Rajasthan High Court - Jodhpur
State Of Rajasthan vs M/S Leeladhar Devkinandan on 15 July, 2024
Author: Pushpendra Singh Bhati
Bench: Pushpendra Singh Bhati
[2024:RJ-JD:27111-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Misc. Appeal No. 760/2024
State Of Rajasthan, Through The Executive Engineer, Public
Works Department Dn Hanumangarh.
----Appellant
Versus
M/s Leeladhar Devkinandan, Through Its Proprietor Mr
Devkinandan Son Of Late Shri Leeladhar Golyan Resident Of Plot
No 17 Sector No 08 Jawahar Nagar Sri Ganganagar Rajasthan
----Respondent
For Appellant(s) : Mr. Manish Patel, AAG with
Ms. Mehali Mehta
For Respondent(s) : Mr. Sheetal Kumbhat
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
HON'BLE MR. JUSTICE MUNNURI LAXMAN Judgment Reserved on 05/07/2024 Pronounced on 15/07/2024 Per Dr. Pushpendra Singh Bhati, J:
1. This Civil Misc. Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'Act of 1996') read with Sections 5 & 13 of the Commercial Courts Act, 2015 has been preferred claiming the following reliefs:
"That in light of the submissions made hereinabove, it is most humbly prayed that the present appeal may be allowed and the award dated 15.10.2011 and the order dated 05.07.2023 passed by the Commercial Court, Bikaner in Civil Misc. Case No.03/2023 may kindly be quashed and set aside.
Any other order, which this Hon'ble Court deems fit and proper in the facts and circumstances of the case, may kindly be passed in favour of appellant."(Downloaded on 18/07/2024 at 08:41:30 PM)
[2024:RJ-JD:27111-DB] (2 of 10) [CMA-760/2024]
2. Brief facts of the case, as placed before this Court by Mr.Manish Patel, learned Additional Advocate General assisted by Ms. Mehali Mehta, appearing on behalf of the appellant-State are that the respondent was awarded a contract as per Agreement no.4 in the year 1995-96 vide work order no. 1670 dated 16.06.1995 pertaining to "Renewal with 20 MM on PMC on Hanumangarh - Rawatsar Pallu Road and Thalarka-Munda Road by Paver Finisher"; the work order as awarded was to the tune of Rs.35,17,994/-. The work was to be commenced on 01.07.1995, supposed to be completed within 11 months i.e. till 31.05.1996. Clause 45 of the Agreement, pertaining to the price escalation was in the draft, but stood consciously deleted at the threshold. 2.1. The work was to commence from 01.07.1995 and after extension of the period of contract as per the Clause 12 of the Agreement, the work in question was sought to be completed on 02.10.1998 with the increased cost from Rs.35,17,994/- to Rs.42,09,963/- as per Clause 45 of the Agreement, which already stood deleted. Thereafter, the respondent submitted the bill with regard to escalation of price of the material and labour; the said bill was not accepted by the appellant-State. 2.2. Subsequently, the respondent filed a Misc. Application No. 42/2002 before this Hon'ble Court, wherein the Court appointed a sole Arbitrator vide order dated 21.08.2003. Thereafter, the arbitral proceedings commenced, and the award dated 15.10.2011 was passed in favour of the respondent.
2.3. Being aggrieved by the award dated 15.10.2011, the appellant-State preferred an appeal under Section 34 of the Act of 1996 before the Commercial Court, Bikaner (Revenue Suit No. (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (3 of 10) [CMA-760/2024] 03/2023), whereupon the learned Commercial Court vide order dated 05.07.2023 dismissed the appeal and affirmed the award dated 15.10.2011.
3. Thus, being aggrieved by the award dated 15.10.2011 and the order dated 05.07.2023, the appellant-State preferred the present appeal claiming the aforequoted reliefs.
4. Learned counsel appearing on behalf of the appellant-State submitted that Clause 45 of the Agreement was deleted at the time of execution of the contract with the consent of both the parties and the extension of contract was granted after imposing the penalty on the part of the respondent, but the learned Arbitrator has wrongly and beyond the jurisdiction passed the impugned award and the same was upheld by the learned Commercial Court, which is not justified in law. 4.1. It was also submitted that after deletion of Clause 45 of the Agreement, the contract was extended, and that, the said Clause 45 cannot be automatically revived without any specific agreement in this regard; but the learned Arbitrator as well as the learned Commercial Court vide the impugned award and the impugned order respectively, without considering the said vital aspect of the matter, applied the deleted Clause 45. 4.2. It was further submitted that the time extension was granted by the Chief Engineer for completion of the work in question on the recommendation made by the Engineer-in-charge; thereafter, extension was granted after imposing the penalty on the respondent; the same was not in the nature of extension in its strict sense, and the same was granted as per Clause 12 of the Agreement. It was also submitted that the learned Arbitrator (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (4 of 10) [CMA-760/2024] passed the impugned award beyond the terms of the agreement, and thus, the impugned award and the impugned order deserve to be quashed and set aside.
4.3. In support of such submissions, reliance has been placed upon the following judgments:-
(a) State of Rajasthan Vs Nav Bharat Construction Co. (2006) 1 SCC 86;
(b) Food Corporation of India Vs Chandu Constriction (2007) 4 SCC 697;
(c) T.N. Electricity Board Vs Bridge Tunnel Construction (1997) 4 SCC 121;
(d) Union of India Vs Mohanalal Capoor & Ors. (1973) 2 SCC 836;
(e) Oil & Natural Gas Corporation Ltd. Vs SAW Pipes (2003) 5 SCC 705;
(f) Anglo American Metallurgical Coal Pvt. Ltd. Vs. MMTC Ltd. (2021) 3 SCC 308.
5. On the other hand, learned counsel for the respondent opposed the aforesaid submissions made on behalf of the appellant-State, while submitting that the respondent submitted an application before the Executive Engineer concerned for grant of extension of time limit, whereafter, Assistant Engineer to Additional Chief Engineer had recommended the same to their next higher authority, opining that the reasons are genuine, and recommended that the same may be considered being beyond the control of the respondent.
5.1. It was further submitted that the Chief Engineer, PWD, Jaipur vide office order dated 25.09.1999 imposed on the respondent the condition of deposition of compensation amount for the purpose of (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (5 of 10) [CMA-760/2024] the extension in question. It was also submitted that after extension in question, Clause 45 stood revived automatically. 5.2. It was further submitted that initially Clause 45 was deleted because time for completion of the work in question was less than 12 months, but due to escalation in price and cost/ value of work i.e. from Rs. 35,17,994/- to 42,09,963/-, therefore, Clause 45 stood automatically revived and remained applicable on the contract in question.
5.3. It was also submitted that the scope for interference and/or judicial review in the present case pertaining to the impugned arbitral award is very limited, more particularly, when the learned Arbitrator passed the impugned award after considering all the relevant aspects of the case, and the same was rightly upheld by the learned Commercial Court vide the impugned order. 5.4. It was further submitted that an identical controversy has already been decided by the learned Single Bench this Hon'ble Court in various cases, wherein Clause 45 stood revived automatically upon extension of time for completion of the work in question. In this regard, learned counsel relied upon the judgments passed by the learned Singh Bench of this Hon'ble Court at Jaipur in the case of Heera Singh Vs State of Rajasthan (S.B. Civil Misc. Appeal No. 2013 of 2002, decided on 13.04.2007), and Public Works Department Raj. Vs M/s Bhawan Va Path Nirman (S.B. Civil Misc. Appeal No. 4663 of 2011, decided on 24.05.2022).
6. Heard learned counsel for the parties as well as perused the record of the case alongwith the judgments cited at the Bar. (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (6 of 10) [CMA-760/2024]
7. This Court observes that the appellant-State awarded the contract as per Agreement no.4 in the year 1995-96 to the respondent vide work order no. 1670 dated 16.06.1995, and the period for completion of the work in question was 11 months. At the time of contract, Clause 45 of the Agreement which is relating to escalation of price was not applicable and stood deleted with the consent of the parties. The work was to be commenced from 01.07.1995 and after the extension in question, as per the Clause 12 of the Agreement, the work in question was sought to be completed on 02.10.1998, with the increased cost from Rs.35,17,994/- to Rs.42,09,963/-. Thereafter, the respondent submitted bill indicating escalation of price of the material and labour so utilized, but the said bill was not accepted by the appellant-State, as Clause 45 stood expressly deleted in the agreement.
7.1. Thereafter, the Arbitrator was appointed and the arbitral proceedings commenced accordingly, followed by passing of the impugned award dated 15.10.2011 in favour of the respondent. Aggrieved by the said award, the appellant-State preferred an appeal under Section 34 of the Act of 1996 before the learned Commercial Court, which was dismissed vide the impugned order dated 05.07.2023.
8. This Court further observes that at the time of contract dated 16.06.1995, Clause 45 of the Agreement was deleted by writing and signing of the parties at the relevant place in the contract. The relevant portion of the said Clause 45 is reproduced as hereunder:
(Downloaded on 18/07/2024 at 08:41:30 PM)
[2024:RJ-JD:27111-DB] (7 of 10) [CMA-760/2024] "If during the progress of the contract of value exceedings Rs.10.00 lakh and where stipulated completion period is more than 12 months the price of any material incorporated in the work (not being materials supplied from the Department) and/or wages of labour increases or decreases as compared to the price and/or wage prevailing at the date of opening of tender for the work, the amount payable to contractor for the work shall be adjusted for increase or decrease in the rates of labour and materials excepting those materials supplied by the department on the basis of the following formula . . . . . . "
This portion in record is struck down with signature and seal of the authority.
8.1. This Court further observes that after deletion of Clause 45 of the Agreement, the work was started and it was not completed in time, whereupon the respondent filed an application for extension of time period for completion of the work in question;
the extension was granted on 25.09.1999 by the Chief Engineer, PWD, Jaipur. This Court also observes that at the time of the said extension, nothing expressly was shown regarding revival of Clause 45 of the Agreement and also there was no specific agreement, letter, and communication between the appellant-
State and the respondent in this regard.
8.2. The relevant portion of the letter dated 25.09.1999 is reproduced as hereunder:
"The above work was allotted to M/s. Liladhar Devkinandan AA-Class P.W.D. Contractor, Sri Ganganagar, with date of commencement and stipulated date of completion being 1.7.1995 and 31.5.1996 respectively. The work has actually been completed on 2.10.1998 resulting into a delay of 2 years.
2. The above delay is reported to have been caused due to the following reasons:-
i) Non-availability of bitumen;(Downloaded on 18/07/2024 at 08:41:30 PM)
[2024:RJ-JD:27111-DB] (8 of 10) [CMA-760/2024]
ii) Shortage of funds;
iii) Non-completion of renewal on these roads, and
iv) Not season for the year 1996, 1997 and 1998.
3. In view of the above, extension of time limit of the agreement in regard to completion of the work from 31.5.1996 to 2.10.1998 is hereby granted in favour of M/s. Liladhar Devkinandan, AA-Class P.W.D. Contractor, Sriganganagar, with a compensation of Rs.1,759/- @ 1/20% on the tender cost of work amounting to Rs.35,17,994/- as shown in the C-Schedule as the contractor has been held partly responsible for the delay in completion of the work.
4. The original Agreement and extension application along with other documents etc. as received with your letters under reference are returned herewith.
Encl:- A/a.
Yours faithfully, sd/-
CHIEF ENGINEER (ROADS)"
9. This Court further observes that at the time of extension of the period for completion of the work in question by the Chief Engineer vide letter dated 25.09.1999, it was mentioned therein that the respondent is partly responsible for the delay in completion of the work in question and imposed the penalty accordingly.
10. This Court also observes that the scope of interference in the impugned arbitral award under Section 37 of the Act of 1996 is the same as provided under Section 34 of the Act of 1996 i.e. very limited as held by the Hon'ble Apex Court in the case of Konkan Railway Corporation Ltd. Vs Chenab Bridge Project Undertaking (Civil Appeal No. 2903 of 2023, decided on 17.08.2023), relevant portion whereof is reproduced as hereunder:
"14. Analysis: At the outset, we may state that the jurisdiction of the Court under Section 37 of the Act, as clarified by this Court in MMTC Ltd. v. Vedanta Ltd., is akin to the jurisdiction (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (9 of 10) [CMA-760/2024] of the court under Section 34 of the Act. Scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act "
11. This Court also observes that as mentioned above, the scope of interference in the impugned arbitral award is very limited, and the same can be interfered with only if the arbitral award is perverse or manifestly arbitrary. In the present case, the learned Arbitrator passed the impugned award after applying Clause 45, which was deleted with the agreement between the parties, at the time of the contract and thereafter it was not even again revived. This Court further observes that the learned Arbitrator as well as the learned Commercial Court failed to consider that once the Clause 45 of the Agreement stood deleted with the consent of the parties, it could not have been revived automatically, merely upon the extension in question.
12. This Court also observes that Clause 12 of the Agreement was of no significance particularly for revival of Clause 45 of the Agreement, because Clause 12 does not give any power to revive Clause 45, for making it applicable upon the extension in question, and therefore, the learned Arbitrator and the learned Commercial Court were not justified in passing of the impugned award and the impugned order respectively.
13. This Court further observes that the judgments rendered in the cases of Heera Singh Vs. State of Rajasthan & Ors (supra) and Public Works Department Raj. Vs M/s Bhawan Va Path (supra) as relied upon by the learned counsel for the respondent is overruled because Clause 45 of the Agreement (Downloaded on 18/07/2024 at 08:41:30 PM) [2024:RJ-JD:27111-DB] (10 of 10) [CMA-760/2024] stood deleted, and it is not the case here that Clause 45 of the Agreement was put under eclipse, for any purposes, including specific time period and/or value of the contract in question; thus, it is a clear case of deletion of Clause 45, and hence, the same cannot be revived automatically only on the ground of extension of time for completion of the work in question. Therefore, the judgment passed by the learned Singh Bench in cases of Heera Singh Vs. State of Rajasthan & Ors (supra) and Public Works Department Raj. Vs M/s Bhawan Va Path (supra), stands overruled by this judgment.
14. Thus, in light of the above observations and looking into the factual matrix of the present case, the present appeal is allowed and the impugned award dated 15.10.2011 passed by the learned Arbitrator and the impugned order dated 05.07.2023 passed by the learned Commercial Court, Bikaner in Civil Misc. Case No. 3/2023 are accordingly quashed and set aside. All pending applications stand disposed of.
(MUNNURI LAXMAN),J (DR. PUSHPENDRA SINGH BHATI),J SKant/-
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