State of U.P. and Another vs Arvind Techno Engineers (P.) Ltd. and Others

R.B. Mehrotra, J.—Tenders were invited for construction of a new barrage across river Ganga at Bhimgoda, district Haridwar and head regulators of canals. The lowest of M/s. Jainson Engineers Pvt. Ltd. was accepted. Thereupon an agreement dated 23.1.1981 was entered into between the Governor of the State of U.P. (hereinafter called the ''Government'') represented by the superintending Engineer, Irrigation Construction Circle, Roorkee of the one part and M/s. Jainson Engineers Pvt. Ltd., a company registered under the Indian Companies Act having its registered office at J-2, Green Park, Delhi for self and as sole proprietor of Arvind Construction Company (hereinafter called the ''Contractor'') of the other part. The contractor changed the name of the aforesaid Company from M/s. Jaison Pvt. Ltd. to Arvind Techno Engineers Pvt. Ltd. In the aforesaid agreement dated 23.1.81, it was provided that in case any dispute arises out in respect of the contract, it shall be referred to two arbitrators, one to be nominated by the contractor and the other by the Government who were to select an umpire by mutual agreement.

The contractor Arvind Construction claimed to have performed and completed the work covered by the contract document in accordance with the drawings and specifications and conditions of contract, however, disputes and differences arose between the contractor Arvind Construction Company and the Government of U.P. touching and arising out and in respect of the aforesaid contract agreement and the subject-matter thereof. The dispute was referred to the arbitration proceeding and M/s. Arvind Construction Company vide letter dated 7.3.88 appointed Justice Avadh Behari Rohatgi, a retired judge of Delhi High Court whereas the Government of U.P. vide order dated 6.6.88 appointed Justice O.P. Mehrotra. a retired Judge of Allahabad High Court. The two arbitrators at the commencement of the reference appointed Justice K.B. Asthana, a retired Chief Justice of Allahabad High Court as the Umpire.

The two arbitrators, appointed to arbitrate on the dispute relating to the agreement for construction of new barrage across river Ganga at Bhimgoda and head regulators of the canal, entered into a reference on 25.6.88 and permitted the parties to submit statement of claims and counter claims along with supporting documents and on considering the claims and counter claims submitted by the parties, gave an award on 46 items to the tune of Rs. 1,35,58,488.08 paise and thereon awarded interest from 1.8.84 to 17.3.89. i.e., the date on which the completion certificate was issued by the Government under Clause 15-5(30.4.84) till the date of the award. i.e., 7.3.89 at the rate of 14% per annum as provided under Schedule 1 para 7A of the Arbitration Act as amended by Section 24D of U.P. Civil Laws (Reforms and Amendment) Act 57 of 1976. Thus a total amount of Rs. 2,23,45,263.08 paise was awarded to the claimant-contractor and it was directed that the said amount be paid by the State Government to the claimant-contractor within 60 days from the date of the award, failing which the Government will be liable to pay interest at the rate of 6% per annum from the date of the award till the date of payment of decree of the court, whichever is earlier. While awarding the interest of 14% from the date the Government issued completion certificate till the date of the award, the arbitrators took into consideration the factor that the Government charged interest on the mobilisation advance paid to the contractor @ 14% per annum. The interest was added as item No. 47 in the award, and in the award on all other items only the description of the claim, the amount claimed by the contractor and the amount awarded by the Arbitrator is mentioned.

The State Government filed objections before the Civil Judge, Roorkee against the aforesaid award and raised as many as 49 grounds wherein it was contended that since the amount involved was more than Rs. 2 crore 23 lacs, the award should have been a speaking award. The Civil Judge, Roorkee vide his detailed and reasoned order dated 23.1.90 dismissed all the objections raised by the State Government and directed that the award be made the rule of the court and further directed the State Government should pay further interest from the date of the award till the date of the rejection of the objections at the rate of 6% per annum on the amount of Rs. 1,35,58,488.08 paise, Aggrieved by the aforesaid order, the present first appeal from order has been filed on behalf of State of U.P.

We have heard at length the learned Standing Counsel for the Appellant and Sri Ravi Kiran Jain, learned Senior Advocate and Shri S.K. Garg appearing for the Respondent claimant.

Learned Standing Counsel has strenuously contended--

(i) That there was no basis or sufficient evidence, oral or documentary, to allow the claim amounting to Rs. 1,35,58,488.08 paise and further, amount of interest at the rate of 14% on the aforesaid amount. The impugned award is unreasoned and is liable to be set aside on this count.

(ii) That the arbitrators exceeded their authority in decreeing the additional claim made by the contractor-Defendant at different stages in the proceedings. The arbitrators failed to frame issues for this additional claim inspite of Plaintiff''s counsel specific request made to that effect during the course of the proceedings.

(iii) That the arbitrators misconducted themselves in law in not affording opportunity and permitting the applicant-Plaintiff to file additional written statement to meet or to answer the additional claims made and submitted by the contractor-Defendant at various stages of the proceedings.

(iv) That the arbitrators failed to appreciate the scope of awarding compensation as provided by Clause 2.10 of the contract agreement which provided that in the event of any loss or damage of whatever amount of work prior to the issue of final completion certificate, the contractor-Defendant is liable to make good the work without further cost to the Government and on that count contended that the arbitrator has misconducted themselves in awarding claims on item Nos. 12, 13, 14, 15, 24 and 29 in violation of the aforesaid agreement clause.

Learned Standing Counsel has placed reliance on the agreement Clause 2.10 and agreement Clause 2.20 and also placed reliance to the reply given by the Government to the claims of the contractor-Respondent before the arbitrators.

We have given a careful consideration to the submissions made by the learned Standing Counsel.

For appreciating the points raised by the learned Standing Counsel, it is necessary to refer to Clause 2.10 and 2.20 of the contract agreement.

2.1O. Risks

The contractor shall be the insurer of the Government, Government''s agents and employees against any and all of the following risks, whether they arise out of the acts of commission or omission of the contractor or of third persons excepting only those risks which result from affirmative wilful acts done by the Engineer-in-Charge subsequent to the execution of the contract.

(a) The risk of loss or damage to the work prior to the issue of the certificate of final completion:

In the event of any such loss or damage the contractor shall promptly repair-replace and make good the work without cost to the Government. The contractor will not be liable for loss or damage to the work due to:

I. Act of God including earthquake,

II. War whether declared or not,

III. Defects in designs furnished by the Engineer-in-Charge,

IV. Shifting of course of river to the barrage location upon the completion of work as per agreed construction programme in any particular working season.

v. Unexpected and unprecedented floods.

(b) The risk of injuries (including wrongful death) and damages, directly or indirectly to Government, their agents and employees and to their property, arising out of or in connection with the performance of the work.

The contractor shall indemnify the Government as well as insure the Government''s Agents and Employees for all such injuries (including wrongful deaths), damages and losses resulting therefrom within the work areas, arising out of or in connection with the performance of the work. The maximum limit of insurance for any individual claim under this clause shall be Rs. 25,000 and the minimum limit shall be Rs. 5,000.

(c) The contractor shall take out insurance in the sum of Rs. three lacs only subject to a maximum individual claim of Rs. 5,000 only for third party risk of all claims of loss of life and property in the work area due to any acts of omission or commission on the part of the contractor within a period of 30 days from the date of receipt of notice to proceed with the work. The contractor shall notwithstanding the taking of insurance as aforesaid, indemnify the Government and the Government''s Agents and employees against and from all such claims and demand, and for all loss and expenses incurred by Government in the defence, settlement and satisfaction thereof. Neither the certificate of final completion nor any payment to the contractor shall release the contractor from his obligation in this respect.

(d) Provision elsewhere in the contract of specific risks or of particular claims for which the contractor is to be responsible shall not be deemed to limit the effect of the foregoing provisions nor to imply that the contractor is responsible for only risks or claims of the types enumerated in this paragraph.

2.20. Emergency

(a) In an emergency affecting the safety of life or of the works or of adjoining property, the contractor shall immediately inform the Engineer-in-Charge of such emergency and of whatsoever measures are proposed to be taken and the conditions that warrant such action. In case sufficient time is not available to obtain approval from the Engineer-in-Charge of the measures required to be taken to meet the emergency, the contractor is permitted to act, at his discretion, to prevent such loss or injury. The measures that the contractor will adopt to prevent such loss or injury shall, however, not cause any damage to any other work.

(b) In case the contractor takes action to meet an emergency at his own discretion, without obtaining approval of the Engineer-in-charge, he shall be bound to Justify the soundness of the action taken by him. In case the action taken by the contractor is not found Justifiable, the contractor shall be entirely responsible for the consequences thereof shall make good any damage or loss at his own cost.

(c) Any compensation claimed by the contractor on account such emergency work shall be determined by the Engineer-in-charge and granted in case the details furnished for this are found satisfactory. The provision of this clause shall not in any way limit the provisions of any other clause nor relieve the contractor of any responsibility whatsoever under any other clause.

In the light of the aforesaid agreement clauses, the Appellants� objection in relation to item Nos. 12, 13, 15, 24 and 29 need to be examined.

Item No. 12 of the award relates to the claim of the contractor in regard to the payment on account extra expenditure incurred by the contractor on idle wages, idle resources, extra diversion work, extra-de-watering etc. due to shortage of cement and non-availability of drawings during the second working season. On that count, the contractor claimed an amount of Rs. 28 lacs and odd, whereas the arbitrator awarded an amount of Rs. 8 lacs and odd.

Item No. 13 relates to the payment for extra de-watering and diversion due to leakage and over-topping from undersluices and weights not envisaged in the contract. On this count, the contractor claimed an amount of Rs. 14,53,174. The arbitrator has accepted the claim in toto.

On item No. 15, the contractor claimed payment on account of direct and indirect loss and payment of extra-expenditure incurred due to late starting of work in third working season due to closure of canal. On this count, the contractor claimed an amount of Rs. 8 lacs, 37 thousand and odd but the claim was accepted only for Rs. 5 lacs, 2 thousand and odd.

On item No. 24, the contractor claimed payment on account of extra-expenditure incurred on diversion arrangement during 5th working season due to breach of bound. The amount claimed was Rs. 2,71,972.85 which was accepted in toto.

On item No. 29, the contractor claimed for the extra item of furnishing and placing G.P. seal at claimants'' submitted rate of Rs. 157 per R.M. as against the rate of Rs. 92.40 per R.M. at which payment was finally made at the behest of T.A.C. On this count, the claimant claimed an amount of Rs. 6 lacs 93 thousands and odd but claimant was awarded compensation for Rs. 4 lacs 15 thousand and odd.

In the light of the aforesaid objections, we have also examined the impugned judgment of the Civil Judge, whereby the award has been made a rule of the court and the objections of the State Government against the award have been rejected. The Civil Judge has placed reliance on following decisions:

(1) The Hindustan Construction Company Ltd., Bombay Vs. State of Uttar Pradesh, .

(2) Allen Berry and Co. Pvt. Ltd. Vs. The Union of India (UOI), New Delhi, .

(3) N. Chellappan Vs. Secretary, Kerala State Electricity Board and Another, .

(4) Tarapore and Company Vs. Cochin Shipyard Ltd., Cochin and Another, .

On the basis of the aforesaid decisions, the Civil Judge held that the court cannot sit in appeal over the award given by the arbitrators. The State Government has failed to point out that the arbitrators have given their award beyond the term of agreement and rejected the State Government objections regarding finding that the State Government has failed to establish that the arbitrators have committed any misconduct in giving the award. It is settled proposition of law that the only scope for challenging the award of the arbitrator is on the basis provided by Section 30 of the Arbitration Act. Section 30 of the Arbitration Act mandates that an award shall not be set aside except on the ground that the arbitrator or umpire has misconducted himself or the proceeding or an award has been made after issue of order by the court superseding the arbitrator or arbitration proceedings having become invalid u/s 35 of the Act or an award has been improperly procured or is otherwise invalid.

Out of the aforesaid three grounds the only ground convassed before us by the learned Standing Counsel is that the arbitrator has misconducted in the proceedings by exceeding their authority to give an award beyond the terms of the agreement.

We have carefully seen the agreement and we have quoted the relevant portion of the agreement on which the learned Standing Counsel has placed reliance. We have also referred to the clauses regarding which the learned Standing Counsel hat; put forward his objections.

While contending that the award given in respect of the claim of the contractor on account of emergency of construction diversion, the learned Standing Counsel contended that the agreement Clause 2.20(c) provides that in case an emergency arises, the work shall be determined by the Engineer-in-Chief. The contractor did not get any such work determined by the Engineer-in-Chief and as such, the amount given for extra-diversion work was beyond the purview of the agreement as it violates Clause 2.20 of the agreement. The learned Standing Counsel also contended that the Chief Engineer was the final authority for payment of any such extra work, as claimed by the contractor. We have carefully seen the agreement Clause 2.20(c) which adds a rider to the entire clause and provides that the provision of this clause shall not in any way limit the provision of any other clause nor relieve the contractor of any responsibility whatsoever under any other clause. The entire agreement was subject to the dispute referable to the arbitrators.

A reference to arbitration agreement Clause 14.01 (c) providing the scope of arbitration is being quoted hereunder:

(c) Every dispute, difference or question which may at any time arise between the parties where to or any person claiming under them, touching or arising out or in respect of this contract or the subject-matter thereof shall be referred for arbitration to two arbitrators, one to be nominated by the contractor and the other by the Government, who shall select an umpire, by mutual agreement and the decision of the arbitrators or the umpire, as the case may be, shall be final and binding on the contracting parties.

It is a term of the contract that the party invoking the arbitration shall specify the dispute or disputes to be referred to arbitration together with the amounts claimed in respect of each such dispute.

Subject to as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings.

The arbitrator may from time to time with the consent of the parties enlarge the time for making and publishing the award.

The aforesaid clause is an over-riding clause in regard to all disputes touching or arising out or in respect of the contract. The dispute raised by the claimant cannot be by any stretch of argument, considered as beyond the purview of the arbitration agreement. The agreement clause is wide enough to cover any dispute in regard to the agreement arrived at between the parties. The contention of the learned Standing Counsel that the arbitrators misconducted in proceedings while accepting the claim of the Respondent beyond the term of the agreement, is patently misconceived.

Learned Counsel appearing for the Respondent has contended that the basis on which the claim was accepted by the arbitrators is not arbitrary. The arbitrators have placed reliance on exhibits referred to in the arbitration proceedings for accepting the claim on each count. The details of the exhibits on which the arbitrators have placed reliance is contained in the index filed by the claimant-contractor before the concerned arbitrators, while referring to several documents on the basis of which the claim was accepted. The said index is contained in volume II at page 291 of the paper book.

In Raipur Development Authority Vs. M/s. Chokhamal Contractors etc. etc., , a Constitution Bench of the Apex Court had held that an award is not liable to be set aside merely on the ground of absence of reasons. It was further held therein that where the arbitration agreement has itself stipulated reasons for the award, the arbitrator is under legal obligation to give reasons. In the present matter, it is evident from the arbitration clauses of the agreement that the arbitrators were not under any obligation to record reasons and since we have held that the award given by the arbitrators was within the purview of the arbitration clause and relates to the dispute arising out of the contract, the award cannot be held to be vitiated by misconduct of the proceedings.

In Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy, , the Constitution Bench of the Apex Court held that if there is no provision to the contrary in the agreement, the interest pendente lite can be awarded by the arbitrator for doing complete justice between the parties. No provision has been brought to our notice that awarding of interest pendente lite was prohibited by any clause of the agreement. This being the position, the contention of the learned Standing Counsel that the interest was awarded beyond the term of the agreement is not sustainable.

On consideration of the entire material, we are satisfied that the judgment of the Civil Judge, Roorkee passed in arbitration suit No. 9 of 1889, Arvind Techno Engineers Pvt. Ltd. v. State of U.P. and Ors. and Misc. Suit No. 84/1889, State of U.P. and Ors. v. Arvind Techno Engineers Pvt. Ltd. dated 23.1.90 does not suffer from any error either of law or of fact. The present first appeal from order is accordingly dismissed with costs.

Since we are of the opinion that the Appellants have unnecessarily dragged the issue for more than 5 years in this Court, they are liable to pay further interest at the rate of 6% per annum on half of the decreetal amount, the payment of which was stayed by the order of this Court and the amount deposited by the Appellants in pursuance of the order of this Court dated 23.1.1993, the Respondent shall be entitled to withdraw along with interest accrued on half of the amount deposited by the Appellants which in turn was directed to be invested by the court below in a fixed deposit receipt in some nationalised Bank.

In the circumstances of the case, we impose a special cost of Rs. 10,000 on the Appellants.