Calcutta High Court
Union Of India vs Abhoy Sarkar And Another on 24 January, 1991
Equivalent citations: AIR1992CAL242, AIR 1992 CALCUTTA 242, (1992) 1 ARBILR 39 (1991) 3 CURCC 354, (1991) 3 CURCC 354
ORDER
1. This is an application under Sections 30 and 33 of the Arbitration Act for setting aside the award passed by Shri A. P. Bhattacharyya, the sole Arbitrator dated 2-5-1989.
2.The facts are briefly as follows:--
A contract for construction of platform wall, dismentaling of the old Station Building and other constructions between platforms Nos. 4A and 5 at Sealday Railway Station was given to the respondent by the petitioner representating the Eastern Railway. The contract was entered into on 17th March, 1978 after the respondent's tender was accepted by the letter dated February 3, 1978. The work was scheduled for completion within six months. The agreement in question incorporates schedules 'A' and 'C'. The Schedule 'A' is the demolition work, Schedule 'C' is a construction of platform wall and Schedule 'B' included works other than a Schedule 'C', The rate agreed upon the Schedule 'B' was 130% of the above the schedule rate. The contract could not be completed according to the respondent contractor within six months owing to the failure on the part of the Respondent-Railway to make over site for demolition. The demolition had to be carried on phase-wise, owing to failure on the part of the Railways in making over possession and that there was also delay in execution of the work on the said agreement and such delay contended upon 31 months beyond the initial six months and in the meantime there had been escalation of cost and price rise which according to the claimant entitles him 298% above schedule rate. The respondent claimed the said rate on the principal contract also for the period during which the work had been delayed i.e. for 31 months. The respondent No. 1 claimed about Rs. 11 lacs and as his demand was not acceded to even if he had written several letters he filed Special Suit No. 23 of 1985. The said suit was allowed and the General Manager, Eastern Railway was directed to refer the matter of Arbitration to the Joint Arbitrators. The Respondent No. 1 thereafter filed an application under Sections 5, 11 and 12 of the Arbitration Act, 1940 in Matter No. 1362 of 1985 and by the order dated 30-7-1986 Mrs. Pratibha Bonnerjea, J. removed the Joint Arbitrators and appointed Sri A. P. Bhattacharyya, a retired Judge of the High Court as Sole Arbitrator. Before the Sole Arbitrator, the Respondent No. 1 filed a total claim against 14 items of Rupees 8,14,159.67 along with the interest from 19-6-1982 at the rate of 19.5% per annum. The petitioners submitted a counter statement and c6ntested each claim on the basis of the facts on record and relying documents filed respect thereof. The learned Arbitrator thereafter allowed the (sic) to the extent of Rupees 2,76,639.58. He also awarded interest at the rate of 12% per annum from 19-6-1982 till the date of entering the reference i.e. on 2-8-1985.
3. Being aggrieved the Union of India has filed this application for setting aside the award. It is submitted on behalf of the petitioner that the Arbitrator did not apply his mind to the fact that first respondent wrongfully and in breach of the said contract and/or neglected to complete the aforesaid works and also several extensions as a result of which the petitioner suffered loss and realisation of which appropriate action has been advised. The Arbitrator did not consider that the claim of Rs. 11 lacs made by the First Respondent did not have support of documents and/or vouchers testifying actual expenses made or loss suffered by him, that the item No. I of the claim does not appear to be justified in terms of Clause 17(2) and (3) of the Eastern Railway General condition of contract of 1969 which is binding on the contract as per the Agreement dated 17-2-89, that the extension of the completion of work has been given to the Contractor on his specific request under Clause 17(2) and (3) of the General Condition of Contract for which the contractor is not payable any extra compensation; that the award against item No. 5 for reimbursement of Insurance Premium is not justified because of Clause 17(2) under which the contractor has been given extension for completion period, that the award against item No. 10 for reimbursement of maintenance cost of staff beyond the original date of completion does not appear to be justified as per Clauses 48(1) and (2) and 50(1) and (2) of the General Condition of Contract which are binding on the parties, that according to Clause 59(1) the contract shall not be considered as completed unless the maintenance certificate is signed by the Engineer stating that the work has been completed and maintained to his satisfaction and that the question of reimbursement of maintenance cost of staff beyond the original date of completion does not appear to be justified as the extension for completion has been given on the Contractor's specific request under Clause 17(3) of the General Condition of contract and that the learned Arbitrator has given 12% interest from the date of Contractor's preferring claim to the General Manager till the date of entering into the reference which does not appear to be justified under Clause 16(2) of General Condition of Contract.
4. The said application has been contested by the respondent No.'I by filing an affidavit-in-opposition. It is contended that it is not correct that the respondent No. 1 has failed and/or neglected to refuse to complete the work wrongfully or in breach of the contract and it is stated that the extension of time for completing the work was necessitated entirely due to defaults on the part of the petitioner and the respondent No. 1 was not responsible for the same. It is further contended that the award is not violative of any Clause of the contract and that Clause 16(2) of the General Condition of Contract does not contain any bar on the part of the Arbitrator to grant interest and that none of the Supreme Court decision debars the Arbitrators from granting pre-reference interest.
5. At the time of hearing Mr. Banerjee appearing for the petitioner has challenged those items in the award in which the cost of escalation was granted to the respondent No. 1 by the Arbitrator on the ground that there was dely of 31 months in execution of the contract.
6. It is an undisputed fact that the contract could not be completed within 6 months from the date of contract. The claimant/respondent alleged that it is due to the fault on the part of the Railway in giving possession of the site both for demolition as well as for construction and there was delay of 31 months in execution of the contract. Even though the petitioner complaint that delay was due to fault of the respondent but whether it was due to the fault of the respondent or of the petitioner railway it was for the Arbitrator to consider. The fact that the Arbitrator granted in some itmes of claim the cost of escalation would clearly reveal that the Arbitrator was satisfied that the delay was due to default on the part of the Railway Administrator in making available the site for demolition as well as for construction.
7. Before me, Mr. Banerjee has challenged the award in respect of item No. 1 namely, claim for reimbursement of alleged expenses for additional cost of execution of all works executed under Schedule 'B' after tthe expiry of original date of completion, item No. 6, namely, claim for reimbursement of extra expenses of unutilised and under-utilised special list gang employed for demolition work due to piecemeal handing over of the building at long intervals, item No. 8, reimbursement of cost incurred in removing dismantled building rubbish on account of Railway's failure to hand over the building in its entirely at a time, item No. 9 being the claim for reimbursement of maintenance cost of staff beyond the original completion period and item No. 10, the claim for reimbursement of prolonged overhead expenses beyond the original contracted period. He has also challenged the grant of interest at 12% per annum on the amount awarded from 19-6-1982 till 2-8-85.
8. The main contention about the above items of claim awarded by the Arbitrator is that even if the contract could not be performed within the stipulated period due to the default on the pan of the Railway in handing over possession, under Clause 17(2) of the General Condition of Contract, the Contractor was entitled to extension of the period and under Clause (3) of Clause 17 of the General Condition of Contract there was a specific bar on the contractor demanding any compensation for the delay in executing the contract. Mr. Banerjee therefore points out that when there is a specific provision under Clause 17(3) of the General Condition of Contract against the contractor demanding any compensation for the delay in execution of the contract then the Arbitrator has to consider the provision of the contract and when the Arbitrator overlooking this provision awarded the excalation cost in those items he committed legal misconduct and the decision of the Supreme Court (Continental Commercial Company v. State of Madhya Pradesh) is clearly attracted to the facts on this case.
9. On behalf of the respondent, Mr. Bhaskar Gupta has submitted that the principle laid down in Continental Construction Company's case is not attracted, that in several other decisions the Supreme Court has clearly explained the decision in Continental Commercial Company's case and has clearly laid down that the principle laid down in Tarapore and Company v. Cochin Shipyard and several other subsequent decisions and has-clearly recognised that when the contract could not performed within the stipulated period due to fault of the administration then the original rates quoted become otiose and the contractor is entitled to escalation cost for performing the contract during the extended period. Mr. Gupta points out that in the Continental Commercial Company's case there was a specific provision against the claim of escalation cost even for the work undertaken with contractor during the extended period and Clause 17(3) is not such a provision and it merely prohibits the contractor from getting compensation from the Railway on the extension being granted by the railway due to fault of the Railway.
10. Mr. Bhaskar Gupta appearing for the respondent No. 1 submitted that the learned Arbitrator on considering evidence both oral and documentary regarding the extra expenses incurred did not award any compensation but only the extra cost incurred on the basis of the said evidence produced by the respondent No. 1 and when in view of the several decisions of the Supreme Court, such escalation cost can be awarded by the Arbitrator then Mr. Banerjee's contention that Clause 17(3) is a bar to the grant of such escalation cost is not acceptable.
11. On considering the submissions made by both the parties, I am of the view that it was for the Arbitrator to interpret the provisions of the contract including Clause 17(3). There is no doubt that before the Arbitrator the present petitioner referred to several clauses of the contract including Clause 17(3) but the Arbitrator had the jurisdiction to interpret Clause 17(3) and if on such interpretation he awarded the compensation towards the escalation cost and the extra expenses which the respondent No. 1 had to incur because of the delay of the railway in giving possession of the site and also for giving the possession of the ite piecemal then I am unable to hold that he committed any misconduct. It was a matter of interpretation as to whether Clause 17(3) totally prohibited the grant of escalation costs and extra expenses incurred by the Respondent No. 1 and it was possible for the Arbitrator to take the view that even though the compensation could not be awarded under Clause 17(3) against the railway but extra expenses incurred due to the fault of the railways in giving possession of the site and also in giving possession of the site piecemal could be awarded in the light of the Supreme Court's several decisions beginning from Tarapore Company's case .
12. In Sudarsan Trading Co. v. Govt. of Kerala, the Supreme Court has held that interpretation of contract is a matter for the arbitrator and when the amounts have been awarded by the arbitrator by taking a particular view of the contract, Court cannot interfere with it and substitute its own decision. In view of the above I am unable to accept the contention of Mr. Banerjee that in awarding the escalation cost for the delay committed by the Railway in handing over the site as also handing over the site piecemal, the learned Arbitrator committed legal misconduct.
13. The other point that remains to be decided as to whether the Arbitrator was justified in awarding interest at the rate of 12% per annum from the date of presentation of the claim to the date of reference. There is no doubt that Clause 16(2) prohibits the contractor in getting interest on the Security Deposit or other amount due from the Railway. Mr. Gupta, however, draws my attention to the circular dated 25-10-79 if the Railway Board in which with reference to Clause 16(2) it has been observed that in view of the Interest Act 1978 Clause 16(2) does not survive. But I am of the view in order to make a claim under the Interest Act, 1978 the Respondent has to prove that any written notice was given by the Contractor claiming interest. Mr. Gupta points out that in the original claim interest at the rate of 19.5% was claimed together with the main item of claim. It is also pointed that those items of claim including the interest claimed was referred to Arbitration in the proceeding under Section 20 of the Arbitration Act and therefore that was a matter for adjudication by the Arbi-trator and when that was a specific matter referred to Arbitration the Arbitrator in awarding interest did not commit any illegality.
14. I am of the view that the provision of Interest Act namely, Section 3(b) clearly lays down that the interest can be awarded by the Court which includes an Arbitrator from the date mentioned in this regard in a written notice given by the person entitled to or the persons making the claim to the person liable and that interest will be claimed up to the date of institution of the proceeding. Before me there is nothing to show that any such demand notice was issued to the Railways claiming interest from a particular date. In order to find a claim of interest under the Interest Act there is to be such a demand of interest and merely because in the claim petition the interest has been claimed and that has been referred to Arbitrator, the contractor cannot claim the interest unless such notice contemplated under Section 3(b) of the Interest Act, 1978 has been given by the contractor to the Railways.
15. I do not find from the award of the Arbitrator that the Arbitrator directed his attention to this aspect of the case in awarding the interest from the date of the claim to the date of the reference. Therefore, the interest awarded by the Arbitrator cannot be sustained.
16. The application is therefore allowed in part. The award is confirmed subject to this that the interest awarded shall be deleted from the award.
There is no order as to costs.
17. Order accordingly.