original Petitions No. 212, 213 of 1996, and 483 & 487 of 1997. O.Ps. No. 212 and 213 of 1996 were filed by the arbitrator to pass a decree in terms of the award and O.Ps. 483 and 487 of 1997 were filed by the appellants herein to set aside the award.
2. Appellants called for tender for construction of houses under SMT scheme Group-5 at Rajapalayam. The first respondent submitted his tender and he being the successful bidder, the work was entrusted to him and an agreement with regard to the execution of the work was entered into. After the completion of the work as the dispute arose with regard to incorrect information as to the lead, settlement of final bill, escalation of charges as well as refund of EMD and FSD along with other minor claims, the matter was referred to the arbitration with the consent of the parties.
3. One Mr. C. Srinivasa Rao., Chief Engineer (Retired), Highways Department, was appointed as the arbitrator. After the enquiry of the claim of both the parties, the arbitrator passed an award regarding O.S.A No. 189 of 1998 under the following heads:-
Head Claim by Awarded by
Contractor Arbitrator
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Rs. Rs.
1. Payment of final bill 3,54,000/- 3,54,000/-
2. Claim for refund of the with-held
amount (Rectification of work) 35,000/- 35,000/-
3. Incorrect Information as to the lead 3,95,000/- 3,69,625/-
4. Improper recording of measurement - -
5. Claim for Earth filling 1,56,000/- -
6. Loss of profit 2,54,740/- -
7. Legal Charges 1,16,500/- 15,000/-
8. Reimbursement of watch and ward salary 32,400/- -
9. Escalation charges 51,05,080/- 36,50,079/-
10.Refund of EMD & FSD 2,59,600/- 2,59,600/-
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70,09,920/- 47,63,329/-
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Regarding O.S.A. No. 190 of 1998 the award is as follows:
Head Claim by Awarded by
Contractor Arbitrator
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Rs. Rs.
1. Payment of final bill 2,33,262/- 2,33,262/-
2. Claim for refund of the with-held
amount (Rectification of work) 65,000/- Rejected
3. Unauthorised recovery 11,584/- Rejected
4. Incorrect Information as to the lead 4,74,989/- 4,49,650/-
5. Improper recording of measurement 2,64,005/- Rejected
5. Claim for Earth filling No claim
6. Loss of profit No claim
7. Legal Charges 1,16,500/- 15,000/-
8. Reimbursement of watch and ward salary 48,000/- Rejected
9. Escalation charges 63,06,006/- 46,08,000/-
10.Refund of EMD & FSD 4,25,000/- 4,25,000/-
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79,44,346/- 56,30,912/-
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4. The learned Judge who heard the original petitions both for passing a decree in terms of the award as well as for setting aside the award, had, by his judgment dated 25.06.1998 allowed the O.Ps. No. 212 and 213 of 1996 filed by the Arbitrator and dismissed the original petitions No. 483 and 487 of 1997 filed by the appellants for setting aside the award and ultimately passed a decree in terms of the award. As against the same, the present appeals are filed.
5. The learned Government Pleader had confined himself in his argument challenging the award of the arbitrator with regard to the claim of the respondents under the following three heads:
(1) Incorrect information as to the lead.
(2) Escalation charges, and (3) Refund of EMD and FSD.
His main contention is that there is absolutely no incorrect information as to the lead, since the contractor has been directed to inspect the site and submit his/her tender. When that be the position, it is for the contractor to inspect the site and submit the tender after specifying the rate and the work involved. If any mistake is done in the submission of the tender, it can only be that of the contractor and the appellants cannot be held responsible.
6. So far as the escalation charges are concerned, his contention is that it is governed by the Madras Detailed Standard Specifications which is in use in the Public Works Department. There is absolutely no clause either in the agreement or in the Standard Specifications providing for escalation charges on any ground. When there is no specific clause either in the specifications or in the agreement entitling the contractor for the escalation, the arbitrator has totally erred in awarding the compensation under the said head. His further contention is that the first respondent is entitled only for extension of time for completion of the contractual work. The respondent had been duly granted the extension of time and as such the question of escalation of charges will not arise. He further contended that the materials are supposed to be supplied by the department. In case of their failure, it is open to the contractor to buy materials in the open market and place the bills before the authorities and claim such expenses. The respondent having failed to do so, is now trying to take advantage of the delay and claim escalation charges which cannot be sustained.
7. So far as the refund of EMD and FSD are concerned, only a formal argument was raised that because of the delay in the completion of the work as the penal clause provides for forfeiture, the respondent is not entitled for the refund of the same.
8. Learned counsel for the respondent however contended that clause 59 of the Standard Specifications relied upon by the Government Pleader is not a bar for the respondent to claim the escalation charges. The said clause refers to the delay on the part of the contractor and not to the delay on the part of the department. In this case, when the delay is on the part of the department, the respondent is entitled for the escalation charges and the department cannot be permitted to have the advantage of their own default.
9. So far as the incorrect information as to the lead is concerned, learned counsel for the respondent contended that admittedly, there is some delay in finalisation of the site where the construction of houses should be made. As per the tender the site was demarcated and in fact, the respondent inspected the site and submitted the tender. Ultimately, the said site was changed and a different site was handed over to the respondent for the purpose of carrying out the construction. This delay as well as the change of site caused additional expenses to the respondent and as such, the respondent is entitled for compensation under that head.
10. So far as the refund of EMD and FSD are concerned, it is his contention that the total delay in the completion of the work having not been attributed to the respondent, the appellants are not entitled to enforce the forfeiture clause.
11. We carefully considered the above contentions of both the counsel.
12. So far as the claim of the incorrect information as to the lead is concerned, we do not want to repeat what the arbitrator has said in the award and what the learned Judge has extracted in the order. Even before us, the learned Government Pleader without any reservation, admitted that there was considerable delay in finalisation of the site in which the houses were to be constructed. Ultimately, the site which was announced in the advertisement calling for the tender, had been altered. Not only the site was shifted, but also the finalisation took nearly six months which resulted in the delay of commencement of work itself. When there is a change of site and the change of total number of houses to be constructed, we have to take into consideration of the totality of the picture. Each incident cannot be independently assessed to ascertain the loss or the damage caused to the respondent. On this principle, we have to uphold the claim of the respondent in respect of the incorrect information as to the lead. The respondent could have simply refused to accept the work on the ground of variation of the site, but having submitted the tender and in order to respect his commitment to the department, it seems he had accepted the work and completed the same. In such circumstances, it may not be fair on the part of the appellants also to refuse any compensation under the head "incorrect information as to the lead". Hence, we concur with the finding of the learned Judge as well as the arbitrator and confirm the findings of the learned Judge.
13. Coming to the second claim of the appellants under the head, "escalation charges", the learned Government Pleader contended that there is no specific clause either in the agreement or in the Standard Specifications. He also referred to conditions No. 11, 29, 34, 58 and 59 in the Standard Specifications in order to give force to his contention that the respondent is not entitled for escalation charges.
14. The learned Government Pleader also relied upon a judgment of a Division Bench of this Court in the case of Union of India represented by Chief Engineer Military Engineering Services, Madras Zone vs. Ramnath International Construction Pvt. Ltd., 2003 (1) CTC 4, to which one of us was a party. In the said judgment it was held that the contractor cannot claim any escalation charges when there is specific prohibition clause prohibiting the contractor from claiming compensation under the head "escalation charges". Regarding clause 59 of the Standard Specifications the Government Pleader contended that the contractor is entitled for extension of time for the completion of the work and not for escalation charges.
15. Learned counsel for the respondent contended that Clause 59 of the Standard Specifications referred to the delay on the part of the contractor and as such that clause has no reference when the delay is on the part of the department. In the case where the delay is on the part of the department, it is always open to the respondent to claim compensation under the head "escalation charges'. Apart from that, the arbitrator has discussed in detail with regard to the non availability of materials due to the default committed by the appellant, which further delayed the completion of the work. When the materials placed before the Arbitrator clearly establishes that there is a delay of more than six months not only in handing over the site but also by not providing the materials for the construction as per the terms of the agreement, the respondent is entitled for the escalation of the charges. He also relied upon the judgment of the Apex Court in the case of Bengal Traders vs. West Bengal State Electricity Board 2001(2) RAJ 315, wherein it has been held that the contractor is entitled for the escalation of the charges, even though the agreement provided that the unit rate quoted shall be firm and shall remain applicable during the entire period of execution of the work inspite of the agreement that the contractor is not entitled for any such escalation.
16. As already stated, there is no dispute that there is delay of more than six months in handing over the site to the contractor. The delay was not for any other reason, but due to the finalisation of the location of the site. When the tender was called for giving out particular sites, it is not for the authorities to reconsider the finalisation of the sites after the receipt of the tenders. This is because the tenders are being submitted by the participants after inspecting the sites and after assessing the locality as well as the work involved. Though the work is a time bound one, admittedly, within the period announced in the advertisement for the completion of work, absolutely preliminary work itself was not completed. In such circumstances, the delay is nothing but due to the conduct of the appellants. The Arbitrator's finding after due discussion, was concurred by the learned Judge as based on question of fact. When that be so, and in the absence of any explanation on the side of the appellants in this regard, we are of the view that the delay in handing over the site is a vital factor to be taken into consideration.
17. Apart from the delay in handing over the site, it is admitted case that the contractor was also not supplied with necessary materials as agreed between the parties in accordance with the terms of the agreement. The defence pleaded by the appellants is that it is always open to the respondent to purchase the materials in the open market and place the bill before the authorities and claim the amount. The reason for the non supply of the materials by the appellant seems to be the non availability of the materials in the open market. When that be so, equally, it may not be possible for the respondent to purchase the materials from the open market and make a claim by placing the bill before the authorities. When there is no dispute that the materials were not available in the open market and the appellant could not supply the materials, such delay also would ensure for the benefit of the respondent.
18. Coming to the entitlement of the respondent under this head, in the judgment relied upon by the learned Government Pleader in Union of India represented by Chief Engineer Military Engineering Services, Madras Zone vs. Ramnath International Construction Pvt. Ltd., 2003 (1) CTC 4, the Division Bench had an occasion to deal with the terms of the agreement where there is a specific prohibition prohibiting the contractor from claiming the enhanced compensation. While considering such specific clause the Division Bench placed reliance on some of the judgments of the apex Court and held that the contractor in that case is not entitled for compensation.
19. In the case on hand, there is no such prohibitory clause. That makes the world of difference between the facts of the case that has been dealt with by the Division Bench, the decision of which was relied upon by the learned Government Pleader and facts of the present case.
20. On the other hand, in the judgment relied on by the learned counsel for the respondent in the case of Bengal Traders vs. West Bengal State Electricity Board 2001(2) RAJ 315, the learned Judges of the Supreme Court has held :
" 6. Learned Counsel appearing on behalf of the respondent submitted that a reading of the claims made by the appellant before the Arbitrator showed that they were for escalation in the sense that the claims were for damages for the delay in the execution of the work. He submitted that, therefore, they were covered by the bar of Clause 49.
7. We cannot agree. What Clause 49 disables the appellant from claiming is escalation of unit rates. It does not apply to a claim for damages of the nature made by the appellant. To the case, the rationale of the judgment in Rayanin's case (State of AP vs. R.V. Rayanim, 1990(1) SCC 433) squarely applies."
21. Placing reliance on the above judgment of the apex Court we hold that the respondent is entitled for the escalation of charges. Accordingly, we concur with the findings of the learned Judge.
22. So far as the refund of EMD and FSD is concerned, it is always open to the appellants to invoke forfeiture clause only if the default is on the side of the contractor.
23. From the above discussion, it is clear that the appellants had not made out any case that the respondent had committed any default on his own volition. The delay caused in the commencement of completion of the construction is only due to the conduct of appellants which is evident from the extension of time granted by the appellants to the respondent for completion of contract without any reservations or conditions.
24. For these reasons we hold that the appeals are liable to be dismissed and are accordingly dismissed. There will be no order as to costs.