Himachal Pradesh High Court
Sh. Sham Mahajan vs Of on 4 August, 2016
Author: Sanjay Karol
Bench: Sanjay Karol
IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
.
Arb. Case No. 107 of 2010
Date of Decision : August 04 , 2016
Sh. Sham Mahajan ...Petitioner
Versus
of
The State of Himachal Pradesh
through Secretary (PWD) to the Govt. of H.P.
& another rt ... Respondents.
Coram:
The Hon'ble Mr. Justice Sanjay Karol, Judge.
Whether approved for reporting? Yes. 1
For the petitioner : Mr. J. S. Bhogal, Sr. Advocate with Mr. Parmod
Negi, Advocate, for the petitioner.
For the respondent : Mr. Ram Murti Bisht, Addl. Advocate General with
Mr. Puneet Rajta, Dy. A.G. for the respondents-
State.
Sanjay Karol, J. (oral)
In this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act"), Contractor who is the claimant, has assailed the Award dated 27.09.2010 passed by the Whether reporters of Local Papers may be allowed to see the judgment?
::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 2Arbitrator-cum-Superintending Engineer, D-1, National Highway U.S. Club, HP. PWD, Shimla - 171001, in Case No. .
SE-NH-Sml-Arb./2010-11-3335-37, arising out of works contract for "Improvement of Shimla - Wangtoo Road NH-22 Km. 153/0 to 200/0 (SH:- Earth Work, B/Wall, R/Wall, CD Works etc. in Km. 153/0 to 161/0)", Agreement No. 93 of of 1992-93 of Theog Division, HP. PWD, Theog.
2. Thert Arbitrator allowed the claims of the Contractor and the State in the following manner:-
Award in favour of the Claimant/Contractor:
Sr. No. Description Amount Amount Remarks.
of claim Demanded awarded
(Rs. In Lacs) (Rs. In
Lacs)
1. 2. 3. 4. 5.
1. Bill for work 26,60,000/- Nil -
done
2. Security 1,00,000/- 1,00,000/- Security to
Deposit be
released.
3. Price 14,57,979/- Nil -
escalation
upto
6.12.1994.
4. Price 99,65,036/- Nil -
escalation
after
6.12.1994
5. Damages. 10,00,000/- Nil. -
6. Disposal of 53,90,000/- Nil -
Earth
7. Interest on Nil - -
withheld
amount
8. Loss of 12,53,859/- Nil -
anticipated
profit.
::: Downloaded on - 15/04/2017 20:58:05 :::HCHP
3
Award in favour of Respondent/EE:
Sr. No. Description Amount Amount Remarks.
.
of Counter Demanded awarded
Claim (Rs. In Lacs) (Rs. In
Lacs)
1. 2. 3. 4. 5.
i. Explosive 10,956/- 10,956/- -
Stone issued 32,561/- 19,141/- -
to the Contr.
ii. Recoveries 62,623/- 62,623/- -
of hire or
of
various
machinery
iii. Recovery of 41,888/- Nil -
useful
stones
iv.
rt Non 1,00,000/- Nil -
employment
of Graduate
Engineer
v. Non 5,000/- Nil. -
submission
of Labour
return.
vi. Damages 7,65,000/- Nil -
caused to
Forest Deptt.
vii. Income Tax 3,099/- 3,099/- -
viii. Sale Tax 2695/- 2695/- -
ix Royalty 44577/- Nil -
x Empty 13,602/- Nil -
cement bags
Total:- 10,82,001 98,514/- -
3. It is an admitted position that State has not filed any objections to the impugned award. Also no challenge is laid before this Court with regard to the adjudication of or quantification of the counter claims.
4. It is fairly stated on behalf of the Contractor that challenge is laid only to the findings returned by the Arbitrator with respect to Claims No. 1, 3 and 4.::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 4
5. Certain facts are not disputed. On 21.11.1992, Contractor came to be awarded work vide agreement No. .
93 of 1992-93. In terms of the said agreement Earth Work, B/Wall, R/Wall, CD Works etc. was to be carried out on the Shimla - Wangtoo Road NH-22. It was not a new construction but work was confined with regard to the of improvement of 47 kms. of stretch on the National Highway.
Though within two years work was to be completed, but rt however, completion date (4.12.1994) came to be extended up to 31.12.1995.
6. It is not in dispute that work was executed only till May, 1995. Though it is alleged by the State that thereafter site came to be abandoned by the Contractor whereas on the other hand it is so urged by him that it came to be closed vide letter dated 21.8.1998. Admittedly Contractor did not carry out any work from May, 1995 till August, 1998.
7. It is also a matter of record, as is evident from the petition filed by the Contractor, seeking appointment of the Arbitrator, that almost 90% of the payments for the work so executed, stood received by him.
::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 58. Disputes arising out of the contract came to be referred by this Court vide order dated 26.5.2000 to the .
Superintending Engineer HP. PWD, Solan. It is also a matter of record that earlier award dated 8.2.2008 passed by the Arbitrator came to be set aside by this Court vide judgment dated 24.2.2009 with the matter being remanded back to of the Arbitrator for consideration afresh, who now, in terms of the impugned award has adjudicated the claims of the rt parties.
9. It is a settled proposition of law that award can be set aside only within the exceptions stipulated under Section 34, which has to be read in conjunction with Section 5 of the Act, wherein it is provided that no judicial authority shall intervene with the award, save and except as provided in Part - I of the Act, wherein Section 34 also finds place.
10. In Arb. Case No. 60 of 2015, titled as Ashok Kumar Thakur vs. The State of Himachal Pradesh through Secretary HP PWD & another, decided on 9th March, 2016, this Court observed as under:-
"4. Courts cannot proceed to comparatively adjudicate merits of the decision. What is to be seen is as to whether award is in conflict with the Public Policy ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 6 of India. Merits are to be looked into only under certain specified circumstances i.e. being against the Public .
Policy of India, which connotes public good and public interest. Award which is ex facie and patently in violation of the statutory provisions cannot be said to be in public interest.
5. In Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 the Court reiterated the of principle laid down in Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Supp (1) SCC 644 holding rt that the award can be set aside if it is contrary to: (a) the fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. However, such illegality must go to the root of the matter and if it is trivial in nature, then it cannot be said to be against public policy. Only such of those awards which, being unfair and unreasonable, shocks the conscious of the court can be interfered with.
6. The principles continued to be reiterated by the apex Court in McDermott International Inc. vs. Burn Standard Co. Ltd. (2006) 11 SCC 181 and Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Ltd. (2006) 11 SCC 245.
7. Eventually in DDA vs. R. S. Sharma and Co. (2008) 13 SCC 80 the Court culled out the following principles:
"21. From the above decisions, the following principles emerge:::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 7
(a) An award, which is
(i) contrary to substantive provisions of law; or .
(ii) the provisions of the Arbitration and Conciliation Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or of
(v) prejudicial to the rights of the parties;
is open to interference by the court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to:
rt (a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.
(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
8. Recently the apex Court in Associate Builders vs. Delhi Development Authority (2015) 3 SCC 49 has further explained the meaning of the words "fundamental policy of Indian law"; "the interest of India"; "justice or morality"; and "patently illegal". Fundamental policy of Indian law has been held to include judicial approach, non violation of principles of natural justice and such decisions which are just, fair ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 8 and reasonable. Conversely such decisions which are perverse or so irrational that no reasonable person .
would arrive at, are held to be unsustainable in a court of law. The court observed that:-
"29. It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not of be a determination which would either be fair, reasonable or objective.
30. rt The audi alteram partem principle which is undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows:
"18. Equal treatment of parties. - The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
* * *
34. Application for setting aside arbitral award. - (1) * * * (2) An arbitral award may be set aside by the court only if -
(a) the party making the application furnishes proof that -
* * *
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;"
31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 9 and requires some degree of explanation. It is settled law that where:
.
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, of such decision would necessarily be perverse."
9. Further, in the very same decision, while relying upon rt Excise and Taxation Officer-cum-Assessing Authority vs. Gopi Nath & Sons, 1992 Supp (2) SCC 312; Kuldeep Singh vs. Commr. of Police, (1999) 2 SCC 10; and P. R. Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, the Court clarified the meaning of the expression 'perverse' so as to include a situation where the Arbitrator proceeds to ignore or exclude relevant material or takes into consideration irrelevant material resulting into findings which are so outrageous, that it defies logic and suffers from the vice of irrationality. What would be "patent illegality"
was clarified in the following terms:-
"42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 10 such illegality must go to the root of the matter and cannot be a of a trivial nature. This again is really a .
contravention of Section 28(1)(a) of the Act, which reads as under:
"28. Rules applicable to substance of dispute.
- (1) Where the place of arbitration is situated in India -
(a) in an arbitration other than an international of commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive rt law for the time being in force in India;"
42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality - for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside. 42.3.(c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute. -
(1) - (2) * * * (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 11 can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to .
decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
43. In McDermott International Inc. vs. Burn Standard Co. Ltd. (2006) 11 SCC 181, this Court held as under:
of "112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the rt matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See: Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma v. Union of India, (2004) 5 SCC 325].
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."
44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573, the Court held:
"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 ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 12 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 of error needs to be proved by evidence extrinsic to the award. [See: Gobardhan Das v. Lachhmi Ram, AIR 1954 (SC) 689, Thawardas Pherumal v. Union of India, AIR 1955 (SC) 468, Union of rt India v. Kishorilal Gupta & Bros., AIR 1959 (SC) 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 (SC) 588, Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji, AIR 1965 (SC) 214 and Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679.]"
45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held:
"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.
44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (2010) 11 SCC 296 to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 13
45. This para 43 reads as follows: (Sumitomo case, (2010) 11 SCC 296, SCC p. 313) '43. ... The umpire has considered the fact .
situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, of which would amount to sitting in appeal. As held by this Court in Kwality Mfg.
Corpn. v. Central Warehousing Corpn., (2009) 5 SCC 142 the Court while considering challenge to arbitral award rt does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.' " "
11. The apex Court in Navodaya Mass Entertainment Limited vs. J.M. Combines, (2015) 5 SCC 698 has further held that it is not open for this Court to reappraise the material on record for the purpose of substituting the view of the Arbitrator and where two views are possible, the one which the Arbitrator has taken, based on proper application of mind, must prevail.
12. While deciding the present case, the aforesaid principles of law are required to be considered and applied.::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 14
Claim No. 1.
13. This claim pertains to quantification of .
unmeasured work carried out by the Contractor. It is alleged that after payment of last running bill, claimant carried out cutting and disposal work to the extent of 10,000 cubic mts. but arbitrarily, State reduced it to of 1381.65 cubic mts.
14. The Arbitrator has decided the said claim by rt assigning the following reasons:-
"Respondent Executive Engineer in his defence statement has stated that the department had been releasing all due payments to contractor against quantum of work actually executed, measured and accepted by contractor through running bills as and when due. The work was done against advance cross sections entered in the, measurement book and duly accepted by the claimant contractor ANNEX. (R-15). The payments were only regulated against acceptance of detailed measurements recorded in the Measurements Book Annex (R-13). Only measurement advance cross section in respect of quantity of 1381.65 cum (measured in M.B. No.2299 P-77-82) as billed for in the final bill has not been signed by the contractor. As due notice was given to the contractor to be present for record of measurement finally. The claim is based on anticipation. Moreover the opportunity was ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 15 extended to the claimant Contr. For representing himself at the time of final measurement vide .
respondents letter dated 22-7-1998 Annex (R-17) when the agreement was rescinded and scope of work curtailed under clause 13 of agreement against the written consent of contractor vide his letter dated 21-1-1998 Annex (C-32). The work was virtually abandoned by the claimant prior to 9/95 and of respondent Department accounted for all items of work executed at site. Moreover while seeking invoking of clause-25 of Agreement (Annex. R-18) rt claimant Contractor had confirmed demand/claim of Rs.12.00 lacs on account of bill for the work done.
Giving due consideration to the claim and defence statement and supporting documents, undersigned infers that the due payment has already been released to the contractor. The work of cutting has been carried out against advanced cross sections entered in the Measurement Books and duly accepted by the claimant contractor; opportunity was given to the claimant to be present for making the final measurements in his presence. The claim of the contractor is based on anticipation No such claim can be accepted which is not based on documentary proof. Hence NIL amounts are awarded against this claim of the Contractor."
15. It cannot be said, as is so urged by Mr. J. S. Bhogal, learned Senior Counsel that the Arbitrator has not assigned any reasons. Reasoning is there. It may not be a ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 16 detailed one but then it is reflective of application of mind and consideration of entire material placed on record by the .
parties.
16. Next it is contended that letters dated 3.9.1994, 20.9.1994 and 7.10.1994 [Annexures C-11, C-12 & C-13 (pages 26 to 31 of File No. 5)] were neither responded to by of the State, nor considered by the Arbitrator. These letters pertain to the reasons assigned by the Contractor for not rt completing the work within the stipulated period of time.
The Sate has categorically refuted contents thereof which is evident from the response filed before the Arbitrator. In any event, these letters have no bearing with regard to the claim in issue, for they were not indicative of the correct picture of the performance of work or the site nor substantiated by any cogent material.
17. It is further contended that the Arbitrator erred in coming to the conclusion that Contractor chose not to associate himself at the time of measurement of unmeasured work. This submission also merits rejection, for it has come on record that on 22.5.1998, Contractor was asked to get in touch with the Assistant Engineer for getting ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 17 the work measured. Since Contractor chose not to take any appropriate or further action in the matter, work came to be .
measured in his absence, on possibly permissible dates. The Contractor knew that his work stood closed. He was aware that some of his work was required to be measured only for the purposes of preparing the final bill. He was put to of notice. Yet he chose not to respond or take appropriate steps for associating himself at the relevant time. He never rt pursued the matter with the authorities. As such the challenge on this ground is untenable in law.
18. It is contended that reduction of quantity of work is arbitrary and illegal, being contrary to and impermissible under the contract. Now on this count, no material stands placed on record, save and except, the written submissions filed by the Contractor before the Arbitrator, to which learned Senior counsel wanted this Court to refer to and rely upon. Now written submissions are neither pleadings nor evidence. It was incumbent upon the Contractor to have placed material on record evidencing the factum of actual quantity of the work executed by him; also payments made by him to third parties, which evidence is absolutely lacking ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 18 in the present case. Thus, no cause arose to make any further payment.
.
19. It is further contended that the learned Arbitrator failed to take into account the decisions referred to by the Contractor [Civil Appeal No. 206 of 1961, titled as Union of India vs. Khetra Mohan Banerjee, decided on 21st November, of 1962 (Supreme Court of India); and S.M. Sareen vs. State of H.P. and others, 1993 (1) Sim. L.C. 89] in its written rt submissions. The principle of law laid down in the said decisions is inapplicable to the given facts, more so in the light of lack of any evidence, even prima facie, establishing the nature and extent of work carried out by the Contractor which was required to be measured or executed in excess of the contracted work.
Claim No. 320. While adjudicating the said claim, the Arbitrator has held clause 10C to be non-arbitral as under:-
"The respondent Deptt. Has however averred that this claim placed before this Hon'ble forum is not within the scope of this Arbitral Tribunal as already decided in law in case of State of H.P. Versus Surender Singh (FAO No.142 of 1985) decided on 13- 11-96 wherein it has been held that clause 10-C is ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 19 out side the scope of Arbitration Jurisdiction and moreover the claim of claimant is not based on the .
material facts.
After going through the claim and defence statement and also keeping in view legal position, it is inferred that no award can be made to claimant on this account, since the claim is beyond the preview of this forum. Hence NIL amount is awarded to of claimant."
21. Clause 10C reads thus:-
rt "Clause 10C -- If during the progress of works, the price of any materials incorporated in the works; (not being a material supplied from the Engineer-in- charge's stores in accordance with clause 10 hereof) and/or wages of labour increases as a direct result of the coming into force of any fresh law, or statutory rule or order (but not due to any charges in sales tax) and such increase exceeds ten percent of the price and/or wages prevailing at the time of acceptance of the tender for the work, and the contractor thereupon necessarily and properly pays in respect of that materials (incorporated in the works) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then amount of the contract shall accordingly be varied, provided always that any increase so payable is not, in the opinion of the Superintending Engineer (whose decision shall be final and binding) ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 20 attributable, to delay in the execution of the contract within the control of the contractor.
.
Provided, however, no reimbursement shall be made if the increase is not more than 10% of the side prices/wages, and if so, the reimbursement shall be made only on the excess over 10% and provided further that any such increase shall not be payable if such increase has become operative after the of contract or extended date of completion of the work in question.
If during the progress of the work, the price of rt any material incorporated in the works (not being a material supplied from the Engineer-in-charge's stores in accordance with clause 10 hereof) and/or wages of labour is decreased as a direct result of the coming into the force of any fresh law or statutory rule or order (but not due to any changes in sales tax) and such decrease exceeds ten percent of the prices and/or wages prevailing at time of acceptance of the tender for the work. Government shall in respect of materials incorporated in the works not being materials supplied from the Engineer-in-charge stores in accordance with 10 thereof and/or labour engaged on the execution of the work after the date of coming into force of such law, statutory rule or order be entitled to deduct from the dues of the contractor such amount as shall be equivalent to difference between the prices of material and/or wages as they prevailed at the time of acceptance of tender for the work minus ten per cent thereof and ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 21 the prices of materials and/or wage of labour on the coming into force of such law, statutory rule or order.
.
The contractor shall for the purpose of this conditions, keep such books of account and other documents as are necessary to show the amount of any increase claimed of reduction available and shall allow inspection of the same by a duly authorized representative of Government and further shall at of the request to the Engineer-in-charge furnish, certificate in such a manner as the Engineer-in- charge may require any document so kept and such rt other information as the Engineer-in-charge may require.
The contractor shall, within a reasonable time of his becoming aware of any alteration in the price of any such material and/or wages of labour, give notice thereof to the Engineer-in-charge stating that the same is given pursuant to this condition together with all information relating thereto which he may be in a position to supply. Only increase exceeding ten percent on the price of material and/or wages is to be reimbursed and upto 10% increased on the price of material and/or wages of labour is to be borne by the contractor(s). No adjustment of profit is allowed under clause 10(C)."
22. The claim pertains to the increase in daily wages of labour within the stipulated period contained in the agreement. On 5.12.1996 (Page - 77 of the paper book No. ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 22
6), claimant had set up his claim with regard thereto. The notification enhancing labour rate, as is evident from the .
response filed by the State before the Arbitrator, was effective from 1.03.1996 (R-21). Now significantly the enhancement came subsequent to the period under which the work was to be executed. Further, bare perusal of the of said communication reveals that no substantive material or proof of increase of rates or disbursement of payments was rt placed before the authorities.
23. That apart in Vishwanath Sood vs. Union of India & another, AIR 1989 SC 952, Clause 2 of the contract agreement has been held to be non-arbitrable for the reason that authority to decide the dispute is provided and his decision on such dispute is agreed to be final. Here the dispute raised pertains to escalation which is covered under Clause 10C. Like in Clause 2 of the contract agreement, 10C also provides authority to decide the escalation claim, hence claim covered under this Clause is not arbitrable as has been held by the Division Bench of this Court in FAO No.142/85, titled as State of Himachal Pradesh vs. Surinder Singh, decided on 13.11.1996.
::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 2324. Attention is also invited to the decision rendered by the apex Court in J. G. Engineers Private Limited vs. .
Union of India & another, (2011) 5 SCC 758. The principle of law laid down in Vishwanath Sood (supra) cannot be said to have been diluted. The Court has only held that it would be open for the Arbitrator to examine the question of delay.
of Hence findings returned on this issue cannot be said to be perverse. rt
25. In the instant case, the issue of delay on the part of either of the parties was not subject matter of consideration either by the Superintending Engineer or the Arbitrator.
26. In a passing reference it was contended on behalf of the Contractor that delay occurred on account of non-handing over of site. Though this was not one of the grounds urged before the Arbitrator, but however Mr. Ram Murti Bisht, learned Addl. Advocate General has clarified that out of 47 km. of road length, some delay in handing over site to the extent of 2.5 km. was there, but it was on account of non-clearance of papers by the statutory authorities under the provisions of the Forest Conservation ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 24 Act. It is also pointed out that despite the same, work could not be completed by the Contractor solely on account of .
inadequate machinery and man power required for executing the work within time. Contractor exhibited his inability to perform reciprocal promises. It stands clarified that this fact has not weighed at all in the adjudication of of the issue.
Claim No. 4 rt
27. The said claim pertains to the difference in amount payable to the Contractor for work executed w.e.f.
December, 1994. Contractor is claiming market rates for the said work. While rejecting the said claim, Arbitrator has assigned the following reasons:-
"... ... ... Moreover slow progress of execution of work in undisputed portions was only due to mismanagement and lack of machinery and manpower on the part of contractor which is quite evident from the fact that departmental machinery such as bulldozers compressors etc. have to be rent out on hire basis to the contractor although there was no such stipulation in the contract. It has been held by a Division Bench of Bombay High Court in the case State of Goa V/s Jyoti Ltd. 1996(1) Arb. L.R. that if an escalation clause is there in the contract, it would equally apply for the period during the ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 25 extended period of contract as it did during the stipulated period. Clause 10-C, the escalation clause .
in the instant case, is applicable both during the agreed period of contract as well as the agreed period extended by mutual consent i.e. extension of time granted under clause 5 of the agreement.
There is prohibition to payment of cost escalation beyond the stipulated date of completion or of extended date of completion as the case may be. The claimant contractor never applied for extension of time limit under clause 5 of the agreement and rt there is no valid extended date of completion. Therefore, even statutory increase beyond 10% under clause 10C after contract date of completions is prohibited. The respondent department never entered in to a supplementary agreement with the contractor for payment of rate for items of work as claimed by the contractor. Moreover the contractor accepted the payment of work done even after the stipulated date of completion at the agreement rates without any objection or reservations. After going through the claim defence statement and record undersigned infers that the operation period of the agreement was extended by the respondent Executive Engineer upto 31-12-1995 in which it was clearly mentioned that this does not entitle the contractor to automatic extension of time to execute the work, for which he shall have to apply on proper prescribed Performa listing therein the genuine causes of hindrances duly recommended by the Assistant Engineer incharge of the work. Such ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 26 application whenever received shall be considered on merits (as per Annexure R-12). The claimant .
contractor never applied for time extension. Hence there was no valid contract agreement after 4-12- 1994. The claim of the claimant is not tenable since there was no valid contract agreement after 4-12- 1994; therefore this claim of the claimant is rejected. Hence NIL amounts are awarded to the contractor of against this claim."
28. Again it cannot be said that the Arbitrator has rt not assigned any reasons while adjudicating the said claim.
The award to this extent cannot be said to be unreasonable.
29. In view of the fact that vide communication dated 21.09.1995, State had extended the period of contract up to 31.12.1995, even though said communication required Contractor to take recourse to Clause-5 of the agreement, which was not so done, Arbitrator could not have held the agreement subsequent to 4.12.1994, not to be valid.
30. Be that as it may, the fact of the matter is that even otherwise Contractor's claims only merited rejection for there was no additional/other material before the Arbitrator, except for the one considered by him, evidencing ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 27 the nature and the quantity of the work executed during the extended period. Also there is no material evidencing the .
factum of escalation in the prices or payments made with respect thereto.
31. In Harsha Constructions vs. Union of India and others, (2014) 9 SCC 246, the apex Court has held as of under:-
"18. Arbitration arises from a contract and unless rt there is a specific written contract, a contract with regard to arbitration cannot be presumed. Section 7(3) of the Act clearly specifies that the contract with regard arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been "excepted". Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.
19. If a non-arbitrable dispute is referred to an arbitrator and even if an issue is framed by the arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the arbitrator. In the instant case, the respondent ::: Downloaded on - 15/04/2017 20:58:05 :::HCHP 28 authorities had raised an objection relating to the arbitrability of the aforestated issue before the .
arbitrator and yet the arbitrator had rendered his decision on the said "excepted" dispute. In our opinion, the arbitrator could not have decided the said "excepted" dispute. We, therefore, hold that it was not open to the arbitrator to decide the issues which were not arbitrable and the award, so far as it of relates to disputes regarding non-arbitrable disputes is concerned, is bad in law and is hereby quashed."
rt The decision does not, in any manner, advance the Contractor's case.
32. However, the case does not fall within any one of the exceptions provided under Section 34 of the Act. The award passed by the Arbitrator cannot be said to be perverse, erroneous, illegal or opposed to public policy.
Thus, for all the aforesaid reasons, the objection petition preferred under Section 34 of the Act is dismissed.
Pending applications, if any, also stand disposed of accordingly.
(Sanjay Karol), Judge.
August 04 , 2016 (PK)
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