Messrs Raymus Porta Buildings Limited vs Union of India (UOI)

V.K. Sharma, J.—In this appeal, the judgment of a learned Single Judge of this Court, dated 30-03-2007, in OMP(M) No. 103 of 2001, titled Union of India v. Raymus Porta Buildings Ltd., being objections u/s 34 of the Arbitration and Conciliation Act, 1996 (in short ''the Act''), setting aside the award of the arbitrator with respect to claims No. 1 and 2 of the appellant herein, which was respondent in the said Court and counter-claim No. 1 of the respondent herein being the petitioner, is under challenge at the instance of the appellant, M/s Raymus Porta Buildings Limited.

The facts giving rise to filing of the objections-petition u/s 34 of the Act, as pleaded by the parties and noticed by the learned Single Judge, are as follows.

The Executive Engineer, Shimla, Central Division No. 1, C.P.W.D, invited tenders for ''Construction of prefab accommodation including internal sanitary installations, water-supply, drainage, development works and internal electrical works for special frontier force at Rupa Valley, Distrt. Kinnaur (H.P.)''. The appellant was one of the tenderers. The rates quoted by it and another tenderer namely Om Parkash, Government Contractor and Engineers, were found to be lower than the rates quoted by other tenderers. One of the conditions of tender being Condition No. 3 of the Special Conditions was that in case the consumption of quantity of steel was found to be less than the quantity indicated in the work schedule, recovery @ Rs. 16000/-, per ton, would be made from the contractor. However, when the tenders were opened on 1.10.1994, it was found that the appellant and the said Om Parkash, Govt. Contractor and Engineers, had not specified the quantity of steel to be used during construction of the aforesaid pre-fabricated structures. Accordingly, they were called upon to specify the quantity of steel to be used by them for various items of work. As such, they vide letters dated 25.10.1994, specified such quantities in respect of each item of work. Thereafter negotiations were held with the appellant and said Om Parkash, Govt. Contractor and Engineers, whose rates were found to be lower than those quoted by others. Some correspondence was also exchanged with regard to those negotiations, on the basis of which both the tenders were evaluated and the tender submitted by the appellant was found to be the lowest. Consequently, the work was awarded in its favour vide letter dated 22.3.1995.

On completion of the work the appellant submitted final bill. It was called upon to intimate the quantity of steel used for each item of work to enable the Executive Engineer to verify whether the quantity used was as per agreement. It submitted details of the quantity of steel used for each item. However, the quantity used was found to be lower than the quantity which the appellant had offered to use vide letter dated 25.10.1994. Accordingly, Special Condition No. 3, referred to here-in-above was invoked and a sum of Rs. 8,12,266/- was worked out as the amount recoverable from the appellant. It was in such situation that the final bill submitted by the appellant was not cleared, giving rise to the dispute between the parties.

It was against the above backdrop that the matter was referred to the arbitrator in terms of the agreement between the parties. The appellant claimed that a sum of Rs. 5,99,759.28 was due to it. Later on, the claim was raised to Rs. 6,00,838.08 on account of the value of bolts. After the claim was preferred, the Executive Engineer released a sum of Rs. 1,05,902/-. So, the appellant reduced the amount of claim to Rs. 4,94,936/-. It also claimed interest @ 24% per annum from the date of completion of work to the date of payment of the amount. A sum of Rs. 2,88,084/- was also claimed on account of extra work. Another sum of Rs. 5,00,000/- was claimed on account of money withheld on the plea that there were some defects in the work.

The respondent, Union of India, claimed that a sum of Rs. 8,12,266/- was recoverable from the appellant on account of use of lesser quantity of steel in terms of Condition No. 3 of the Special Conditions as aforesaid. Some other counter-claims were also set up.

The matter was adjudicated by the arbitrator, who made award dated 30.5.2001, holding that the appellant was entitled to a sum of Rs. 4,11,932.28 on account of balance payment under claim No. 1 along with interest @ 14% per annum from 3.12.1996, the date of invocation of the arbitration clause being clause No. 25 and future interest @ 18% per annum. In addition thereto, it was also held entitled to a sum of Rs. 36,018.16 on account of extra work carried out by it. As regards claim of Rs. 5,00,000/- for withholding the amount for the alleged defects in the work, the arbitrator awarded Rs. 3,76,832/-. Counter claims of the respondent, Union of India, were rejected.

The respondent, Union of India, felt aggrieved by the award, particularly, rejection of its counter-claim for recovery on account of consumption of lesser quantity of steel and allowing of the claim of the appellant for the balance amount under claim No. 1, as also the award of interest on the said amount. It was alleged that the award was not in consonance with the provisions of Section 31 of the Act and was also in violation of the provisions of Sections 16 and 20 thereof. It was further alleged that the arbitrator had travelled beyond the scope of the agreement. It was also alleged that the appellant was not a Private Limited Company, hence the dispute could not have been referred by it to the arbitrator.

The objections-petition was contested by the appellant on preliminary objection that the objections filed by the respondent, Union of India, do not fall within the scope and ambit of Section 34 of the Act. On merits, challenge was mainly on the grounds that the work awarded to it was completed on 12.12.1995 and completion certificate was issued on 25.7.1998, without any protest, demur or reservation. Whereas, the claim set up by the appellant was genuine and justified, the counter-claims were frivolous and devoid of any substance or merit and as such were rightly rejected by the arbitrator. The recovery of Rs, 8,12,266/- on the basis of letter dated 25.10.1994, was stated to be illegal on the ground that the said letter did not form part of the agreement or even award letter and the finding returned by the arbitrator to this effect is unassailable.

A rejoinder refuting the stand taken by the appellant and reiterating the averments set up in the objections-petition, was filed by the respondent, Union of India.

The following issues were settled by the learned Single Judge:

Whether the impugned award is not in consonance with the provisions of Section 31 of the Arbitration Act, if so, its effect? OPP.

Whether the impugned award is in violation of the provisions of Indian Contract Act with special reference to Sections 16 and 20 thereof, if so, its effect? OPP.

Whether the Arbitrator has gone beyond the scope of agreement, if so, how and its effect? OPP.

Whether the objections filed by the petitioner are maintainable u/s 34 of the Arbitration and Conciliation Act, 1996? OPP

Whether the Contractor is not a private Limited Company, as alleged, if so, its effect? OPP.

Relief.

After the parties led evidence by way of affidavits, the objections-petition was disposed of by the learned Single Judge in the above terms by holding issue Nos. 1, 2 and 5 in negative and issue Nos. 3 and 4 in affirmative.

We have heard the learned Counsel for the appellant, learned Asstt. Solicitor General for the respondent, Union of India and perused the records.

The controversy between the parties lies within a narrow compass. To be precise, it is whether the letter dated 25 October, 1994, along with ''details of steel requirements/per ton sq.m.'' (Ex.C-11), which have also been brought on record as enclosures to the letter dated 27.10.1994 (Annexure R-3), addressed to Shri S.K. Chawla, Chief Engineer (NZ), Central P.W.D, R.K. Puram, New Delhi-66, by the Executive Engineer, Shimla Central Division, Central P.W.D, Shimla, forms part and parcel of the contract agreement.

Whereas, according to the respondent, Union of India, the answer to this query is in affirmative, the stand taken by the appellant is to the contrary. Likewise the learned Single Judge has resolved this controversy by giving a finding in affirmative, repelling the view taken by the arbitrator to the contrary.

In order to set the controversy at rest, it shall be appropriate to notice certain admitted facts. Insofar as inviting of tenders, submission of bids by the appellant, the said Om Parkash, Govt. Contractor and Engineers and other tenderers, those submitted by the first two being lower than the rates quoted by other tenderers are concerned, there is no dispute between the parties. It is also not in dispute that one of the conditions of tender being condition No. 3 of the Special Conditions was that in case the consumption of quantity of steel was found to be less than the quantity indicated in the work schedule, recovery @ Rs. 16,000/-, per ton was to be made from the contractor. The further admitted facts are that when the tenders were opened on 1.10.1994, it was found that the appellant and the said Om Parkash, Govt. Contractor and Engineers, had not specified the quantity of steel to be used during construction of the aforesaid pre-fabricated structures. Accordingly, they were called upon to specify the quantity of steel to be used by them for various items of work. As such, they vide letters dated 25.10.1994, specified such quantities in respect of each item of work. As noticed above, the letter dated 25.10.1994, along with details submitted by the appellant is Annexure C-11, which along with a like letter-cum-details dated 25.10.1994, submitted by the said Om Psarkash, Govt. Contractor and Engineers, was forwarded by the Executive Engineer, Shimla Central Division, Central P.W.D, Shimla, to Shri S.K.. Chawla, Chief Engineer (NZ), Central P.W.D, R.K. Puram, New Delhi-66, vide letter dated 27.10.1994 (Annexure R-3). It was only thereafter that the negotiations were held with the appellant and said Om Parkash, Govt. Contractor and Engineers, whose rates were found to be lower than those quoted by others, on the basis of which both the tenders were evaluated and the tender submitted by the appellant was found to be the lowest. Consequently, the work was awarded to the appellant vide letter dated 22.3.1995, Ex.C-6. In such circumstances, it cannot be said by any stretch of imagination that the letter along with details dated 25 October, 1994, Ex.C-11, which was a condition precedent for conclusion and finalization of the contract agreement between the parties, did not form part of the said agreement. In such situation, the appellant cannot wriggle out of the offer held out by him to the respondent by way of the letter along with details dated 25 October, 1994, Ex.C11, which on acceptance by the latter led to execution of the agreement between the parties.

The learned Counsel for the appellant submitted by relying upon two judgments rendered by the Hon''ble Supreme Court in Ravindra Kumar Gupta and Company Vs. Union of India (UOI), and State of Rajasthan Vs. Nav Bharat Construction Company, that re-appreciation of evidence does not fall within the limited jurisdiction available to the Court for interference in the award of the arbitrator. However, the submission does not survive for consideration in view of the following observations made by the learned Single Judge at page 8-9 of the impugned judgment, dated 30.03.2007:

Admittedly, the negotiations were held after the letter Ex. C-11 dated 25.10.1994 was submitted by the respondent. This letter and the detail attached therewith having provided for the information found missing in the tender, which was required to be supplied to meet the requirement of Special Condition No. 3, automatically became part of the tender. The view taken by the Arbitrator that this letter and the detail submitted therewith having not been referred to in the letter of award of work cannot be treated as part of the tender/agreement, is perverse. The Arbitrator having not treated this letter and the detail submitted therewith as part of the tender/agreement, has acted illegally and beyond the scope of the agreement and thus his award is against the public policy of India within the meaning of Section 34(1)(b)(ii) of the Arbitration and Conciliation Act, 1996. The Hon''ble Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., has held that an award which is contrary to the terms of agreement is patently illegal and such an illegality would fall within the mischief of being in conflict with the public policy of India and hence it will be liable to be set-aside, u/s 34.

The irresistible conclusion that emerges from the above discussion is that there is no scope for any interference with the impugned judgment dated 30.03.2007 and accordingly the appeal is dismissed being without any merit.