Andhra HC (Pre-Telangana)
Sponge Iron India Ltd., (Rep. By Its ... vs B.V. Radhakrishna And Anr. on 29 September, 1995
Equivalent citations: 1996(3)ALT557
Author: P. Venkatarama Reddi
Bench: P. Venkatarama Reddi
JUDGMENT D.H. Nasir, J.
1. C.M.A. No. 1277 of 1988 arises from the order and decree dated 30-8-1988 passed in O.P.No. 349 of 1986 by the IV Additional Judge, City Civil Court, Hyderabad, by which the learned Judge dismissed the appellant's application for setting aside the award of the Arbitrator Under Section 30 of the Arbitration Act, (for short 'the Act'). C.R.P. No. 3695 of 1988 arises from the judgment and decree dated 30-8-1988 passed in O.S.No. 1027 of 1986 by the IV Additional Judge, City Civil Court, Hyderabad, by which the learned Judge accepted the award of the Arbitrator partly and made the rule of the Court. Since the subject matter of both these proceedings is common, the same are being disposed of by this common judgment.
2. For the sake of convenience, M/s. Sponge Iron India Limited will be known as 'the Company' and Mr. B.V. Radhakrishna, who undertook to carry out the work entrusted to him by the company will be known as 'the Contractor'.
3. The Contractor undertook the work of transportation of waste and finished products within the plant (area) of the Company for the year 1982-83 as per agreement dated 8-6-1982. Certain disputes arose between the parties with regard to the said work. Since the Company failed to respond to the representations made by the Contractor on 14-6-84 and 1-8-84 he filed O.S. No. 1272 of 1984 on the file of the IV Additional Judge's Court Under Section 20 of the Act for appointment of sole Arbitrator to adjudicate upon the dispute between the parties. Justice Sri K. Punnaiah (retd. Judge) was appointed as the sole Arbitrator by order dated 31-10-85. The Arbitrator after hearing both the parties passed theawardonl-8-1986.O.S.No. l027of 1986 was instituted by the Contractor for making the Arbitrator's award the rule of the Court with a further prayer that interest be allowed at 21 per cent per annum from the date of decree Under Section 29 of the Act.
4. O.P.No. 349 of 1986 was filed by the Company Under Section 30 of the Act for setting aside the award of the Arbitrator. The same was dismissed by the learned Judge. Being aggrieved by the judgment of the trial Court, the Company filed C.M.A.No. 1277 of 1988. The Company also filed C.R.P.No. 3695 of 1988 against the judgment and decree passed in O.S.No. 1027 of 1986.
5. The Company invited tenders for the work of transportation of its waste products etc. from its bunkers/discharge points to various places in the plant area within a lead of 1 Km for the period from 1-4-1982 to 31-3-1983. The Contractor's tender was found to be the lowest and the Company issued a letter of intent to the Contractor on 29-3-1982. The rate for transportation was quoted at Rs. 3.50/MT, and the rate for manual loading was quoted at Rs. 475/MT. The total quantity to be transported was indicated to be about 65,000 metric tons (for short MT).
6. At the end of the contract period the Contractor addressed a letter dated 29-3-1982 to the Company requesting for an upward revision of the rate from Rs. 3.50/MT to Rs. 14/MT. The Contractor contended that he transported a total quantity of 47,463.29 MT out of which he transported and dumped 10,195.80 MT within a lead of 1 Km to and fro, and the remaining quantity of 37,267.49 MT was transported and dumped beyond 1 Km upto 4 Km to and fro. The Contractor further contended that he was paid only Rs. 1,30,436.22 ps for transporting and dumping 37,267.49 MT beyond 1 km upto 4 km to and fro. He further contended that as per the contract he had to transport the sponge iron from bunkers to godown which he had to deliver to the customers of the Company. But contrary to the agreement, the Company effected direct sales to its customers at the bunkers, as a result of which he sustained a loss of profit to a tune of Rs. 31,500/-. The Contractor also demanded payment for transporting and dumping 37,267.49 MT beyond 1 km upto 4 km to and fro, but there was no response from the Company, and therefore he approached the Civil Court and filed O.S.No. 1272 of 1984 Under Section 20 of the Act before the IV Additional Judge, City Civil Court, Hyderabad for appointment of a sole Arbitrator to adjudicate upon the disputes. The Company resisted the said suit However, after hearing both the parties and after taking into consideration the evidence on record, the learned Judge passed an order appointing Justice Sri. K. Funnaiah as the sole Arbitrator to adjudicate upon the disputes between the parties.
7. During the proceedings before the learned Arbitrator, it appears that an application was made for local inspection and accordingly local inspection was taken by the learned Arbitrator in the presence of the counsel for the rival parties as well as the parties themselves. The points agreed to be looked into and decided were also determined with the consent of the parties. One of the main points which was raised for consideration was whether the Contractor transported 47,463.29 MT of finished and waste products within a lead of 1 Km or whether the Contractor transported 37,267.49 MT of finished and waste products beyond 1 Km lead, and if so, what additional transport charges were due and payable to the Contractor by the Company.
8. Oral evidence was adduced by both the parties. Documentary evidence was also taken on record. The Contractor was examined as P.W.1, and documents Exs. P-1 to P-23 were admitted in evidence on his side. The Company examined 5 witnesses being P.Ws. 1 to 5 and documentary evidence being Exs. P-1 to P-12 were admitted on its side. In the cross-examination of witnesses certain documents were produced and they were admitted in evidence as Exs. C-1 to C-5. The learned Arbitrator came to the conclusion that it was abundantly clear from Ex.P-12 that the Contractor transported 10,195.80 MT of material and dumped within 1 Km lead, and the balance quantity of 37,267.49 MT was transported beyond 1 Km lead, and that due to nonavailability of space, the contractor was constrained to dump the material near the railway sidings, and the distance covered was between the range of 1 Km and 4 Kms.
9. The parties do not appear to be sharply divided on the proposition of fact whether 37,267.49 MT of material was carried beyond 1 Km, but what is hotly contested in the meaning of the word 'lead'. The question is whether 1 Km lead was intended to mean 1 Km by one side only or to and fro, as contended by the contractor. P.W. 1 asserted in his evidence that in the transport contracts where the word 'lead' was mentioned, it would mean "by one side".
10. In the schedule of work attached to the contract the following description is given with regard to transportation work to be carried out:
"Transport of various waste products and finished products from bunkers /discharge points to various places in the plant area within a lead of 1 Km including unloading, levelling and spreading as may be loading by Hopper discharge mechanically as necessary, including cost of labour, tools, trucks, all incidentals etc., complete as per conditions of tender."
11. The learned Arbitrator held that the definition in A.P.D.S.S. did not lend any support to the view expressed by P.W.1 regarding the word 'lead'. He further observed that the definition relates to earth work, and therefore, it could not be applied to transport contract. Having so observed, the learned Arbitrator did not discuss the meaning of the term 'lead' used in ordinary or engineering parlance. He relied on two factors, namely the tender notice of another Company (Ex. C-2) and the so-called admission of R.W.5 which we shall refer to later.
12. What is important is to find out whether the word 'lead' means the distance covered from the point of origin to the point of destination only, or the return empty trip from the destination to the point of origin should also be taken in to consideration. If a distance of, say, 4kms was to be covered by way of 'lead', whether it would mean that a distance of only 2 Km from the point of origin to the point of destination would be taken into account or whether the return trip of 2 Km also would be included within the meaning of the word lead'. We have no doubt in our mind that, that is not the meaning which could be attributed to the word 'lead'. 'Lead' means and for all practical purposes it is only the one way distance to be covered from the point of origin to the point of destination unless otherwise specified. If a particular rate is sanctioned for a lead of 2 Km, it would mean that the distance of 2 Km from the point of origin to the point of destination should be taken into consideration and the return trip of 2 Km from the point of destination to the origin does not fall for consideration at all. When the contractor quotes his rate on the basis of lead, it is with this clear understanding in his mind that he would be paid for one way distance from the point of origin to the point of destination, and he quotes his rate in such a manner that the expenditure which may be incurred on the return trip from the point of destination to the point of origin is covered by the rate quoted for such lead.
13. The concise Oxford Dictionary, 1990 Edition, spells out different meanings of the word 'lead' used in different contexts. As far as the present context is concerned, the meaning of the word 'lead' is stated to be as follows in the said dictionary :
"Bring to a certain position or destination".
In Oxford Universal Dictionary (Illustrated), the meaning of the word 'lead', under the sub-head 'Engineering' is given as follows:
"The distance to which ballet, coal, soil, etc. is to be conveyed to its destination."
14. This meaning attributed to the word 'lead' in the Oxford Dictionary makes it abundantly clear that only one way distance from the point of origin to the point of destination is to be taken into account. In that view of the matter, therefore, if a certain rate is quoted for a distance of 5 Km, it would not mean that the distance to be covered would be only 25 Kms from the point of origin to the point of destination. It clearly means that full length of 5 Kms is to be considered from the point of origin to the point of destination. This concept of the word 'lead' also stands confirmed from the the meaning attributed to it on page 7 in A.P. Standards Specifications which is as under:
"301.5.1.1 reads:
(I) Lead is horizontal distance between central line to the pit cross-section and the central line to the bank which is formed with the above excavated earth......."
15. The learned counsel for the contractor drew our attention to the observations made by the learned Arbitrator in his award that the contractor relied upon the tender notice Ex. C2, issued by Singareni Collieries Company Limited, Bellampally, dated 5-11-85 published in the Indian Express dated 19-11-1985, in which it was specifically stated that tenders were invited from reputed con tractors for transport of coal in self dumping lorries at the following places:
& "One way distance in Kms Approx. quantity in terms (approx.) by/month. SRP.2Atol4.1RaP-1CSP 9,000& "
16. After quoting this the learned Arbitrator came to the conclusion that it was clear from Ex. C2 that in a contract relating to transport "One way distance" is specifically mentioned. However, the mere fact that the expression "one way distance" was mentioned in the above tender notice does not give rise to a reasonable conclusion that in all cases where it was intended to mean one way distance only by uising the word 'lead', there should be a specific mention of the expression "one way distance", and that in the absence of such clarification in the tender notice, to and fro distance should invariably be attributed to the meaning of the word 'lead'. In fact, it is the converse that is true. Unless there is a specific mention that the total distance covered both ways shall be reckoned as lead for the purpose of calculation of rate, the ordinary and common sense meaning of the term 'lead' has to be adopted. We have already discussed how within the meaning,of the word 'lead', the one way distance between the point of origin to the point of distinction could only be taken into account and not the distance also covered by the return trip. A possibility cannot be ruled out that in the case of tender notice Ex. C-2, the Company which issued the tender would have passed through the same experience as the one which we are facing now, and for that reason, the clarification by inserting the expression "one way distance" would have been made. In any case, a mere expression of "one way distance" in the case of one tender notice pertaining to a different Company could not legitimately form the basis for understanding the scope of expression 'lead' occurring in all tenders which are issued day in and day out in umpteen number.
17. The learned Arbitrator has relied on the so-called admission of R.W.5, one of the tenderers who completed the said work within three months. In his examination-in-chief he stated that "one kilometre lead means one kilometre from discharge point to dumping point. One kilometre lead includes to and fro". The learned Arbitrator extracted only the second sentence and construed it as an admission. In our view, the second sentence cannot be read independently but both the sentences must be read together. If so read, the evidence of R.W.5 is not capable of being understood in the manner in which it was understood by the arbitrator. R.W.5 minces no words in saying mat 1 Km from distance (sic. discharge) point to dumping point was to be covered if the lead was 1 Km. Neither in his examination-in-chief nor in his cross-examination, it emerged as if 1 Km lead would mean only half a kilometre to be covered in the forward trip from the point of origin to the point of destination and the remaining half a kilometre on the return trip from the point of destination to the point of origin has also to be taken into consideration for calculating the rate. We have therefore no doubt in our minds with regard to the meaning of the word 'lead'. We are also of the view that it admits of one and only meaning and the Arbitrator, on a consideration of irrelevant factor, namely, tender notice of Singareni Colleries and going by a non-existent admission of R.W.5, understood the word 'lead' in a sense contrary to its plain meaning, without any factual or legal basis and, therefore, there is an error of law apparent on the face of the award. The construction of a material portion of document is a question of law, but not merely one of fact. There is no basis at all for the Arbitrator's conclusion and the legal error is therefore apparent.
18. Even on examining the oral evidence of P.W.1, the contractor, it emerges from his examination-in-chief itself that he stated "Some quantities of the material I transported within a lead of 1 Km to and fro. In this way I have transported 10,195.80 MT. Totally I have transported 47,462.29 MT. The balance of the material i.e , 37,267.49 MT was transported by me beyond 1 Km to 4 Km to and fro". The contractor further went on to say that "When I wanted to dump the material at that space, I was instructed by the R.M.O. to take the material to a place at a distance of 1 Km from the discharge point, because the respondent wanted to stock.... When I took the material in the vehicle to the spot at the distance of 1 Km...." If it was true that in cases where the lead of 1 Km was to be covered, the total distance covered by to and fro trip was to be taken into account, he would not have said that he was instructed by the R.M.O. to take the material to a place at a distance of 1 Km. He would have clearly said that he was instructed to take the material to a place at a distance of half a Kilometre, if the return trip of half a kilometre, was also to be taken into account for the purpose of 1 Km lead stipulated in the contract. At a subsequent stage in his examination-in-chief, P.W.1 clarifies that "When I said the distance 1 Km, 2 Km, 3 Km and 4 Km I meant the distance to be measured as to and fro i.e., for going and coming" But this clarification made by him does not obliterate the statement made at an earlier stage that the R.M.O. instructed him to take the material to a place at a distance of 1 Km from the discharge point. We are at a loss to understand what more clarity could be expected to come on record to say that the meaning of the word 'lead' clearly meant that it was a distance from the point of origin to the point of destination which clearly did not cover the backward trip from the point of destination back to the point of origin.
19. The next question is about the actual distance from the discharge point to the dumping point. In other words, to what extent the lead of 1 Km stipulated in the schedule of work extracted above was exceeded by the contractor, is the point to be dealt with. The learned arbitrator made a local inspection and got the measurements taken from the discharge point to the railway siding where the material is dumped and the distance was found to be 1.5 Kms. P.W.1 also admitted that the distance was 15 Kms. That means, as per the view taken by the arbitrator, if the contractor is to be paid for the return trip also, the lead for which payment is to be made would be 1.5 x 2=3 Kms. But the learned arbitrator accepted the case of the contractor (P.W.1) that the track was not straight at the relevant point of time and the bends were removed and the track was straightened by the date of inspection. Therefore the arbitrator calculated the distance from the discharge point to the railway siding at 4 Kms to and fro instead of 3 Kms. The learned Counsel for the appellant attacked this finding. Though we see considerable force, we are not inclined to interfere as there is some evidence on the basis of which the arbitrator could have acted upon. Therefore, we proceed on the basis that the maximum distance covered by the contractor was 2 Kms (one way).
20. The next question is the payment to which the contractor is entitled assuming that he traversed a distance upto 2 Kms to reach the railway siding. It is the admitted case of the contractor that he dumped 10,195.80 MT of material upto a lead of 1 Km which is within the stipulated distance. The dispute is only with regard to balance quantity of 37,267.49 MTs. which were taken beyond 1 Km and upto 2 Kms. The following is the break-up of the figures given by the contractor in Ex. P-20 statement filed by him and also in his evidence:
1. Upto a lead of 2 Km ... 6,288.56 MT
2. Upto a lead of 3 Km ... 1,868.34 MT
3. Upto a lead of 4 Km ... 29,113.59 MT 37,267.49 MT Assuming that these particulars are correct, the contractor is eligible to receive payment for only half the distances in each case, because in his calculation he had taken into account the distance covered in the return trip, which he is not entitled to claim as already discussed above. According to the Contractor's case, the amount payable would work out as follows for the additional distances:
1. Rs. 3.50 x 2 x 6,288.56 MT = Rs. 44,019-92
2. Rs. 3.50 x 3 x 1,865.34 MT = Rs. 19586-07
3. Rs. 3.50 x 4 x 29,11359 MT = Rs. 4,07590-26 Total Rs. 4,71,196-25 The Contractor is eligible to receive only half of this amount in accordance with the meaning attributed by us to the word 'lead", which works out to Rs. 2,35598-12. A sum of Rs. 35,685-30 is the undisputed amount which the Contractor is eligible to receive in respect of 10,195.80 MT for 1 Km lead, which would mean that the total amount which the Contractor is entitled to receive on this count is Rs. 2,71,283-42. The Contractor has already been paid a sum of Rs. 1,30,436-22 at the rate of Rs. 3.50/MT for the entire quantity of 47,46329 MT, which amount is required to be deducted from the total amount arrived at, which the Contractor is considered to be eligible to receive, and therefore, the net amount payable to the Contractor would work out to Rs. 1,40,847-20.
21. We are at a loss to appreciate how the learned Arbitrator in spite of the Contractor himself having advanced a claim that 10,195.80 MT was transported to a distance of 1 Km, and that the balance upto a distance of 2 Km, 3 Km and 4 Km, as per particulars shown above arrived at the rate of Rs. 1050/MT for the entire quantity of 47,463.29 MT. We are of the opinion that on the basis of the meaning which we have attributed to the word 'lead' and applying the rate of Rs.3.50/MT to different distances covered for transporting different quantities as stated above, nothing more than Rs. 1,40,847-20 could have been awarded by the learned Arbitrator. Any amount awarded in excess of the same is unwarranted and to that extent the award is liable to be altered and modified.
22.The Contractor also claims compensation of Rs. 31500/- on account of loss of profit for the quantity of the material in question directly sold by the company to another party. The dispute between the parties on this claim was not much in controversy and nothing has come to our notice as far as this claim is concerned which could be treated as either an error apparent on the face of the award or a claim which was totally inadmissible or that there was any misconduct on the part of the learned arbitrator. Therefore, the impugned award on this item does not warrant any interference by the Court.
23. The learned counsel for the appellant then contended that the arbitrator seriously erred in allowing the rate of Rs. 3.50 per 1 Km even for the return trip. He pointed that the rate of Rs. 3.50 is made up of many components such as transportation and labour charges of loading, unloading and levelling and that the labour charges could have been awarded for one way and not more. It is not necessary to deal with this contention having regard to the view we have taken that the rate stipulated is for one way only having regard to the connotation of the term 'lead'.
24. The learned counsel for the contractor has cited the judgments in Kapoor Nibkheri Co-op. Dairy Farm Society Ltd. v. Union of India, ; N. Chellappan v. Kerala S.E. Board, ; U.P. Hotels v. U.P. State Electricity Board, and State of Orissa v. Dandasi Sahu, for the proposition that an award cannot be interfered with even if there is an error of law or of fact and if two interpretations are possible, the Court while deciding an application Under Section 30 cannot find fault with the view taken by the arbitrator even if it is not a correct view. We do not think that the proposition laid down in these decisions would have any application to the facts of this case. We have come to the conclusion that the award is vitiated by error of law apparent on the face of it. A view on the construction of the contract document which it is not reasonable to take was adopted by the arbitrator on irrelevant and non-existent grounds. It is not a case of mere interpretation but is a case in which wholly untenable conclusion was reached without any material, before the arbitrator. The principles laid down in the recent judgment of the Supreme Court in State of Rajasthan v. Puri Construction Co. Ltd., 1994 (6) SCC 435 at paragraph 31 and K.P. Poulose v. State of Kerala, will apply with great force to the case we are dealing with.
25. There remains the dispute as regards interest. The contractor has claimed interest at 21 per cent per annum on the amount claimed before the learned Arbitrator from 1-4-1983 i.e., the date on which the amount, according to the contractor became due and payable by the company till the date of payment or till the date of passing the decree. The learned arbitrator has allowed interest at 18 per cent per annum on the amount awarded from 1-4-1983 till the date of decree. In Harihar Prasad v. Balmiki Prasad, the Supreme Court held that interest prior to the reference cannot be awarded unless the claim falls within the purview of the Interest Act, 1978, one of the conditions for attracting the liability to pay interest being demand of interest. The learned Counsel for the appellant is right in submitting that interest is admissible only from the date of demand i.e., 14-6-1984.
26. Hence the contractor is entitled to receive a sum of Rs. 1,40,847-20 by way of transportation charges plus a sum of Rs. 31,500/-by way of compensation for loss of profit aggregating Rs. 1,72,347-00 with interest at 18 per cent per annum on the said amount from 14-6-1984 till payment. Accordingly the award and the decree of the Court below will stand modified.
26. The C.M.A. and C.R.P. are thus partly allowed. No costs.