B.D. Sharma Firm vs Western Coalfields Limited

Leave granted. Heard.

The appellant made several claims against the respondent and they were referred to arbitration. The Arbitrator made an award dated 12.8.1996 and granted the following amounts:

(a)

Infructuous overheads

Rs.5,85,960/-

(b)

Loss of profits

Rs. 43,088/-

(c)

Loss due to idellabour

Rs. 50,000/-

(d)

Escalation

Withdrawn

(e)

Interest on delayed payments

Rs. 27,190/-(at 12% p.a.)

(f)

Refund of security deposit

Rs. 1,00,000/-

(g)

Interest

Not awarded

(h)

Payment of final bill - Direction issued to record final measurement and then make payment in accordance with the agreement rates for quantities not covered by earlier bills.

(i)

Pendentelite interest and future interest

- 12%p.a. pendentelite [15%p.a. in case of delay beyond 30 days]

The respondent challenged the said award u/s 30 and 33 of Arbitration Act, 1940. The Civil Court, by judgment dated 10.4.2000, rejected the objections and made the award, a rule of the Court. Feeling aggrieved, the respondent filed an appeal before the High Court. The High Court allowed the appeal in part by judgment dated 28.2.2007. It set aside the award in regard to claims (a), (b), (c), (e), (g) and (i) on the ground that the arbitrator had travelled beyond the express terms of the contract and granted claims which were expressly barred by the provisions of the agreement. It, however, upheld the award in regard to claims (f) and (h). The said judgment of the High Court is challenged in these appeals by special leave.

The High Court has 'interfered with the award in regard to items (a), (b) & (c) on the assumption that the same were coatrary to Clause 3.2.0 which reads thus:-

3.2.0. If there be any dislocation in the issue of cement beyond the control of Western Coal Fields Limited, the Contractor/ Agency shall not have any claim whatsoever for the same, and in such an eventuality, extension of time of completion only to a suitable extent will be considered.'

The High Court, relied upon the decision of this Court in Ramnath International Construction Pvt. Ltd. Vs. Union of India (UOI) and Another, , wherein the Court held that where the contract provided that if in cases of delays attributable to employer, the contractor will be entitled for only extenision of time and if the contractor had sought and obtained extension of time, he would not be entitled to claim any compensation on the ground of such delay.

The Arbitral awards can be interfered only on limited grounds. The Court does not sit in appeal over the findings of the Arbitrator. It will interfere with an award if there is an error apparent on the face of the award or if there are apparent inconsistencies in the award or if the Arbitrator has misconducted himself or the proceedings. If clause 3.2.0 is to be invoked to deny a claim of the contractor, there should be a clear finding (a) that the delay was only on account of issue of cement, and (b) such delay in issue of cement was for reasons beyond the control of the respondent (Western Coal Fields Limited). If the delay was on account of several grounds and if there is no pleading or proof by the respondent that the dislocation in issue of cement was for reason beyond its control, clause 3.2.0 will not operate. In this case, the award clearly showed that the delay alleged was not only the delay in supply of cement but also on several other grounds one of which was failure to clear the appellant's monthly bills in time as stipulated in the contract and such delay went upto 780 days as against the stipulated one month period. There was also no specific claim nor finding that the delay in supply of cement was due to circumstances beyond the control of the respondent.

Having regard to the limited scope of interference in regard to arbitral award, we are of the view the High Court was not justified in interfering with the award in regard to claims (a), (b) and (c).

It may also be noted that as long back as 21.5.1999, the respondent had suggested that if the appellant's claim for interest is given up, the respondent will consider and agree for the award in regard to other claims, by way of out of court settlement. The appellant has agreed to give up the interest if the other claims under the award were paid.

In view of the above, these appeals are allowed in part. The judgment of the High Court, in so far as claims (a), (b) and (c) is reversed. The judgment of the High Court in regard to claims (f) and (h) is upheld. In so far as the award of interest under claims (g) and (i), they are set aside as given up, as stated in para 7 above. Claim (d) was given up even before the Arbitrator.

If the amount due as per the award is not paid or deposited in the trial Court within three months from today, the appellant will be entitled to interest on the amount outstanding at the rate of 12% per annum from the date of the award till the date of payment. Parties to bear their respective costs.