State Of Kerala vs P.P.Thomas (PWD Contractor)

P.B.Suresh Kumar, J.

This appeal is directed against the judgment in O.P.(A) No.132 of 1994 on the files of the Court of the Principal Subordinate Judge, Thiruvananthapuram. The appellants are the respondents in the proceedings.

The dispute relates to a canal formation work namely “KI & TCDP - Left Bank Canal System - Formation of Main Canal from Ch.54,000 m to 55,000 m including cut and cover Part I from Ch.54,000 m to Ch.54,540 m and Ch.54814 m to Ch.55000m including cut and cover” executed by the respondent as contractor for the appellants. The agreement executed between the parties in this regard on 31.03.1987 provides for resolution of disputes in connection with the execution of the work by recourse to arbitration. In the course of execution of the work, disputes arose between the parties, and in the light of the aforesaid provision in the agreement, the same have been referred to the Arbitral Tribunal for adjudication.

Before the Arbitral Tribunal, the respondent raised several claims namely, Claims (a) to (m) and the appellants raised a counter claim. The Arbitral Tribunal passed an award in favour of the respondent directing the appellants to pay a sum of Rs.3,90,000/- on Claim (a), a sum of Rs.1,43,750/- on Claim (b), a sum of Rs.3,32,800/- on Claim (c), a sum of Rs.3,32,200/- on Claim (d), a sum of Rs.27,37,500/-on Claim (e), a sum of Rs.95,000/- on Claim (f), a sum of Rs.71,10,000/- on Claim (g), a sum of Rs.42,58,825/- on Claim (h) and a sum of Rs.9,69,437/- on Claim (m).  Claims (o), and (p) and the counter claim of the appellants were considered collectively and an award was passed directing the appellants to pay a sum of Rs.1,50,031/- on those claims also after adjusting the amounts found due to the appellants from the respondent in the counter claim. Claim (q) was one raised by the respondent for interest and the said claim was disposed of by the Arbitral Tribunal directing the appellants to pay to the respondent interest for the various amounts found due at the rate of 18% per annum from 31.03.1992, the date of completion of the work till the date of payment, or decree, whichever is earlier. The remaining claims have been rejected.

The respondent thereupon filed a petition before the court below under Section 17 of the Arbitration Act, 1940 (the Act) for pronouncing a judgment in terms of the award. In the said proceedings, the appellants filed an application invoking Section 33 of the Act seeking orders to set aside the arbitral award. Although the court below rejected the application of the appellants to set aside the arbitral award as one filed beyond the time prescribed in Article 119(b) of the Limitation Act, disposed of the petition modifying the award by reducing the compensation granted on Claims (a) to (e) to Rs.9,84,062/- from Rs.39,36,250/-. Similarly, in terms of the order passed in this regard, the compensation granted on Claim (g) was also reduced to Rs.7,10,000/- from Rs.71,10,000/-. As far as the claim for interest is concerned, the court below held that the respondent would be entitled to interest only at the rate of 12% per annum till the date of decree and 6% per annum thereafter. As noted, the appellants are aggrieved by the said decision of the court below.

Heard the learned Government Pleader as also the learned counsel for the respondent.

One of the arguments advanced by the learned counsel for the respondent was that insofar as the application preferred by the appellants before the court below for setting aside the arbitral award was rejected, the appellants are estopped from challenging the arbitral award, and the appeal is, therefore, not maintainable, although the court below modified the award on certain claims without jurisdiction.

It is seen from the records that the respondent has raised the point relating to the maintainability of the appeal immediately on receipt of notice of this appeal on the ground referred to above and this Court, after perusing the records of the proceedings before the court below, held that insofar as the sustainability or otherwise of the various claims have been dealt with on merits by the court below, it has to be presumed that the court below has condoned the delay in filing the interlocutory application for setting aside the arbitral award, and the appeal is, therefore, maintainable. It is conceded by the learned counsel for the respondent that the finding rendered by this court on the point relating to the maintainability of the appeal has not been challenged by the respondent and the said finding has become final. By virtue of Section 41 of the Act, insofar as the provisions of the Code of Civil Procedure, 1908 are applicable to the proceedings before the court as well as to all appeals under the Act, we are of the view that in the light of the finding aforesaid, the respondent is precluded from re-agitating the question of maintainability of the appeal on the ground aforesaid.

The question arises for consideration, in the circumstances, is as to whether the award of the Arbitral Tribunal, as modified by the court below, is sustainable in law.

9(i). Claim (a) is one raised by the respondent for compensation for idling his establishment, men and machinery for the period from 07.05.1987 to 13.07.1987 on the ground that the execution of the work was obstructed by the local people claiming that they should also be engaged by the respondent for carrying out the work. The case set out by the respondent in this regard was that, the contemplation of the parties at the time of entering into the contract was that the work would be executed by the skilled workers of the respondent; that the work is not one that could be executed by engaging the unskilled local labourers; that it was, therefore, obligatory for the appellants to take necessary steps to remove the obstruction created by the locals and that the appellants could remove the obstructions only on 13.07.1987. The stand taken by the appellants in the defence statement filed before the Arbitral Tribunal as regards this claim is that it was for the respondent to settle labour issues of the instant nature in terms of the provisions of the contract and the respondent is, therefore, not entitled to claim compensation on that ground. The relevant portion of the defence statement reads thus:

“As per LCB condition labour unrest has to be settled by the claimant himself and the respondents have nothing to do in this matter. Even though irrespective of the local/his own labour. All assistance required from the departmental side were provided to settle the disputes. Hence the department is not liable for the loss incurred on account of delay and hence the claim is denied. The claim has no basis and exorbitant. The same has only to be rejected.”

On an appraisal of the materials on record, the Arbitral Tribunal found that the respondent, who had made all arrangements for commencing the excavation work on 26.05.1987 with necessary engineering personnel, supervisors, operators, drivers, mechanics and with the required machinery such as excavator, bull dozers, tippers etc., could not commence the work owing to the obstruction till 13.07.1987; that the respondent has suffered loss on account of the same; that the obstruction caused to the work resulted in a law and order issue which should have been tackled by the appellants and that the respondent is, therefore, entitled to compensation for idling his establishment, men and machinery for the period from 07.05.1987 to 13.07.1987.

(ii) The argument advanced by the learned Government Pleader in this regard is that there is nothing on record to indicate that the respondent has in fact brought the men and machinery to the site and the case of the respondent that there was idling of the men and machinery cannot therefore be accepted.

(iii) . The argument advanced by the learned Government Pleader is not one raised either before the Arbitral Tribunal or before the court below. A contention of this nature, raising an incidental factual issue as to whether the respondent has in fact brought the men and machinery required for the execution of the work at the site during the relevant period, according to us, cannot be raised for the first time in an appeal under Section 39 of the Act. Even otherwise, the argument is fallacious, since there cannot be any doubt that the contemplation of parties at the time of entering into the contract was that the respondent shall make available the establishment, men and machinery required for execution of the work at the site when he is called upon to commence the work. That apart, machinery and skilled personnel required for carrying out a work of this nature cannot be arranged at the beck and call of the contractor. As already noticed, although the court below interfered with the quantum of compensation granted under this head, there is no appeal by the respondent challenging the said part the judgment. The award of the Arbitral Tribunal on Claim (a) as modified by the court below, in the circumstances, does not call for any interference.

10(i). Claim (b) is one raised by the respondent for compensation for partial idling of the establishment, men and machinery of the respondent for the period from 25.08.1987 to 04.11.1987 as also from 06.12.1987 to 07.03.1988. The case set out by the respondent in this regard is that the appellants were obliged to make available the entire site of the work before 31.03.1987; that the site of the work was offered to the respondent only in a piecemeal manner; that the optimum deployment of men and machinery arranged for the execution of the work could not, therefore, be achieved and that he has therefore, suffered loss on account of the same. The stand taken by the appellants in the defence statement filed before the Arbitral Tribunal as regards this claim is that the respondent who has not submitted in advance a construction programme for making arrangements and facilities cannot be heard to contend that he could not carry out the work as planned for want of the entire site of the work. The relevant portion of the defence statement reads thus:

“The claimant has not submitted the advance construction programme as per LCB conditions for making the arrangements and facilities for providing inorder to adhere to the programme and to complete the work as schedule. As explained in Para - 8 the claimant has given consent to start the work at the starting point before executing the agreement. Hence claimant's argument that the work could have been commenced simultaneously at both the ends is baseless. So the department is not liable for the under - utilization of his establishment and compensation. Hence the exorbitant claim may be rejected.”

On an appraisal of the materials on record, the Arbitral Tribunal found that a portion of the site was handed over to the respondent only long after the commencement of the work; that the respondent had submitted the construction programme well in advance; that on account of the failure on the part of the appellants in handing over the entire site, the respondent could not carry out the work as contemplated by the parties at the time of entering into the contract and that the respondent is therefore, entitled to compensation for partial idling of the establishment, men and machinery for the relevant period.

(ii). The argument advanced by the learned Government Pleader in this regard was that only a trivial extent of site was remaining to be handed over, and insofar as the respondent could have completed during the delayed period the work to be performed at the site which has already been handed over to him, the claim is without any basis.

(iii). A perusal of the arbitral award would indicate that the contemplation of the parties at the time of entering into the contract was that the excavation and refilling works entrusted to the respondent were to be executed simultaneously and that simultaneous execution of the excavation and refilling works were not possible on account of the delay on the part of the appellants in handing over the entire site of the work to the respondent. The question whether the respondent has suffered any loss on account of the delay on the part of the appellants in handing over the entire site of the work is a pure question of fact. It is trite that the finding rendered on such a question by the Arbitral Tribunal cannot be interfered with by the court on reappraisal of the facts and evidence. The argument advanced by the learned Government Pleader, in the circumstances, is liable to be rejected. Needless to say, in the absence of an appeal by the respondent, the award of the Arbitral Tribunal on Claim (b) as modified by the court below does not, therefore, call for any interference.

11(i). Claim (c) is one raised by the respondent for compensation for idling his establishment, men and machinery for the period from 05.11.1987 to 05.12.1987. The case set out by the respondent in this regard is that in terms of the provisions of the agreement, he was obliged to arrange the land for dumping the cut spoil; that he purchased a land for the said purpose; that when the work of excavation was in progress necessitating dumping of the cut spoil, on 05.11.1987, the Tahsildar, Kottarakkara issued an order prohibiting the use of the land for dumping the cut spoil and that the land could be used for the purpose intended only from 05.12.1987. According to the respondent, he suffered loss on account of the interdictory order issued by the Tahsildar, as the former could not deploy his men and machinery for the works during this period. The stand taken by the respondent in the defence statement filed before the Arbitral Tribunal was that the respondent was obliged under the contract to find out his own space for dumping the cut spoil and he is, therefore, not entitled to claim compensation on that ground. The relevant portion of the defence statement reads thus:

“In the absence of sufficient space to dump the cut spoil it is the duties of the claimant to found his own space for dumping the cut earth if any necessary. Hence the department is not liable for the hindrance / obstructions if any occurred and hence the claim may be rejected.”

On an appraisal of the materials on record, the Arbitral Tribunal found that the interdictory order came to be passed when the works were in full swing and insofar as the inability of the respondent to remove the cut spoil from the site was not due to any reason attributable to the respondent, the appellants are liable to make good the loss caused to the respondent in this regard.

(ii). The argument advanced by the learned Government Pleader in this regard was that the respondent was unauthorisedly filling a paddy land by dumping the cut spoil and that he cannot, therefore, claim compensation from the appellants for the loss allegedly caused to him on account of the interdictory order.

(iii). As noted, this claim is preferred on the premise that the respondent was obliged in terms of the contract to arrange lands for dumping the cut spoil. The relevant averment in the claim statement reads thus:

“Agreement contemplates the excess cut earth is to be dumped in Claimant's own dumping yard.”

Clause (2) of the Specification for Canal works, which is part of the contract, indicates that the land required to be used for dumping the cut spoil, namely spoil bank will be provided by the appellants. Clause 28 of the Specification of the Canal works indicates that the cut spoil is to be dumped at points approved by the Engineer-in-charge. It is, therefore, clear that, if a contractor dumps cut spoil at a place other than the place provided to him by the appellants or permitted for the said purpose by the Engineer-in-Charge, he will be doing so at his own risk. Ext.C59 is the prohibitory order. Ext.C59 indicates that the prohibitory order was issued, as the respondent was found filling a paddy land violating the provisions of the Land Utilisation Order. Insofar as the act that was interdicted in terms of Ext.C59 is not an act that was contemplated by the parties to be performed as per the terms of the contract, we are of the view that the loss allegedly caused to the respondent in this regard cannot be claimed from the appellants. Needless to say, the award under this head suffers from the vice of jurisdictional error, being one passed beyond the scope of the contract, and liable to be interfered with [See Bharat Coking Coal Ltd. v. Annapurna Construction, (2003) 8 SCC 154].

12(i). Claim (d) is one raised by the respondent for compensation for idling his establishment, men and machinery for want of cement for the period from 28.04.1988 to 24.05.1988. The case set out by the respondent in this regard is that the establishment, men and machinery arranged for concreting the barrel between Ch.54105m and Ch.54205m had to be idled during the said period for want of cement which was to be supplied by the appellants. The stand taken by the appellants in the defence statement filed before the Arbitral Tribunal in this regard was that the excavation in between Ch.54205m and Ch.54260m did not reach the stage of concreting, and 660 bags of cement were available with the respondent for carrying out the concreting work in the available portion. The relevant portion of the defence statement reads thus:

“The Exhibit 18 referred to in the above para reveals that the statements made in this para are not true to the fact. 660 bags of cement was available with the claimant. Moreover, the earthwork for 54205 to 54260 m was not complete and 1m (one) depth of excavation was yet to be carried out. The claimant would have attempted to execute the possible length with the available cement. Initially he has attempted for a length of 50m which resulted the delay, slipping etc. Also the exhibit - 18 reveals that this portion of the cut and cover could have been done before the monsoon. Hence the claim for idling charges by the claimant is not correct and hence the same may be denied.”

The Arbitral Tribunal, on an appraisal of the materials on record, found, based on Ext.R18, that the stand of the appellants that the excavation between Ch.54205m and Ch.54260m did not reach the stage of concreting is incorrect. It was also found by the Arbitral Tribunal that the documents made available would establish that only 400 bags of cement were supplied during the relevant period, which were insufficient for carrying out the concreting work. It is on the aforesaid premise that the Arbitral Tribunal passed an award under this head.

(ii). The argument advanced by the learned Government Pleader in this regard was that the factual finding rendered by the Arbitral Tribunal that the excavation between Ch.54205m and Ch.54260m did not reach the stage of concreting is incorrect.

(iii). It is relevant to note in this regard that the learned Government Pleader did not raise any argument on the finding rendered by the Arbitral Tribunal that sufficient quantity of cement required for undertaking the concreting work during the relevant period, for which arrangements were made, was not made available. The question whether the excavation work between Ch.54205m and Ch.54260m had reached the stage of concreting is a pure question of fact. A finding on such a question rendered by the Arbitral Tribunal based on the materials on record, cannot be interfered with in an appeal filed under Section 39 of the Act. The arguments advanced by the learned Government Pleader, in the circumstances, are without merits. Needless to say, in the absence of an appeal by the respondent challenging that part of the arbitral award passed under this head which was interfered with by the court below, the award of the Arbitral Tribunal on Claim (d) as modified by the court below, does not call for any interference.

13(i). Claim (e) is one raised by the respondent for compensation for the loss incurred to him on account of idling of the establishment, men and machinery for want of steel and cement for the period between 17.04.1989 and 22.04.1989, 22.04.1989 and 14.08.1989, and 18.08.1989 and 20.02.1990. The Arbitral Tribunal, after having divided the claim chronologically under three sub-heads namely e(i), e(ii) and e(iii), rejected the claim under the sub-head e(i) and upheld the claim under sub-heads e(ii) and e(iii). As far as the claim e(i) is concerned, the stand taken by the appellants in the defence statement filed before the Arbitral Tribunal was that lack of cement was not the reason for idling the establishment during the relevant period and that the respondent could have carried out other works during the said period to avoid idling of the establishment. The relevant portion of the defence statement reads thus:

“Lack of cement is not reason for the idling of men and machinery for the period from 17-4-89 to 16-8-89. Exhibit - 22 shows that 600 bags of cement was available with the claimant which was locally purchased during may 1989. If the claimant had attempted the refilling and finishing work, the idling of men and machinery could have been avoided. The idling due to heavy flood for the period from August '89 to February '90 as alleged by the claimant is not true. Only the usual rain fall occurred during the period. During this period also the work done as in other reaches. Hence the claim for idling for men and machinery for the period from 18-8-89 to 20-2-90 cannot be admitted. Hence the claim may be rejected.”

As far as the claim made under sub-head e(ii) is concerned, on an appraisal of the materials on record, the Arbitral Tribunal found that there was short supply of cement and that the respondent has sent several letters during the relevant period to the officers concerned demanding supply of steel and cement, informing them that he is idling the establishment for want of steel and cement, and requesting the appellants to exonerate him from the contractual obligations. It was also found by the Arbitral Tribunal that the respondent had even sought permission of the appellants to allow him to purchase steel and cement from the open market so as to mitigate the loss caused to him. As far as the claim made under sub-head e(iii) also, the Arbitral Tribunal rendered identical and similar findings. It is on the basis of the aforesaid findings that awards under those sub-heads have been passed.

(ii). Further, as regards the award passed on the claim under sub-head e(ii), the argument advanced by the learned Government Pleader was that the Arbitral Tribunal has not taken into account the fact that there was heavy rain during the relevant period and there was no question of using steel and cement during the relevant period. However, no argument was advanced in respect of the award passed on the claim under sub-head e(iii).

(iii). As noted, the question whether there was idling of establishment is a pure question of fact to be decided based on the facts pleaded by the parties as also the documents produced by them. The Arbitral Tribunal found categorically based on the pleadings of the parties as also the documents made available that there was idling of establishment of the respondent during the relevant periods and that the respondent has suffered loss on account of the same. The law on the point is that, even if the findings on issues of this nature are found to be incorrect, the court exercising the power to set aside the arbitral award cannot interfere with the same. In the said view of the matter, we do not find any infirmity in the award passed on the claims made under the above sub-heads. Needless to say, in the absence of an appeal by the respondent against the award under the said sub-heads to the extent the court below has interfered with the same, the award of the Arbitral Tribunal on claims under those sub-heads as modified by the court below do not call for any interference.

14(i). Claim (f) is one raised by the respondent for compensation for the loss of shuttering materials, steel rods etc. and for cleaning the partially concreted portion necessitated on account of slipping of earth between Ch.54500m and Ch.54525m and between Ch.54205m and Ch.54260m due to the long delay occurred in completing the concreting work after making necessary arrangements for the same for want of cement. The case of the respondent was that even though he was paid for handling the slipped earth, he was not paid compensation for the loss caused to him on account of the damage to the shuttering materials as also to the steel rods used for reinforcement. It was also his case that he should have been paid compensation for cleaning the partially concreted portion over which the slipped earth fell. The stand taken by the appellants in the defence statement filed before the Arbitral Tribunal was that payment for removal of the slipped earth was made, and the claim made for loss on other heads is without any basis. The relevant portion of the defence statement reads thus:

“All possible safety measures (as detailed in para 12 of this defence statement) were taken by the department to avoid slipping. All the cracked side portions were there is possibility to occur slips were measured and found only 6400m3 and not 8025m3 as claimed by the claimant. Payment for the removal of the slipped earth was made @ Rs.74 / m3. The expenditure said to have been incurred on clearing and the damage of form work cannot be admitted. Hence the claim may be rejected.”

On an appraisal of the materials on record, the Arbitral Tribunal found that the respondent should have been paid the loss caused to him on account of the damage to the shuttering materials, steel rods etc. used for making preparations for concreting also. It was further found by the Arbitral Tribunal that the respondent should have been paid the expenses incurred by him for cleaning the partially concreted portion as well. The aforesaid findings are the basis of the award passed under this head.

(ii). The learned Government Pleader submitted that the respondent had no case while dealing with Claim (e) that there was slippage between Ch.54505m and Ch.54540m. According to the learned Government Pleader, the case set out under Claim (f) that there was slippage between Ch.54500m and Ch.54525m is therefore incorrect.

(iii). As noted, the contention now raised is not one raised before the Arbitral Tribunal. Before the Arbitral Tribunal, the appellants were proceeding as if the allegation of slippage as alleged in the claim statement is correct and the attempt was to establish that the respondent is not entitled to compensation under the heads claimed. Contentions of this nature requiring factual adjudication which have not been raised before the Arbitral Tribunal cannot be raised for the first time in an appeal under Section 39 of the Act. Needless to say, in the absence of an appeal by the respondent against the award under the said sub-heads to the extent the court below has interfered with the same, the award of the Arbitral Tribunal on claims under those sub-heads as modified by the court below does not call for any interference.

15(i). Claim (g) is one raised by the respondent on the premise that a particular item of work executed by him was not one contemplated by the parties to the contract. According to him, the amounts paid to him for having executed the said work as fixed by the appellants is highly inadequate and the claim is made for the balance due. The case set out by the respondent in this regard is that as per the terms of the agreement, the bottom width of the cut and cover of the canal was 3.60m and sides slope was ½:1; that in the course of execution of the work, in order to avoid slipping, sliding and accidents, the bottom width of the canal was increased from 3.60m to 4.60m and side slope has been altered to ¾:1 from Ch.54000m to Ch.54540m; that on account of the same, the scope of the work is changed and that when the scope of the work is changed, the work is liable to be treated as an extra one. It was alleged that the amounts payable for the extra work cannot be fixed unilaterally and the amount fixed and paid for the work is grossly inadequate. The stand taken by the appellants in the defence statement filed before the Arbitral Tribunal was that the work cannot be treated as an extra work and the same is liable to be treated only as one falling within the scope of item 3 of the schedule of the works. The relevant portion of the defence statement reads thus:

“The argument of the claimant, profile, design and thereby scope of the work has been changed is against the terms and condition of canal specification which forms part of the Agreement (clause 13). Moreover by changing the width and by providing a flatter slope will increase the out turn of the earth work quantity and the quoted rate becomes more profitable.

As per clause 32 of LCB condition the contractor is bound to carryout excess upto 30% at the approved rate in the schedule. Hence the change has not resulted is more than 30% increase in quantity for treating this as extra item. Hence the claim of the claimant for Rs.158 / m3 is denied. Regarding the similar claim at the adjacent reach of ch.54540m to 54814m, action is being taken to recover the amount paid. Hence based on an error committed making another payment cannot be justified treating this as a similar case. Hence the claim may be rejected.”

On an appraisal of the materials on record, the Arbitral Tribunal found that the claimant was required to excavate 79000m3 of earth in a different manner not contemplated by the contract and the said work, in the circumstances, is liable to be treated as an extra item, for which rate should have been fixed on mutual agreement.

(ii). The learned Government Pleader submitted that compensation has been granted under this head by the Arbitral Tribunal on the mistaken premise that more quantity of earth had to be removed by the contractor from the site to distant places and he had to bring back the same later. The argument is that, what was contemplated was simultaneous removal of earth and use of the removed earth for refilling and there is absolutely no reason for removal of the earth to distant places and reconveyance of the same back to the site at a later point of time.

(iii). There is no substance in the argument advanced by the learned Government Pleader. As noted, the finding rendered by the Arbitral Tribunal was that the excavation work in respect of the quantity mentioned was done in a different fashion altogether, not as contemplated by the contract and the contractor is therefore, entitled to be paid additional remuneration for the said work, treating the same as an extra item. The said finding being one rendered on a pure question of fact, we do not think that any interference on the same is permissible under law. As already noticed, although the court below interfered with the quantum of compensation granted under this head, there is no appeal by the respondent challenging the said interference. The award of the Arbitral Tribunal on Claim (g) as modified by the court below does not therefore call for any interference.

16(i). Claim (h) is one raised by the respondent for re-handling and re-conveying the removed cut spoil to the dumping yard for refilling. The case set out by the respondent in this regard is that, what was contemplated at the time of entering into the contract was simultaneous removal of earth for formation of the canal and refilling the same at places where refilling is required after completing the concreting work over the barrel of the cut and cover of the canal. According to the respondent, simultaneous excavation and refilling over the barrel of the cut and cover of the canal was not possible due to short supply of cement and steel and other reasons not attributable to the respondent and he, therefore, had to rehandle and reconvey 70000m3 for the purpose of refilling after completion of the concreting work of the cut and cover. The stand taken by the appellants in the defence statement before the Arbitral Tribunal in this regard was that the respondent could execute the excavation and refilling work simultaneously and no loss is caused to him on account of the same. The relevant portion of the defence statement reads thus:

“The statement of the claimant that the cutting and filling could not be done simultaneously from both ends as proposed in the sanctioned estimate is not correct. As explained in para 14 above the sanctioned estimate does not say that 47m at the inlet and 55m at the out let to be excavated at first. It is the claimant to decide a programme and quote his workable rate as per the terms and conditions of the agreement. The estimate does not specify the excavation work.

The claimant has carried out the excavation and refilling simultaneously. The claimant has claimed a rate of Rs.158 / m3 for the earthwork excavation including refilling. Hence the claimant has demanded Rs.158 / m3 for refilling alone. The claim for refilling is inclusive of claim under para 22g. This cannot be treated as extra on any account and this claim may be rejected.”

The Arbitral Tribunal found that as per letter dated 31.01.1989, the respondent has intimated the appellants that he was carrying out refilling work by re-handling the cut spoil from the dump yard situated at a distance about 8km; that the respondent has also intimated the appellants the quantity of cut spoil re-handled by him for refilling purposes; that the appellants did not dispute the quantity of the re-handled cut spoil before initiation of the arbitration proceedings and that without re-handling the cut spoil as claimed to have been done by the respondent, the refilling work could not have been completed. It is on the basis that an award has been passed by the Arbitral Tribunal under this head.

(ii). The argument advanced by the learned Government Pleader in this regard was that when the contract provides for simultaneous excavation and refilling, compensation cannot be claimed on the premise that excavated earth had to be rehandled and reconveyed.

(iii). There is no substance in the argument advanced by the learned Government Pleader. As noted, the categoric finding rendered by the Arbitral Tribunal is that without re-handling the cut spoil claimed to have been removed by the respondent, the refilling work could not have been completed. It was also noticed by the Arbitral Tribunal that the fact that the respondent had carried out refilling work by re-handling the cut spoil from the dump yard situated at a distance of about 8km and the fact that the quantity of cut spoil re-handled by him for refilling purposes have not been disputed by the appellants anytime before the initiation of the arbitration proceedings. In the circumstances, we do not find any infirmity in the award passed by the Arbitral Tribunal on the said claim warranting interference in a proceedings under Section 39 of the Act.

17(i). Claim (m) is one raised by the respondent for revised rates for the portion of the works executed beyond the term of the agreement, viz, 22.08.1988 mainly on the ground that there was exorbitant increase in the cost of execution of the works. According to him, the delay in completing the work within the time stipulated in the agreement is due to reasons not attributable to him and that he is, therefore, entitled to be paid revised rates for the same. In support of the said claim, it is stated by the respondent in the claim statement that the estimate of the work was prepared based on the 1982 schedule of rates fixed by the Government, and having regard to the cost escalation, the Government itself have revised the schedule of rates during 1984 and 1986. The relevant portion of the claim statement pertaining to the subject claim reads thus:

“m) The estimate was prepared on the basis of schedule 1982. Claimant had quoted rates expecting that the authority will provide the required facilities at site and perform their contractual obligation. But the authorities have committed breach of contract sustaining huge losses and damages. As a result such breaches and failures to perform the contractual obligation caused protraction of execution. The cost of POL items have increased exorbitantly. The price index and industrial index showed unprecedental increase. Budget of State and Central Government inflicted heavy impact on the costs due to imposition of taxes. All these had increased the cost of execution. Taking into account the said aspects, the Government has revised the Schedule rates during 1984, 1986, 1988 and another revision was done during 1990. Evidently the cost escalation is admitted by the department. The claimant had to pay in par with the prevailing market rate whereby he is put to heavy losses and damages. The actual losses and damages incurred in carrying out the work in respect of items and quantities excluding the items and quantities covered under Appendix - I , II and III done after the original period of completion is Rs.10,20,528. The claimant is entitled to be compensated the said losses and damages sustained as indicated above. This may be awarded to the claimant by the Honourable Arbitrator.”

The stand taken by the appellants in the defence statement before the Arbitral Tribunal in this regard was that the respondent is not entitled to revision of rates in terms of the provisions of the agreement entered into with the appellants. The relevant portion of the defence statement reads thus:

“The claimant has claimed Rs.10,20,528 / - due to the increase in wages and cost of materials for the items including items in appendix I , II & III. This is a duplicate claim since all the claims mentioned earlier except items under appendix I , II & III (Para-I) comes under this claim also.

The government have revised the schedule of rates during 1984, 1986 and 1990 considering the increase in cost of materials and labour. But this increase is only about 40% than the 1982 schedule. But as per the terms and conditions of the Agreement the claimant is not eligible for any increase in rate other than the price adjustment as per clause 32A of LCB from the exhibits it is clear that the delay was due to the fault of the claimant itself. Hence the claim may be rejected”. .

The Arbitral Tribunal found that insofar as the respondent has not agreed to execute the work beyond the term of the contract at the rates originally agreed, he is entitled to revision of rates for the portion of the work executed beyond 22.08.1988. He was, therefore, awarded a sum of Rs.9,69,437/- under that head which would work out to be 38% over and above the agreed rate.

(ii). The argument advanced by the learned Government Pleader in this regard was that, in the light of clause 32A of the Local Competitive Bidding Specification prescribed by the Government, which is part of the contract, the respondent is not entitled to any amount by way of compensation.

(iii). As noted, the contention now raised by the learned Government Pleader is a contention that was raised by the appellants in the defence statement filed before the Arbitral Tribunal. Clause 32A of the Local Competitive Bidding Specification provides that price quoted shall be firm and fixed. It is, however, made clear in the said clause that for the works, if the time of completion as notified in the tender notice is more than 12 months, price adjustment as indicated therein would be applicable. It is also clarified in the provision that the price adjustment clause is applicable only for the work that is carried out within the stipulated time or extension thereof, as are not attributable to the contractor. It is also clarified in the provision that no claims for price adjustment other than those provided therein shall be entertained. The relevant portions of the said clause reads thus:

“The price quoted shall be firm and fixed.

For works, the time of completion as notified in the Tender notice is more than twelve months, the following price adjustment is applicable.

The amounts paid to the Contractor for the work done shall be adjusted for increase or decrease in the rates of labour and materials and petrol, oil and lubricants (POL) excepting those materials supplied by Government as per Schedule C.

Increase or decrease in the cost due to labour shall be calculated quarterly in accordance with the following formula.

x x x x

The increase or decrease in cost of materials other than POL shall be calculated quarterly in accordance with the following formula.

x x x x

Increase or decrease in the cost due to Petrol, Oil and Lubricants (POL) shall be calculated in accordance with the following formula.

x x x x

Price adjustment clause shall be applicable only for the work that is carried out within the stipulated time or extension thereof as are not attributable to the Contractor. No claims for price adjustment other than those provided herein, shall be entertained. (emphasis supplied)

It is now trite that when a contract specifies that the price fixed therein is firm and fixed, the normal rule is that the contract price must remain firm and fixed unless there be any other provision in the contract agreement which permits any modification in given circumstances. It is also settled that if there is any provision in the agreement that the contract price is firm and fixed, even if the bidder is able to satisfy the concerned authority that he had on account of ignorance or inadvertence failed to take into account certain cost, expenses, tax liability etc. which he was entitled to take into account while making the bid, he will not be permitted to change the contract price and he must suffer the consequences [See Power Grid Corporation of India v. L.S.Cable, 2012 SCC OnLine Del 2021]. In other words, if the terms of the contract is that the price offered is firm and fixed, a party entitled to such price cannot claim anything other than what is provided for in the contract.

(iv). It is seen from the price adjustment clause extracted above that the respondent was entitled to revision of rates if there is escalation in the cost of execution of the work due to increase in the cost of labour and materials in terms of the formula provided for in the clause. The question is whether the respondent was justified in raising a claim in the manner indicated in the claim statement. As noted, the case set out in the claim statement by the respondent is that the delay in completing the work within the time stipulated in the agreement is due to reasons not attributable to him and that he is, therefore, entitled to be paid the revised rates for the same. Insofar as the respondent was permitted to execute the work beyond the expiry of the term of the contract and since he was paid the amounts due in respect of the work executed beyond such expiry, it can be certainly presumed that the term of the contract was extended upto the date on which the respondent completed the balance work. When the contract provides that the price quoted shall be firm and fixed and when it provides for a mechanism for revision of rates on account of cost escalation for delayed execution of the work due to reasons not attributable to the contractor and when it precludes the contractor from raising any claim for revision of rates otherwise than in accordance with the price escalation clause in the agreement, we have no doubt in our mind that the contractor would be precluded from raising any claim otherwise than in accordance with the terms of the contract. It is now settled that if an award is passed by an arbitral tribunal ignoring the express terms of the contract by wandering outside the scope of the contract, the award suffers from the vice of jurisdictional error and such cases are liable to be treated as cases where the arbitral tribunal has misconducted itself, thereby acting ultra fines compromissi [See Bharat Coking Coal Ltd.]. The relevant portion of the judgment reads thus:

In Associated Engg. [(1991) 4 SCC 93] it has been held: (SCC pp. 104-05, paras 27-29)

“27. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error.

x x x x

In the instant case, the umpire decided matters strikingly outside his jurisdiction. He outstepped the confines of the contract. He wandered far outside the designated area. He digressed far away from the allotted task. His error arose not by misreading or misconstruing or misunderstanding the contract, but by acting in excess of what was agreed.

x x x x In awarding claims which are totally opposed to the provisions of the contract to which he made specific reference in allowing them, he has misdirected and misconducted himself by manifestly disregarding the limits of his jurisdiction and the bounds of the contract from which he derived his authority thereby acting ultra fines compromissi.”

We, therefore hold that the court below acted illegally in rendering the impugned judgment on the basis of the said award on Claim (m).

Claim (o) is one raised by the respondent for release of the security deposit furnished by him as also the retention amounts. Likewise, Claim (p) is one raised by the respondent for disbursement of the proceeds of the final bill of the work. As noted, the aforesaid two claims have been considered by the Arbitral Tribunal along with the counter claim raised by the appellants. It is seen that there was no dispute as regards Claims (o) and (p). The Arbitral Tribunal, however, found that a part of the counter claim raised by the appellants is liable to be upheld, and consequently passed an award directing disbursement of the amounts covered by Claims (o) and (p) less the amount found payable to the appellants on the counter claim. The appellants have not raised any argument on the award passed under this head. The arbitral award, insofar as Claims (o) and (p) are concerned, is only to be upheld.

As noted, Claim (q) is one raised for interest and the said claim was disposed of by the Arbitral Tribunal directing the appellants to pay to the respondent interest for the various amounts found due at the rate of 18% per annum from 31.03.1992 till the date of payment or decree, whichever is earlier. In the context of an arbitral award passed in a reference based on the terms of an agreement entered into on 11.01.1989 under the Act, the Apex Court in State of Rajastan v. Ferro Concrete Construction Pvt.Ltd. (2009)12 SCC 1, granted pendente lite interest only at the rate of 9% per annum. The agreement in the instant case is one entered into on 31.03.1987. In the light of the said judgment, we deem it appropriate to modify the pendente lite interest granted by the Arbitral Tribunal to the respondent as affirmed by the court below from 18% to 9% per annum.

In the result, the appeal is disposed of setting aside the arbitral award on Claims (c) and (m), affirming the arbitral award on Claims (a) to (h), (m) and Claims (o) and (p) as modified by the court below, and modifying the arbitral award on Claim (q), granting interest to the respondent for the amount due in terms of the award at the rate of 9% per annum from 31.03.1992 till the date of the decree.