Madras High Court
Union Of India vs M/S.Parandhamaiah & Co on 19 October, 2010
Author: P.Jyothimani
Bench: P.Jyothimani
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 19.10.2010
CORAM:
THE HONOURABLE MR.JUSTICE P.JYOTHIMANI
O.P.No.339 of 2007
Union of India
rep. by the Chief Engineer (Navy)
Station Road
Visakhapatnam 530 004. .. Petitioner
Vs.
1. M/s.Parandhamaiah & Co.
C/o.B.Srinivas Road
Vasu Sadhan, 48-3-4
Srinagar, Visakhapatnam-530 016.
2. Shri Dinesh Sikand, DG (Pers)
Sole Arbitrator
Director General Personnel
Military Engineering Services
Engineer-in-Chief's Branch
Kashmir House, New Delhi 110 011. .. Respondents
Prayer: Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 31.10.2005 with the further amendment dated 9.11.2005 passed by the second respondent.
For Petitioner : Ms.Bhuvaneswari, ACGSC
For Respondents : Mr.B.Soundara Pandian
for 1st respondent
ORDER
The Union of India, which is the respondent before the Sole Arbitrator who has passed the award dated 31.10.2005, subsequently amended on 9.11.2005, has filed the present original petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act") to set aside the award.
2. The award even though considers 24 claims of the first respondent/applicant before the Arbitrator, the dispute raised by the petitioner in the original petition is restricted in respect of the claim Nos.3, 4, and 9. The original petition also, of course, relates to the claims made by the Union of India which were rejected by the Arbitrator, viz., relating to claim Nos.1, 2(a), 2(c) and 3.
3. For the purpose of brevity, the petitioner is referred to as "the Employer" and the first respondent is referred to as "the Contractor".
4.1. The contractor entered into a contract with the Chief Engineer, Madras Zone, Island Grounds on 6.3.1995 for construction of 'A' Type School building and staff quarters with connected external services for Kendriya Vidyalaya at INS Kattabomman, Vijayanarayanam, Tirunelveli. The Chief Engineer, Madras Zone has accepted the contract on 6.3.1995 for a sum of ` 1,57,48,466.55 and as per the work order No.1, the date of commencement and completion of the first phase was between 27.3.1995 and 26.6.1995, the second phase was to be completed by 25.3.1996 and the balance work was to be completed by 26.9.1996. The main award was passed on 31.10.2005, which came to be amended on 9.11.2005.
4.2. The contract was a lumpsum contract and the work commenced on 27.3.1995. It is the case of the employer that the contractor has not completed the work in spite of the extension of time granted up to 30.9.1997. Originally, the contract was cancelled by the employer on 29.9.1997, with effect from 15.10.1997 and that cancellation was revoked on 14.10.1997 and ultimately, the contract was cancelled on 15.2.1999, with effect from 20.2.1999.
4.3. The contractor has raised various grounds as defence attributing delay in approval by the employer; not giving decision in time; non issue of stores; non payment of RAR and ultimately, according to the contractor, it was the employer who has prevented to complete the work.
5. Claim No.1 made by the contractor relates to the extra cost due to additional labour wages. The amount claimed was ` 16 Lakhs and the same was subsequently revised to ` 15,20,900/-. The said claim was rejected.
6. Again, Claim No.2 relates to extra cost due to variation of provisional items to an extent of ` 7,38,000/-, which was revised as ` 2,52,876.20 and that claim was also rejected.
CLAIM No.(3) 7.1. Claim No.3, which is one of the subject matter of this petition, is relating to the claim of the contractor for extra payment due to procurement of sand from place other than the place mentioned in the contract and in that regard, the contractor made a claim of ` 9,68,000/-, which was revised as ` 9,50,000/-.
7.2. As per the terms of contract, the procurement of sand shall be from Chittoor River. However, the District Collector has banned lifting of sand from Chittoor River. When that was informed to the employer by the contractor, the employer took up the matter with the District Collector for permission, since it is a top priority defence work. There was no reply from the Collector up to July, 1995. In the absence of any such approval granted by the Collector, the contractor informed the employer that lifting of sand from Chittoor River is not possible and the nearest source of sand was Chengalpatnam, stated to be 50 Kms. away from the site of work and that was approved by the department after testing by the Government laboratory and accordingly, sand was subsequently procured from the said source and it was in that regard, the extra cost had to be incurred by the contractor, based on which the claim was made.
7.3. However that claim was not accepted by the employer, on the basis that as per the contract the procurement must be only from Chittoor River, which is only 8 Kms away, and if the contractor procures sand from any other place, it shall be at his cost and therefore, the contractual obligation has to be followed.
7.4. The Arbitrator has found that as per the terms of the contract, the procurement by the contractor shall be from Chittoor River, which is 8 Kms. away, or from any other river bed sand complying to contract specifications as approved by the Garrison Engineer and that the contractor has not given any details or material evidence regarding the amount actually spent by him and that the calculation given is inflated. The Arbitrator made a simple calculation as follows:
No. of lorries involved 3800/6=633.33 Say 600 Since no documentary evidence provided I take the difference in lead =20 Km Keeping Rs.8/- per Km for =20x8x600 Lorry 96,000/-
and partly allowed the claim of the contractor to the extent of ` 96,000/-, as against the claim of ` 9,50,000/-.
7.5. Even though it is the case of the employer that as per the terms of contract, which is a lumpsum contract, to find out the sand is the look out of the contractor, the fact remains, as admitted by the employer, that the Collector, Chittoor has refused permission to take sand and in spite of the efforts taken by the employer to permit the contractor to take sand, no such permission was granted and therefore, as a matter of necessity, the contractor had to go to a far away place and the quality of sand in respect of that area was approved by the department and therefore, the Arbitrator considering the above said circumstances has partly awarded only a small amount of ` 96,000/- in favour of the contractor by giving reasons and therefore, I am of the considered view, that the said part of the award in respect of Claim No.3 of the contract does not require any interference by this Court under Section 34(2) of the Act.
CLAIM No.(4) 8.1. Claim No.4 of the contractor relates to the additional cost incurred due to extended period of completion, in respect of which originally the contractor has made a claim of ` 4,20,000/-, which was revised to ` 10,80,000/-.
8.2. It was the case of the contractor that the original period of contract was 18 months and it was due to the delay on the part of the employer, it was extended for 48 months and it was in that regard additional expenses were incurred by the contractor due to loss of overheads and profit, on account of idle labour and machinery and increased cost of material and labour.
8.3. On the other hand, it was the case of the employer that the contractor was unable to achieve the required progress of work and even after 48 months, the work done was only 69%. The extension of time was granted only as requested by the contractor due to the reasons adduced by him, viz., delay in mobilization of skilled labour, delay in procurement of approved river sand, increase in height of compound wall, delay in excavation due to rocky strata in foundation, delay in redesign of foundation, and delay due to paucity of funds, and therefore, the same was on account of reasons which were beyond the control of both the parties.
8.4. Even though the claim of the contractor was in respect of One Site Engineer, Four Supervisors, Two Clerks and Four Helpers/Chowkidars, during the enquiry, the Arbitrator found that it was the case of the employer that the staff was not deployed by the contractor and on verifying from the diary, it was found that only the Engineer-in-Chief has signed the work diary till 19.12.1998 and thus came to a conclusion that neither party can be held responsible for the delay. But taking note of the admission of the employer that there was a delay due to the redesign of foundation and due to paucity of funds, which is attributable to them, and also on referring to the work diary from which it was noticed that the contractor has not employed enough work force, the Arbitrator has granted an amount of ` 60,000/- as against the claim of ` 10,80,000/-. In fact, the amount of ` 60,000/- has been arrived at by the Arbitrator technically as follows:
"18.5. Extension of time was granted to contractor upto 30 Sept 97 Original date of completion was 26 Sept 1996. Therefore, for 12 Months amount paid to site Engineer was 12 x 10 = 1,20,000.00. I put 50% burden an Union of India i.e. 1,20,000 x = = 60,000.00."
which, in my considered opinion, does not require any interference by this Court.
CLAIM No.(9) 9.1. The next claim of the contractor, viz., claim No.9, relates to loss due to delay in payment of RAR's. While the contractor has originally claimed in that regard an amount of ` 3,80,000/-, it was revised to ` 1,01,427.75.
9.2. The case of the contractor was that the RARs were not submitted due to the non availability of funds with the employer and the contractor was directed to approach the Kendriya Vidyalaya Sangathan to find out the fund position and as there was no response, thereafter, the contractor has informed the employer that he would proceed with the work in a restricted manner and it was only thereafter, on 21.11.1996, the employer has expressed that the funds are available with the department, but the lack of fund continued and interim bills claimed were not paid and therefore, the contractor claimed 18% interest for a period of three months for the denied payment. It is claimed that based on Sections 53 and 54 of the Contract Act, it was the responsibility of the employer to make the payment at the intervals specified in the contract.
9.3. On the other hand, the contention of the employer is that the payment of RAR forms part of the contract and such payment has to be made at an interval not less than 30 days. It was the case of the employer that the contractor has to be paid for the work done by him in terms of the contract provision, but at the same time the site executive has to ensure that there is no surrender of funds to the KV authorities for non payment to the contractor. It was also stated that the contractor was very slow and behind the schedule and there was no restriction at payment to the contractor, except in respect of the VI RAR and that was also because of the poor planning of the contractor.
9.4. It was in those circumstances the Arbitrator has found that both the parties are at fault and arrived at an amount of ` 21,000/- in the following manner:
"Amount restrictions = (1.5+4.5+1) = 7 Lakhs Considering interest at 12% for a period of 3 months as suggested by claimant himself.
=7,00,000.00x12x3 = 21,000.00"
100x12 and awarded the part amount of ` 21,000/- to the contractor as against the claim of ` 1,01,427.75 and inasmuch as the Arbitrator has decided on merits, by giving reasons, there is absolutely no ground for this Court to interfere with the same.
10. Now, let us deal with the claims made by the Union of India before the Arbitrator, namely Claim Nos.1, 2(a), 2(c) and 3, which were rejected by the Arbitrator.
CLAIM No.(1) of the Employer 11.1. It is seen that the employer in claim No.1 has made a claim for extra amount incurred by the Government for completion of incomplete work, which was originally made at ` 87,69,870/-, which was revised to ` 58,56,800.39. The contract was cancelled as per condition No.54 of the General Conditions of Contract due to the default of the contractor and the balance work was done through other agency at the risk and cost of the contractor and it was in that regard the extra amount incurred by the employer was stated to be ` 58,56,800.39.
11.2. The Arbitrator, by referring to Claim No.16 of the contractor, which relates to the claim of the contractor to the extent of ` 34,99,780.76 on the basis of the payment due to the error in final bill, has come to a conclusion that the cancellation of the contract cannot be attributable to any of the parties to contract and therefore, the claim of the employer was rejected in respect of claim No.(1).
11.3. On a reference to the finding by the Arbitrator as to who is responsible for the cancellation of the contract, it is seen that the Arbitrator has considered various grounds raised by the contractor for the delay in his statement of claims, in which the contractor has specified the lack of availability of funds almost from the date of beginning of the work, as it is reflected in various exhibits. Even though the employer has not accepted the allegation of lack of availability of funds, the Arbitrator has found that the said claim has not been refuted and it was implied in the restriction of the amount in VI RAR dated 12.8.1996 and the letters of Garrison Engineer, Tirunelveli dated 21.11.1996 and the Assistant Garrison Engineer dated 18.12.1996, marked as Exs.C81 and C83, wherein the officers of the department have stated that the funds were available only then and therefore, the Arbitrator has connoted that earlier sufficient funds were not available. The Arbitrator has also found that in respect of Schedule 'B' stores, the contractor has been making repeated claims, as shown in various exhibits, and that has not been refuted by the employer and it was in those circumstances the contractor was forced to execute the work in a restricted manner.
11.4. The Arbitrator has also referred to the letter of Garrison Engineer, INS Kattabomman dated 10.9.1996 stating that the slow work was due to lack of funds available from KV Rangatham. The Arbitrator has also referred to the various extensions of time granted to the contractor up to 30.9.1997 with specific reference to the letter of the Garrison Engineer, Tirunelveli dated 23.12.1996, marked as Ex.C-107, wherein the department has specifically accepted that the work has suffered due to non availability of sufficient funds during the contract period, even though it is stated that even subsequently the contractor has not improved his work.
11.5. Having found that the contract is reciprocal promise and there has been a breach by both the sides and that after granting extension, ultimately, by letter dated 29.9.1997, the contract was cancelled with effect from 15.10.1997 and that letter came to be cancelled by another letter dated 15.10.1997 and thereafter, no further extension of time was granted to the contractor, the Arbitrator observed that it was in those circumstances the contractor could not proceed with the work due to non availability of funds. It was in those circumstances the claim of the contractor was also not accepted by the Arbitrator and applying the said analogy, claim No.(1) of the employer was also rejected.
11.6. By applying the reasons given by the Arbitrator in this regard, I do not think that any of the grounds mentioned under Section 34(2) of the Act are available to the employer to enable this Court to interfere with the said part of the award rejecting its claim No.(1).
CLAIM No.2(a) of the Employer 12.1. The said claim of the employer relates to the recovery due to non return of Government stores.
12.2. It is the case of the employer that the cement and various steel sections were issued to the contractor under Schedule 'B' for incorporation in the work. It is the complaint that out of the total quantity issued, certain quantity was neither incorporated in the work, nor returned to the department. It is stated that under the communication dated 23.10.2002 (Ex.7) by the AGE(I), Tirunelveli, the contractor was asked to return the surplus stores, but the same was not complied with. As per condition No.10 of the General Conditions of Contract, the Government is entitled to recover the cost of such unreturned surplus materials at double the prevailing market rate and therefore, the employer has claimed an amount of ` 16,29,008.30.
12.3. The contractor while admitting that as per the letter dated 23.10.2002 the employer has asked him to return the schedule 'B' stores, by relying upon condition No.67(g) of the contract has stated that the period of recovery of any amount shall not be beyond two years; that even as per the Limitation Act, the right to recover is limited for three years; and that the dispute does not exist as the same is barred by limitation.
12.4. The Arbitrator found that as per Clause 10 of the General Conditions of Contract, the employer should have issued notice to the contractor for recovery towards non return of stores, but however such notice has been issued on 23.10.2002 (Ex.7), which is after three years from the date of cancellation. Therefore, the Arbitrator found that imposing punitive rate of double the market value is not justified, however holding that the value of Schedule 'B' stores at the market rate should be allowed and accordingly, the Arbitrator has taken the market rate as given in Appendix 'B' of Statement of Case of the employer and worked out the amount to be recovered by the employer by awarding a sum of ` 4,05,473.61, as against the claim of the employer to the extent of ` 16,29,008.30.
12.5. The construction of the clause in the agreement, viz., Condition No.67 of the General Conditions of Contract which contemplates such recovery only within a period of two years and also the application of the general principles of the Limitation Act which gives three years time cannot be said to be beyond the scope of the arbitral award. Moreover, in the absence of anything to show that the said finding is beyond the terms of reference; that while giving such finding the employer was not given any opportunity; and that there is any misconduct or malafide attributable, it is not possible to accept the contention of the learned counsel for the employer to interfere with the award in respect thereof.
CLAIM No.2(c) of the Employer 13.1. The next claim of the employer under Claim No.2(c) relates to over payment on account of engagement of chowkidar to safeguard government stores lying at site. The employer has claimed an amount of ` 1,04,600/- on the ground that the stores left at site by the contractor were assessed by the department and after cancellation of the contract, the said materials left at site are to be kept safely and while engaging a Chowkidar for three shifts a day, for a period of 18 months, the department has spent ` 1,04,600/-.
13.2. It is, on the other hand, the case of the contractor that when the contract was cancelled and the site and stores were handed over at the risk of the contractor, it becomes the property of the employer and the cost of safeguarding the same thereafter cannot be mulcted on the contractor.
13.3. Finding that the site wherein the materials were lying during the time of contract and since the cancellation belongs to the employer, the Arbitrator, in my view, correctly has found that the cost of safeguarding the same cannot be imposed on the contractor and accordingly, the rejection of the said claim by the Arbitrator cannot be said to be against Section 34(2) of the Act.
13.4. The clause which is mentioned, namely Clause 10(c) of the contract reads as follows:
"Clause 10(c): Material required for the works, whether brought by the contractor supplied by government shall be stored by the contractor only at places approved by the Engineer-in-charge. Storage and safe custody of material shall be at the risk and the responsibility of the contractor"
and that cannot be construed to mean that for storing the same, the contractor should be made responsible. It means that after the contract is cancelled, till the goods are surrendered by the contractor, until the clearing of goods is effected by the Government, during that time if any damage happens to such goods, the risk and responsibility will be on the contractor, which includes any loss that may be caused in respect of either resale or other activity. Storage and safe custody relates to only the possible damage that may be caused to the materials during that time. In any event, there is absolutely nothing to construe in that regard that the award of the Arbitrator is either illegal or perverse.
CLAIM No.(3) of the Employer 14.1. The last claim of the employer, viz.,claim No.(3), relates to compensation for delay in completion of work and the amount claimed is ` 7,62,438.50.
14.2. The said claim was made on the basis that the time is essence of contract and non completion of work by the contractor in time is liable to be compensated as per condition No.50 of the General Conditions of Contract.
14.3. On the other hand, it has been the case of the contractor that the time has never been considered as an essence, since the employer itself has been extending the time and even after cancelling the work, it was revoked. It was the case of the contractor that he was not allowed to adhere to the planned program due to various reasons, viz., non payment of funds and non availability of materials, which are attributable to the department.
14.4. The Arbitrator, having found that no one of the parties can be exclusively made responsible for such delay, has rejected the claim and in my considered view, the same does not require any interference by this Court while exercising the jurisdiction under Section 34(2) of the Act.
15. In fine, the arbitral award cannot be said to be either illegal or perverse, so as to enable this Court to interfere under any of the conditions contemplated under Section 34(2) of the Act. Merely because there has been an improper appreciation of evidence here and there by the Arbitrator or even if there is any miscalculation of the amount arrived at in quantifying, it is not for this Court to interfere while exercising the jurisdiction under Section 34(2) of the Act.
In such view of the matter, the original petition stands dismissed and the award of the Arbitrator stands confirmed. No costs.
sasi