JUDGMENT
R.L. Khurana, J.
1. The petitioner Messrs Inderjit Singh Avtar Singh, a registered partnership firm and carrying on the business as registered Government Contractors, entered into an agreement with the H.P. State Electricity Board/the predeccssor-in-interest of the present respondent for the execution of the work relating to “Construction of Pre-stressed Concrete double Line Bridge over river Satluj at Rampur Bushahr on Rampur Bye-pass Road” on the terms and conditions contained in the agreement. The work was to be executed by the petitioner on a total costs of Rs. 7,206 lacs within the stipulated period of 18 months to be reckoned from the 15th day after the issuance of the acceptance letter. Calculating on such basis the original stipulated date for completion of the work was 5.6.1990. For certain reasons, the work could not be undertaken till March, 1993. In the meantime the assets and liabilities of Nathpa Jhakri Project was taken over by the respondent, Nathpa Jhakri Power Corporation Limited from the H.P. State Electricity Board.
2. The petitioner, in the meanwhile, had raised a claim for damages to
the tune of more than Rs. 85 lacs on account of delay in the execution of work.
Simultaneously the petitioner submitted a revised offer for the execution of
the said work in view of the changed circumstances. After negotiations the
revised offer of the petitioner was accepted and as a result thereof a
supplementary agreement came to be entered into between the parties on
6.3.1995. The time stipulated for the completion of the work was fixed as 18
months to be reckoned from 24.12.1994. In order words, the work was to be
completed by 23.6.1996. As a consequence of such supplementary agreement,
the petitioner withdrew its claim of damages amounting to more than Rs. 85
lacs.
3. The work was undertaken by the petitioner and the same was completed on 6.1.1999. During the course of execution of the work, some dispute arose between the parties, which could not be settled mutually between the parties. As a result, such disputes, in terms of the arbitration clause contained in the agreement came to be referred to the sole Arbitrator Shri T.L. Sharma, Retired Engineer-in-Chief, H.P. Public Works Department, who entered upon the reference on 30.12.2000.
4. The petitioner submitted the following claims before the Arbitrator :
Claim
No.
Claim
Amount
(1)
Amount
of escalation admissible to the petitioner
Rs. 13,25,784
(2)
Interest
on the above amount at the rate of 18% per annum from August, 1995 till the
date of sub-mission of claim
Rs. 12,76,000
(3)
Interest
on the amount wrongly recovered from the petitioner
Rs. 5,00,000
(4)
Interest
on the amount of security deposit received by the respon-dent from the Bank
but not paid to the petitioner
Rs. 26,000
(5)
Interest
at the rate of 18% per annum on all the amounts wrongly withheld by the
respondent from the date of claim till the date of realisation of the amount.
5. The claims raised by the petitioner were denied by the respondent, who pleaded that nothing was payable to the petitioner.
6. The Arbitrator under Claims No. 1 and 2 held the petitioner entitled to a total sum of Rs. 24,29,886, that is Rs. 13,25,784 towards escalation as claimed by the petitioner and Rs. 11,04,102 as compound interest on the said amount calculated at the rate of 12% per annum. However, the Arbitrator allowed an adjustment of Rs. 9,87,295 to the respondent as the interest payable by the petitioner on the advance payments of Rs. 14,79,750 received by it during the period 31.5.1990 and 30.3.1992. Thus, a net sum of Rs. 14,42,591 was awarded to the petitioner under Claims No. 1 and 2 by the Arbitrator.
7. Under Claim No. 3, the Arbitrator awarded a sum of Rs. 2,20,933 in favour of the petitioner.
8. Insofar as Claim Nos. 4 and 5 are concerned, no amount was awarded to the petitioner since both these claims stood settled during the pendency of the arbitral proceedings.
9. Under Claim No. 6 pertaining to pendents lite and future interest, the Arbitrator allowed interest at the rate of 12% per annum to the petitioner
as under:
(i) on the amount payable to the petitioner under Claims No. 1 and 2 from the date of submission of claims, that is, 29.12.2000 till the date of award ;
(ii) on the amount wrongly withheld by the respondent, as detailed in Claim No. 4 from the date of the respondent realised the interest on the fixed deposit to the date of payment of such amount by the respondent to the petitioner in June, 2001.
10. Insofar as future interest is concerned, the Arbitrator observed that the provisions of Arbitration and Conciliation Act, 1996, would apply,
11. The award was made by the Arbitrator on 31.8.2001. The petitioner on 11.9.2001 made an application under Section 33 of the Arbitration and Conciliation Act, 1996, to the Arbitrator for correction of the award. Two contentions were raised therein, namely,
(a) the amount payable under Claims No. 1 and 2 in claims of interest at the rate of 12% per annum works out to Rs. 21,86,658 and not Rs. 24,29,886. There is mistake in calculation of the amount of interest payable on the principal amount of Rs. 13,25,784 ; and
(b) there is an error in adjusting the amount of Rs. 9,87,295 against the sum payable to the petitioner under Claims Nos. 1 and 2 inasmuch as no such adjustment was claimed by the respondent. No adjustment could have been allowed without there being a claim in this regard by the respondent.
12. The Arbitrator vide his supplementary award made on 4.10.2001 disallowed the application by holding :
(a) the amount of Rs. 24,29,886 under Claims No. 1 and 2 was correctly calculated since compound interest was awarded at the rate of 12% per annum; and
(b) adjustment of Rs. 9,87,295 was correctly allowed being the amount of interest payable by the petitioner on the amounts of advance received by it during the period 31.5.1990 and 30.3.1992 in terms of the agreement and that such adjustment could be ordered even in the absence of specific claim in that behalf.
13. Aggrieved by the award of the Arbitrator, the petitioner has approached this Court by way of the present Objection petition under Section 34, Arbitration and Conciliation Act. The only grievance made is with regard to the adjustment of Rs. 9,87,295 allowed by the Arbitrator under Claims No. 1 and 2. It is pleaded that by allowing such adjustment in the absence of claim in that regard by the respondent, the Arbitrator has travelled beyond the scope of reference and as such, the award is contrary to terms of agreement between the parties.” Besides, the award is bad being opposed to the public policy of India.
14. The respondent while resisting the claim averred that adjustment of Rs. 9,87,295 was rightly allowed by the Arbitrator in view of Clause 56.2(ii)(A) of the agreement. The award neither is against the public policy of India nor is contrary to the terms of agreement between the parties.
15. Following issues were framed by this Court on the pleadings of the parties on 23.5.2002 :
(1) Whether the award is bad being opposed to the public policy of
India ? OPO
(2) Whether the award is contrary to the terms of the agreement between
the parties, as alleged ? OPO
(3) Relief.
16. I have heard the learned counsel for the parties and have also gone through the record of the case. My findings on the above issues are as under :
Issues No. 1 and 2
17. Both the issues being co-related and inter-connected are taken up for determination and disposal together.
18. At the very out-set, it may be stated that the adjustment allowed by the Arbitrator while making his award in respect of Claims No. 1 and 2 cannot be said to be outside the purview of the agreement between the parties. It arises as an incident of the determination of the amount payable, if any, under Claims No. 1 and 2 as laid by the petitioner.
19. The following facts are admitted by the parties :
(a) the original agreement with regard to the execution of the work was entered into between the parties on 21.11.1988 ;
(b) The work was to be completed by 205.1990 at a total cost of Rs. 72.06 lacs;
(c) the work, for certain reasons could not be undertaken till March, 1993;
(d) the petitioner submitted a revised offer for the execution of the work and consequent upon the negotiations between the parties, the revised offer of the petitioner for execution of the work at a total cost of Rs. 203 lacs was accepted. A supplementary agreement came to be executed between the parties on 6.3.1995 ; and
(e) a sum of Rs. 14,79,750 was paid to and received by the petitioner during the period 31.5.1990 and 30.3.1992, that is, after the original agreement dated 21.11.1988 and prior to the execution of the supplementary agreement dated 4.3.1995.
20. Clause 9 of the supplementary agreement dated 6.3.1995, provides :
“The NJPC hereby covenants to pay the contractor, in consideration of the execution and completion of the works, the contract price at the rate and in the manner prescribed in the original contract. Agreements and the payments already made to the contractor by the HPSEB/NJPC will be deducted from the above negotiated price of each bridge.”
21. There is no denying that save and except the modified terms and conditions contained in the supplementary agreement dated 6.3.1995, all the terms and conditions contained in the original agreement dated 21.11.1998 would apply to the parties inasmuch as Clause 6 of the supplementary agreement dated 6.3.1995 provides :
“For other terms and conditions the original contract agreement will govern.”
22. Clause 56.1 of the original agreements permits the grant of advance to the petitioner and Clause 56.2(ii)(a) provides for payment of interest at the rate of 12% per annum on the amount(s) of advance.
23. As stated above, a sum of Rs. 14,79,750 was received by the petitioner during the period 31.5.1990 to 31.3.1992 after the execution of the original agreement and before the execution of the supplementary evidence (agreement). It is also admitted case of the parties that the work in terms of the original agreement could not be undertaken till March, 1993. In view of the same, the Arbitrator rightly treated the amount of Rs. 14,79,750 as having been paid to the petitioner as advance and thereafter allowed interest thereon in terms of Clause 56.2(ii)(a) of the agreement.
24. In calculating the “amount due or payable” under a particular claim from or by a party to another, the Arbitrator can take into account the amount(s) already paid to or due from such party and allow the adjustment/ deductions of such sums against the sum found due/paid under a particular claim. Such award of the Arbitrator can neither be termed as against the public policy of India nor outside the purview of the agreement or beyond the scope of reference.
25. In P.M. Paul v. Union of India, AIR 1989 SC 1034=1989(2) Arb. LR 215 (SC) the dispute that was referred to the Arbitrator was, as to who is responsible for the delay, what are the repercussions of the delay and how to apportion the consequences of the responsibility. The Arbitrator after holding the Public Works Department to be responsible for the delay allowed escalation to the extent of 20% of the total costs and awarded interest on such amount of escalation at the rate of 10% per annum. An objection to the award was raised that claim as to escalation was outside the purview of the contract and as such the Arbitrator had exceeded his jurisdiction in awarding escalation.
26. Rejecting the objection it was held that the claim as to escalation was not outside the purview of the contract. It arises as an incident of the contract. Once the Arbitrator had the jurisdiction to find that there was delay in the execution of the contract due to the conduct of the Department, it was liable for the consequences of the delay, namely, increase in price. The award of Arbitrator was, thus, held to be valid.
27. In the present case also, the liability of the petitioner to pay interest on the amounts received in advance is not only a term of the agreement, the same had arisen as an incident of the contract and the claim raised by the petitioner under Claims No. 1 and 2. The two issues are accordingly decided against the petitioner.
Relief
28. As a result, the present objection petition is dismissed. No orders as to costs.