State of Uttaranchal and Another vs R.K. Construction Company

B.C. Kandpal, J.—This appeal, u/s 39 of the Arbitration Act, 1940, has been preferred against the judgment and order dated 22-2-2000, passed by II Additional Civil Judge (Senior Division), Dehradun, in Misc. Case No. 36/1996, State of U.P. v. R.K. Construction Company.

The facts of the case, in a nutshell, are that agreement No. 1/SE/91-92 was entered into between the parties for completion of Left Bank and Boulder Pitching of Tail Race Channel of Khara Hydel Project, Dehradun. There arose dispute between the parties and Sri Vinod Prakash, Chief Engineer was appointed Sole Arbitrator to give award, who filed his award dated 7-5-1998. Against the aforesaid award, objection Under Sections 30 and 33 of the Arbitration Act, 1940 was filed by the State of U.P. and the same was registered as Misc. Case No. 36/96. The objection of the State was that the

Arbitrator did not analyze the evidence properly and in order to favour the contractor has given the award, therefore, misconducted himself. It was also alleged that the Arbitrator has awarded the claim "B" against the conditions of the agreement. The claim "C" was awarded on increased rate whereas the payment had already been made to the contractor. Claims D, E and F have also been allowed against the specific terms of the contract agreement. Claim ''A'' was also allowed against the terms of agreement. There was no provision for payment of interest and the Arbitrator has awarded 18% interest arbitrarily.

On behalf of the Contractor written statement was filed supporting the award. According to him the Arbitrator has fully considered all the submissions and evidence on record and gave reasons for his said award. The contractor denied any payment by the department for Rs. 35,020/- for the excavation of earth work and alleged that the Arbitrator has given justified rate for this work. The contractor also alleged that it is not open to the court to probe the mental process of the arbitrator and speculate as to what impelled the arbitrator to arrive at his conclusion. Reasonableness of the reasons cannot be challenged. Therefore, prayer for making the award rule of the court was made by the contractor.

The learned Additional Civil Judge, after having heard learned Counsel for the parties and considering the objections of the parties, rejected the objection of the State and made the award rule of the court vide impugned judgment and order dated 22.2.2000.

Feeling aggrieved, the State has filed this appeal.

Heard learned Counsel for the parties and perused the record.

Learned Standing Counsel has submitted that the arbitrator has misconducted in allowing the claim "A" regarding the recoveries imposed by the Technical Audit Cell for the poor quality of work done by the Respondent. The Arbitrator also overlooked the specific rates prescribed in Schedule-C of the agreement and allowed claim "B" for the enhancement of rates of earthwork. Learned Standing Counsel also submitted that Arbitrator again committed grave illegality in awarding claim "C" at enhanced rate for digging work. Claims "D" "E" and "F" for earthwork in bolder pitching, sorting out of boulders and varied quantities of work respectively done by the contractor, have also been allowed against the terms of the work agreement.

On the other hand learned Counsel for the respondent has refuted the submissions advanced by learned Standing Counsel and submitted that the Arbitrator has allowed the claims after considering the documentary evidence. The Department did not deny the quantities of work done by the contractor; excavation earth work done in embankment for laying pitching on slopes was not denied and payment was not made to the contractor. He also submitted that additional work in sorting out of boulders was done and the claim was allowed for this work. There was variation in quantities of work and for this variation claim has rightly be allowed.

For proper appreciation of the submissions of the learned Counsel for the parties, it is relevant to go through the impugned award. The arbitrator has allowed Claims "A" "B" "C" "D" "E" and "F" and claim "G" was rejected.

Under Claim "A" Rs. 38,600/- was awarded on account of wrong recoveries. The submission of the learned Standing Counsel is that the recoveries were made as per Clause 18-A of agreement, on the advice of Technical Audit Cell. The contractor alleged that the recoveries were wrongful as nowhere in the statement of recoveries it is shown that the recoveries are made under Clause 18-A; no concurrence of contractor was taken for the recoveries and the recovered amount was not finally adjusted by the department but was kept under suspense head ''deposit'' to be adjusted later on. The arbitrator has given reasoning that as per final bill the work has been completed as per specification provided in the agreement. The defects were pointed out, during progress of work, but finally were put in order by the contractor in the final stage. The Technical Audit Cell has examined the work during progress stage and indicated defects in a vague manner and the contractor removed the same at the final stage of the work, therefore the recoveries should have been finally adjusted in the works accounts. Therefore, the arbitrator was justified in awarding claim "A" for the recoveries made by the Department from the contractor.

Claim "B" pertains to payment due on account of excavation at enhanced rates. According to the contractor he got done earth work in filling of left embankment from the excavation of canal bed, as desired by the Department. The quantity of work was 36,000 cubic meter. The contractor demanded rate of Rs. 35/- in place of Rs. 30/- per cum. The matter was brought to the notice of Department through letters dated 6.12.91, 20.9.92 and 10.6.93 by the contractor. In the work agreement there were two items of earth work (i) earth work in filling and (ii) earth work in excavation. The rates were Rs. 30/- per cum and Rs. 35/- per cum. respectively. The department did not deny the justification narrated in the replication dated 12.10.97 filed before the arbitrator. The disposal plan supplied by the department indicated excavation of 37,500 cum earthwork to be filled in left bank embankment in the reach under question. According to plan there existed a deep drain on left side of embankment and on right side existed canal section. There was no area to have access for obtaining the earth. In the above situations the arbitrator has awarded Rs. 1,50,000/-@ Rs. 5/- for 30,000 cum earthwork, which in my view is justified.

Claim "C" relates to payment due on account of excavation enhanced rates. The contractor has claimed cost of the earth work involved in four trenches in toe walls, dug on the inner bank slope @ Rs. 80/- per cum. The department disputed the claim before the arbitrator and argued that payment @ 35/- per cum under general rate of earthwork in embankment as per agreement should be made. The drawing filed before the arbitrator clearly indicated that work has been done with 1000 cum of earth work. According to him the excavation work in trenches is difficult, slow and requires more efforts, therefore the claim was allowed at a higher rate of Rs. 60/- per cum. The arbitrator awarded a sum of Rs. 60,000/-. The reasons given by the arbitrator while allowing the increased rate are well-founded and do not require interference. The claim has not been allowed in violation of terms of contract agreement.

Claim "D" relates to payment due on account of cost of excavation involved in pitching after the embankment was made ready. Although the department has disputed the rate claimed by the contractor under the claim but they agreed that this work was done by the contractor. The work done under this excavation in embankment for laying pitching on slopes, work was 2130 cum. After going through the relevant documents the stand taken by the department was rejected by the arbitrator and awarded the rate of Rs. 60/- per cum and a sum of Rs. 1,27,800/- was awarded under this claim. The stated earlier the department did not dispute the quantities of work done by the contractor, therefore, the award under this head cannot be said illegal and against the terms of agreement.

Under claim "E" payment was claimed on account of sorting out of boulders. The Arbitrator awarded a sum of Rs. 1,20,000/- under this claim. The contractor alleged that additional effort was done in sorting out of boulders after bringing the same with earth near the embankment and after sorting out boulders again transporting them back to the stacking point, near to the place of excavation. The department submitted that for sorting and splitting of 3425.31 cum boulders Rs. 1,09,057-57 has already been paid to the contractor. The department agreed with the quantity of boulders and did not deny the work done. This work was not provided in Schedule ''C'' of the agreement, however, it was executed by the contractor as an extra item allowed by the department. The sorting and stacking of boulders were done as per specifications of items, earth work, Clause 5.08, 5.09 and 5.06 of agreement. In the measurement book the work was not properly measured. Only entry was made that ''boulders are stacked at places directed by the engineer-in-charge''. The exact stacking places were not mentioned in the measurement book. The distance between embankment and boulder stacking area is 500 meter but in the disposal plan this distance has been noted only 350 meter. Therefore, the arbitrator, in the above circumstances, has rightly allowed this claim.

Claim "F" pertains to payment due on account of variation in quantities of work upto 3.7.1992. The contractor claimed 15% more rate of five items of work having unprecedented variations over the quantities as provided in Schedule -C of agreement due to increase in prices, beyond actual date of completion of work. The contractor also claimed loss of profit due to deletion of supply of 20 numbers pressure release valves. The objection of the department was that according to agreement quantities can vary to any extent and therefore nothing extra to be paid. It was also stated that the contractor was responsible for delay in completion of the work. The original time of completion was six months but it was varied by 13 months. The final value of the work was Rs. 36.13 lacs against the agreement cost of Rs. 21.72 lacs. The variation in quantities took place due to the department ordering to execute other works such as drains, bridges etc, not provided in the original agreement. The work also suffered due to strike of Junior Engineers for the period 6.2.92 to 13.2.92 beyond the control of the contractor. The rates of all material/labour have increased during the work period. The time was extended by the department for completion of work though no claim certificate was obtained on demand. The arbitrator has allowed the claim with 15% higher rates for 4 items than the agreement rates for Rs. 1,48,660/-. The contractor was also awarded a sum of Rs. 1500/- only due to loss of profit on the deletion of supply of 80 numbers of pressure release valve.

Therefore, I do not find any illegality and impropriety in the finding arrived at by the arbitrator. Further, it will not be out of place to mention here that the Court cannot look into the mental process of the Arbitrator and speculate as to what impelled the Arbitrator to arrive at his conclusion as mentioned in the award. It is a settled principle of law that the Court cannot sit over the award as an appellate court in order to assess and examine the evidence on record.

The arbitrator also awarded interest @ 18% per annum upto one day before the date of award. An interest @ 6% per annum from the date of award to the date of payment or making the rule of the court whichever is earlier.

Learned Standing Counsel has submitted that there was no provision in the work agreement for any interest, therefore, the Arbitrator has misconducted himself by awarding interest @18% per annum.

Learned Counsel for the respondent, on the other hand, submitted that the Arbitrator has powers to award interest in cases, which arose after the Interest Act, 1978, which has become applicable after 19-8-1981.

Learned Standing Counsel has not brought to the notice of the Court that there was any specific barring clause in the contract agreement to award the interest. In absence of any specific clause in the agreement otherwise, after the enforcement of Interest Act, 1978, the arbitrator has powers to award interest, from the date of dispute and during the arbitration proceeding. Hence, award of interest @ 18% per annum on the sums due against the Department, cannot be said to be illegal. The arbitrator further awarded interest @ 6% per annum on the awarded sum from the date of award to the date of payment or making the rule of the court, whichever is earlier, as per the provision of Section 29 of the Arbitration Act, 1940. Therefore, the submission of learned Standing Counsel on the point of interest awarded by the arbitrator in not acceptable.

For the reasons recorded above, the appeal lacks merit and is liable to be dismissed.

Accordingly, the appeal is dismissed. The impugned judgment and order dated 22-2-2000, passed by the II Addl. Civil Judge (S.D.) Dehradun, rejecting the objection of the State and making the award dated 7-51998, rule of the court, is hereby upheld.