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Judgment
Vinod K. Sharma, J.—This petition, u/s 34 of the Arbitration and Conciliation Act, 1996, has been filed by the Union of India to challenge
the award dated 23.01.2003.
The Respondent Shri T. Panicker, Engineering Contractor, was awarded the work for the construction of additional Satellite Main Earth Station
Antenna Room and duct covering at BSNL, Korattur, vide agreement dated 20.07.1998. The contractor was to commence the work on
30.07.1998 and was required to complete on 29.11.1998. In the contract initially awarded, period fixed for completion of work was 10 months,
which was, on mutual understanding, reduced to 4 months. The contractor was able to complete the work only on 28.09.1999 i.e. with the delay
of 10 months.
The total contract price agreed by the 1st Respondent was for a sum of Rs. 27,05,435/- (Rupees Twenty Seven Lakhs Five Thousand and
Four Hundred Thirty Five only), whereas the measurement of actual amount worked out to be Rs. 24,64,836/- (Rupees Twenty Four Lakhs Sixty
Four Thousand Eight Hundred Thirty Six only). The contractor sought reference in terms of Clause 25 of the agreement.
The request of the first Respondent was accepted and Shri Gurbox Singh, Chief Engineer (Arbitration) was appointed as the sole arbitrator. On
vacation of office of the Chief Engineer (Arbitration) Shri Gurbox Singh, the present Arbitrator Shri A.K. Nayak was appointed as the Sole
Arbitrator.
The first Respondent filed the following claims under different heads:
On account of increase in cost of construction beyond
Claim No.1 Rs.1,08,800/-
the contract period.
On account of payment towards the extra items of
Claim No.2 Rs.15,360/-
building work.
On account of payment towards extra work of 12mm
Claim No.3 Rs.15,360/-
thick cement plaster to the walls of Antenna Room.
On account of additional payment towards extra item of
Claim No.4 Rs.6,400/-
PVC flooring in Antenna Room.
Claim No.5 On account of payment towards idle establishment
Rs.2,56,600/-
charges beyond the contract period at site and office.
Claim No.6 On account of payment towards idle construction
equipment charges during the prolonged period of Rs.96,000/-
contract.
Claim No.7 On account of payment towards centering materials idle
charges during the period of 1 month.
Claim No.6 On account of payment towards idle construction
equipment charges during the prolonged period of Rs.96,000/-
contract.
Claim No.8 On account of payment towards extra lift charges over
Rs.8,200/-
3.5M height including compensation.
Claim No.9 On account of payment towards refund of withheld
Rs.6,000/-
amount including compensation.
Claim No.10 On account of payment towards loss of profit and the
Rs.65,280/-
value of the work reduced.
Claim No.11 On account of payment towards delayed payment of
Rs.80,000/-
final bill security deposit withheld amount of 10cc claim.
Claim No.12 On account of refund of excess recovery towards cost
Rs.33,000/-
of steel made from running mill including compensation.
Claim No.13 On account of cost of arbitration Rs.30,000/-
Claim No.14 On account of interest....
The claims of the first Respondent were contested by the Petitioner, by filing a detailed counter before the 2nd Respondent, by pleading therein
that claims raised were contrary to the facts and agreement. In the application u/s 34 of the Act, challenge was also to award interest @ 18% p.a.
Learned Counsel for the Petitioner challenges the impugned award by contending therein that the award passed is contrary to the terms and
conditions of the contract and the award is biased. In support of this petition, learned Counsel for the Petitioner vehemently contended that under
heads referred to above, the Respondent had claimed a sum of Rs. 1,08,800/- on account of increase in cost of construction beyond the contract
period. Against the said claim, the Arbitrator allowed a sum of Rs. 75,905/-, which is against the terms of the contract.
This contention is based on the fact that the contract was agreed to be concluded within a period of 4 months, therefore, the contractor was not
entitled to this amount. The escalation cost was payable only for the work for which the stipulated period was 6 months or above, and not for any
other work.
This contention of the learned Counsel for the Petitioner cannot be accepted. There is clause in the contract between the parties, which permits
escalation and there is no clause in the contract, which bars escalation of prices, on account of the delay in execution of work.
It is for the Arbitrator to decide as to whether a party was entitled to escalation and to what amount. This Court, while exercising the
jurisdiction u/s 34, does not sit appeal over the award. Therefore, the contention raised by the learned Counsel for the Petitioner deserves to be
rejected.
Learned Counsel for the Petitioner also contended that the second claim raised by the Respondent was not maintainable, as rates were fixed
by the parties with regard to the extra item. The contention of the learned Counsel for the Petitioner is that the Arbitrator was bound by the terms
of agreement, therefore, award passed with regard to claim No. 2, being contrary to the terms of agreement, is liable to be set aside.
This contention of the learned Counsel for the Petitioner is again misconceived. The Arbitrator has jurisdiction to interpret the clause and of
agreement. The amount claimed otherwise is for the extra work done, which was measured and granted. The claim No. 2, therefore, cannot be
said to be beyond terms of agreement, as contended.
Learned Counsel for the Petitioner also challenged the award with respect to claim No. 3 on the plea that the payment for extra work 12mm
thick cement plaster was not permissible, as it was not necessary for the first Respondent to do 12 mm thickness.
This contention, on the face of it, is not sustainable. Once plastering is required to be done, it has to be done as per the building norms,
therefore, no fault can be found with grant of this claim also.
Learned Counsel for the Petitioner challenged the award of claim No. 5 to be again against terms of agreement.
The contention of the learned Counsel for the Petitioner was that clause-5 with regard to extension of time was with respect to unavoidable
hindrances in completion of work, but it could not be the ground to grant escalation, as there was a specific Clause 10cc, dealing with escalation.
This contention of the learned Counsel for the Petitioner cannot accepted. Once there is no bar to grant of escalation due to delay in execution
of work, no fault can be found with this finding.
Learned Counsel for the Petitioner also challenged the award of other items like acceptance of claim towards idle, lift charges etc on the
ground that these were not maintainable, as no right vested with the contractor under the terms of the contract to claim these amounts.
This plea again deserves to be noticed to be rejected. Once it is not disputed that there was no delay on the part of the contractor and
extension was granted keeping in view the delay on part of Petitioner for making necessary arrangement, no fault can be found with the grant of
claim by the Arbitrator.
Learned Counsel for the Petitioner also challenged the claim No. 10 on the ground that no payment was payable on account of loss of profit
by virtue of reduction in the value of the work. Learned Counsel for the Petitioner contended that for having done less work, no amount can be
paid to the contractor, therefore, the award does not only suffer from error on the face of record, but is also contrary to the terms of the contract.
This contention again cannot be accepted. The contract awarded to the applicant was for Rs. 27,05,435/- (Rupees Twenty Seven Lakhs Five
Thousand and Four Hundred Thirty Five only), whereas in fact the contractor was only allowed to execute the work worth about Rs. 24,64,836/-
(Rupees Twenty Four Lakhs Sixty Four Thousand Eight Hundred Thirty Six only).
The Arbitrator has merely awarded loss of profit on this account by fixing at 10% of total cost, which is quite reasonable, therefore, it can
neither be said to be arbitrary.
As regard grant of interest is concerned, though it is within the jurisdiction of Arbitrator to grant interest @ 18%, as stipulated in the Arbitration
and Conciliation Act. But the Arbitrator could grant interest keeping in view the commercial contract. Commercial rate of interest has substantially
fallen down, therefore there is no justification to grant interest @ 18% on the award amount.
Consequently, while upholding the amount, the rate of interest is reduced to 9% p.a.
With the above modification qua interest, this original petition is ordered to be dismissed. No costs.