State of H.P. and Another vs Mohan Singh Shandil

Surjit Singh, J.—By this judgment, we are disposing of two appeals, i.e. Arbitration Appeals No. 5 and 6 of 2006, because both of them not only arise out of the same order of the learned Single Judge, but also raise similar questions.

We may first notice the relevant facts. Respondent, Mohan Singh Shandil, had been awarded two works by separate contracts for construction of Type-VI residences, by the State of Himachal Pradesh, through Executive Engineer, Shimla Division No. 2, HP PWD, Shimla. Clause 12 of the agreement in both the cases provided for payment of items of work, which were not covered by the agreement, but which the Engineer-in- Charge might require the contractor to execute. Clause 12 in both the contracts is verbatim. The same is reproduced below for ready reference:

CLAUSE 12.-The Engineer-in-Charge shall have power to make any alterations in, omissions from additions to or substitutions for, the original specifications, drawings, designs and instructions, that may appear to him to be necessary during the progress of the work, and the contractor shall carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge, and such alterations, omissions, additions, or substitutions shall not invalidate the contract and any altered, additional or substituted work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respect on which he agree to do the main work. The time for the completion of the work shall be extended in the proportion that the altered, additional or substituted work bears to the original contract work, and the certificate of the Engineer-incharge shall be conclusive as to such proportion. Over and above this, a further period to the extent of 25% of the time so extended shall be allowed to the contractor. The rates for such additional, altered or substituted works under this clause shall be worked out in accordance with the following provisions in their respective order:

(i) If the rates for the additional, altered or substituted work are specified in the contract for the work, the contractor is bound to carry out the additional, altered or substituted work at the same rates, as are specified in the contract for the work.

(ii) If the rates for the additional, altered or substituted work are not specifically provided in the contract for the work, the rates will be derived from the rates for a similar class of work as are specified in the contract for the work.

(iii) If the rates altered, additional or substituted work includes any work for which no rate is specified in the contract for the work and cannot be derived from the similar class of work in the contract, then such work shall be carried out at the rates entered in Himachal Pradesh Schedule of rate 1987 of tender minus/plus percentage which the total tendered amount bears to the estimated cost of the entire work put tender.

(iv) If the rates for the altered, additional or substituted work cannot be determined in the manner specified in clauses (i) to (iii) above, then the rates for such work shall be worked out on the basis of the schedule of rates of the district, specified above minus/plus the percentage which the total tendered amount bears to estimated cost of the entire work put to tender. Provided always that if the rate for a particular part/parts of the item is not in the schedule of rates, the rate for such part or parts will be determined by the Engineer-in-charge on the basis of the prevailing market rates when the work was done.

(v) If the rates for the altered, additional or substituted work cannot be determined in the manner specified in Sub-clause (i) to (iv) above, then the contractor shall, within 7 days of the date of receipt of order to carry out the work, inform the Engineerin- Charge of rate which it is his intention to charge for such class of work, supported by analysis of the rate/rates claimed, and the Engineer-in-Charge shall determine the rate or rates on the basis of prevailing market rates, and pay the contractor accordingly. However, the Engineer-in-charge, by notice in writing, will be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable. But under no circumstances, the contractor shall suspend the work on plea of non-settlement of rates of items falling under this clause.

(vi) Except in case of items relating to foundations, provisions contained in Sub-clause (i) to (v) above shall not apply to contract or substituted items as individually exceed the percentage set out in the tender documents (referred to herein below as "deviation limit") subject to the following restrictions:

(a) The deviation limit referred to above is the net effect (algebrical sum) of all additions and deductions ordered.

(b) In no case shall the addition/deductions (arithmetical sum) exceed twice the deviation limit.

(c) The deviations ordered on items of any individual trade included in the contract shall not exceed plus/minus 50% of the value of that trade in the contract as whole or half the deviation limit, whichever less.

(d) The value of additions of items of any individual trade not already included in the contract shall not exceed 10% of the deviation limit.

Admittedly, in this case the additional items of work were not covered by sub clauses (i) to (iv), but by Clause (v). Petitioner quoted his rates to the Engineer-in- Charge, in terms of sub Clause (v) of Clause 12, as reproduced hereinabove. Engineer-in-Charge accepted the rates, quoted by the contractor (respondent) with some reduction and required the contractor to execute those items of work. However, after the execution of work, the respondent-contractor was not paid, as per rates quoted by him, and accepted with some changes by the Engineer-in- Charge. He was paid at much lower rates. Respondentcontractor then invoked the Arbitration Clause of the contract. Reference was made to the Arbitrator. The Arbitrator allowed the rates, as quoted by the respondentcontractor and accepted by the Engineer-in-Charge with some changes. The Arbitrator also allowed the claim of respondent-contractor for compensation on account of prolongation.

Appellants filed objections u/s 34 of the Arbitration and Conciliation Act in this Court. They pleaded that rates approved by the Engineer-in-charge were not paid, but were subject to approval by the Chief Engineer. Learned Single Judge has dismissed the objections. View taken by learned Single Judge is that Clause 12(v) of the contract nowhere provides for the approval of the rates, determined by the Engineer-in6 Charge, by some Engineer superior to him and, therefore, the rates quoted by the respondent-contractor, and as accepted by the Engineer-in-Charge with some changes, were payable to respondent-contractor. Learned Single Judge took support from an earlier judgment of this Court (by a learned Single Judge), in Executive Engineer, H.P. PWD v. Rajesh Thakur 2004 (2) Shim.L.C. 42.

Appellants are aggrieved by the judgment of the learned Single Judge. It has been urged on their behalf that administrative instructions, issued by the Government, provide for approval of rates, determined by the Engineerin- Charge by the Chief Engineer and in this case also, Chief Engineer was approached by the Engineer-in-Charge, but he did not approve the rates, as determined by the Engineer-in-Charge, and reduced them and consequently, the contractor-respondent was paid at the reduced rates. Also, it is contended on behalf of the appellants that nothing could have been awarded to the respondent-contractor on account of prolongation of work period, because the contract did not provide for payment of anything on this count.

We have heard the learned Counsel for the parties and perused the record.

From a perusal of the order of learned Single Judge, it appears that award of compensation on account of prolongation of work period, by the Arbitrator, was not assailed before the learned Single Judge, during the hearing of the matter. Therefore, the appellants cannot be allowed to agitate this point in the present appeal.

As regards the award, pertaining to extra items in accordance with rates, determined by the Engineer-in- Charge, we are of the considered view that the learned Single Judge has rightly concluded that the agreement having not provided for the approval of the rates, settled by the Engineer-in-Charge, by Chief Engineer or any other superior authority, the rates settled by Engineer-in-Charge were to be applied for working out the charges payable to the respondent-contractor for the extra items of work, executed by him. It is clear from a bare reading of subclause (v) of Clause 12 that the rates were to be determined by the Engineer-in-Charge and the rates, so determined by him, did not require approval of any superior authority, including the Chief Engineer.

For the foregoing reasons, we see no merit in the present appeals. Therefore, the same are dismissed.