Andhra HC (Pre-Telangana)
Superintending Engineer And Anr. vs Kehar Singh on 25 February, 1993
Equivalent citations: 1994(1)ALT293, 1994(2)ARBLR148(AP)
Author: Syed Shah Mohammed Quadri
Bench: Syed Shah Mohammad Quadri
JUDGMENT Syed Shah Mohammed Quadri, J.
1. These three cases arise out of the common judgment dated 17.3.1986 passed by the learned Second Additional Judge, City Civil Court, Hyderabad, in O.P. No. 181/84 and O.S. No. 452 of 1984, on the file of his court.
2. The petitioner in C.R.P. No. 2526/86 and the appellant in C.M.A. No. 1229 of 1986 which arise out of O.S. No. 452/84 and O.P. No. 181/84, is the Government of Andhra Pradesh. The respondent in these cases (hereinafter referred to as "the contractor") is the petitioner in C.R.P. No. 2775 of 1987 which arise out of O.P. No. 181/84, referred to above. We may briefly refer to the facts which led to the filing of these cases.
3. The work relating to Nagarjunasagar Left Canal II (I.C.B.) earth work excavation and banking of 21st M.B.C. from Km. 44/0 to Km. 49/9 including construction of structures, valued at Rs. 8.75 lakhs, was given to the contractor. The agreement relating to the said work hearing No. 38/SE/K77-78, was entered into between the parties on 15.12.1977. The site was handed over two days earlier to the execution of the contract i.e., 13.12.1977. The work was to be completed on or before 14.12.1979. In execution of the said work disputes arose between the parties. The said disputes were referred to a panel of three arbitrators on 11.7.1983. Time was extended with the consent of parties for passing of the award and the award was made on 31.3.1984. The contractor preferred as many as 16 claims in addition to general claims 1 to 5. Out of the said claims the arbitrator allowed ten claims. The suit O.S. No. 452 of 1984, was filed under Section 14 of the Arbitration Act, by the arbitrator, to pass a decree in terms of the award and O.P. No. 181 of 1984 was filed by the Government under Section 30 of the Act to set aside the award. By a common order dated 17.3.1983 the learned Second Additional Judge City Civil Court, Hyderabad, made the award rule of the court by decreeing the suit and dismissed the O.P. The validity of the said judgment is now assailed in the above said three cases.
4. The learned Advocate General appearing for the Government in C.M.A. No. 1229 of 1986 and C.R.P. No. 2526 of 1986, contends that in the agreement there is a specific condition which provides that the claim made beyond fifteen days from the date of cause of action shall not be entertained and all the claims preferred by the contractor were made beyond fifteen days and therefore entertainment of the claims itself is without jurisdiction and therefore the award is liable to be set aside.
Mr. P. R. Ramachandra Rao, the learned counsel for the contractor, on the other hand contends that Condition No. 83 of the agreement does not stipulate any limitation for preferring the claims, therefore the claims cannot be said to be barred by limitation. In any event, submits the learned counsel, the award being a non-speaking award the court cannot go into the reasons for entertaining the claim.
5. It is no doubt true that in case of non-speaking award the court cannot go into the validity of the reasons because no reasons appear in the award. It is not permissible for the court to speculate as to what reasons could have impelled the arbitrator to pass the award and then venture to decide the validity of the supposed reasons. It is one thing to give reasons in the award; but it is different thing to record a finding on a jurisdictional question. If the terms and conditions of the agreement provide that a claim could be entertained only when preferred within fifteen days and not thereafter, the arbitrator has to determine the jurisdiction factor. Whether Condition No. 83 prescribes the jurisdictional fact and makes it incompetent for the arbitrator to decide the claims filed beyond any specified period can be determined by reading the said condition which reads as follows :
"83 Claims and disputes.
Any claims or disputes out of the contract should be submitted in writing to the Superintending Engineer within 15 (fifteen) days from the date of cause of action, so that the points at issue could be immediately verified at site by the field Officers, facts ascertained and a prompt decision given. Claims raised subsequently at such a distance of time as to make it impossible to verify the facts are liable to be rejected. The tenderer shall carefully note this stipulation."
6. A persusal of the above clause makes it clear that it is in two parts. The first part enjoins the contractor to raise any claim or dispute in writing and submit the same to the Superintending Engineer concerned within 15 days from the date of cause of action for immediate verification at site by the Field Officer and ascertainment of fact to take a prompt decision. The second limb says the claims raised subsequently after long time which make it impossible to verify the facts, are liable to be rejected and the tenderer were asked to note this stipulation carefully. A plain reading of the above condition leaves no doubt in our mind that the question whether the claim has been submitted within 15 days or not is not a question of the jurisdictional fact. In our view Condition No. 83 is a condition meant for convenience of both the parties and does not lay down a rule of limitation, much less a pre-condition for the arbitrator to entertain the claim. The contention of the learned Advocate General is therefore rejected.
7. It is then contended that claim No. 2 by the contractor for damages, is a claim too remote to be considered by the arbitrator, therefore award of a sum of Rs. 7 lakhs against this claim is wholly without jurisdiction. Sir Ramachandra Rao, contends that the businessmen & more so building contractors do not allow the money to be kept idle; they rotate money which naturally yields profits to them. Non-payment of money in time's does result in loss to the contractor, therefore he is entitled for damages and the award connot be faulted on that ground.
8. To appreciate the contention of the learned counsel it would be appropriate to note the nature of the claim. The claim in question reads as follows :
"Loss of earning and consequential damages. The claim is for Rs. 49,20,332.00."
In dealing with this claim the arbitrator passed the following award;
"The claims is partly admitted. We direct the respondents to pay the claimants a sum of Rs. 7,39,000/- (Rupees seven lakhs and thirty nine thousand only)."
9. It has been laid down by this court that the arbitrator is a creature of the agreement and the position of the arbitrator is not above the position of the court. If the court is bound by the provisions of the substantive law so also the arbitrator. As such in passing of the award the arbitrator cannot act contrary to the provisions of the substantive law. Section 73 of the Indian Contract Act provides as follows :
"73. Compensation for loss or damages caused by Breach of contract :
When a contract has been broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach."
From a perusal of the above section it is evident that the damages which can be awarded as a result of breach of contract by one of the parties to the other party who suffered by the said breach, is entitled to receive any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew when they made the contract to be likely to result from the breach of it. It is specifically made clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. Illustration (n) appended to the said section clearly brings out the difference between the loss which naturally arises out of the contract and the loss which is too remote and cannot be awarded under Section 73.
10. It cannot be disputed that as a result of not receiving of money in time the contractor suffered loss and for that he will be entitled to damages which can be measured either by way of interest or otherwise. In the instant case the basis of the claim is that had the amount been released in time, the contractor would have been able to undertake five times the value of the work and get 15% of the profit on the out-turn. It would be pertinent to note here that on the amounts awarded under general claim No. 3 the arbitrator had awarded interest from the date of the claim, the relevant portion of the awarded reads "we award and direct that interest should be paid to the claimant by the respondent on the total sum awarded above at 12% interest per annum from the date of award to the date of the decree or payment whichever is earlier." The amount awarded by the arbitrator is admittedly not in the nature of interest which has already been awarded but is in addition to it and is too remote a claim to be allowed under Section 73 of the Indian Contract Act. Therefore, in our view, the arbitrator has acted without jurisdiction in awarding the said claim No. 2. We therefore, set aside that part of the decree relating to claim No. 2 which is made rule of the court.
11. The last contention which remains to be considered is raised in C.R.P. No. 2775 of 1987. The learned counsel for the petitioner contends that the arbitrator had awarded interest at 12% from the date of the award till the date of decree, or payment whichever is earlier. The court has no power to vary or modify this part of the award and reduce the interest from 12% to 6%, the relevant portion of the award which deales with the interest has already been extracted above. From a perusal of the above extracted award it is clear that the arbitrator awarded interest at 12% p.a. from the date of the award to the date of the decree or payment whichever is earlier. The power of the arbitrator to award interest pendente lite as well as future interest is upheld by the Supreme Court in Secretary, Irrigation Department, Government of India v. G. C. Roy . Therefore, award of interest by the arbitrator is well within the jurisdiction of the arbitrator. It would be appropriate to read here Section 17 of the arbitration Act which is in the following terms :
"17. Judgment in terms of award : Where the court sees no cause to remit the award of any of the matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of or not otherwise in accordance with the award."
This section provides that if the court does not find any cause to remit the award or any matters referred to arbitration for consideration or to set aside the award, the court has to pronounce judgment according to the award and decree has to be drawn accordingly. It further provides that no appeal shall lie from such decree except on the ground that it is in excess of or not otherwise in accordance with the award. Further Section 39 of the Arbitration Act also provides modification or correction of an award as one of the grounds for appeal. In the judgment and decree under appeal the learned II Additional Judge held that 1st defendant would be entitled to interest at 6% p.a. from the date of the award till the date of realisation of the amount that is awarded in the award. As has been noticed above, the arbitrator had already awarded interest at 12% from the date of the award till the date of decree. Therefore, the judgment and decree insofar as it deals with reduction in the rate of interest from 12% to 6% from the date of the award to the date of the decree cannot be sustained, it is accordingly set aside. Consequently the contractor would be entitled to interest at 12% p.a. from the date of the award, till the date of the decree.
12. The judgment and decree under appeal are accordingly modified; consequently C.M.A. No. 1229 of 1987 and C.R.P. No. 2526 of the 1986 are partly allowed and C.R P. No. 2775 of 1987 is allowed as indicated above. In the circumstances of the case, we direct the parties to bear their own costs.
13. Appeal and revision partly allowed.