IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 21/09/2006
CORAM
THE HONOURABLE MR. JUSTICE P.K. MISRA
AND
THE HONOURABLE MR. JUSTICE R. SUDHAKAR
O.S.A. Nos.406 and 407 of 2000
O.S.A. No.406 of 2000 (O.P. No.908 of 1999):
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. The State of Tamilnadu
represented by its Secretary to Govt.
Animal Husbandry & Fisheries Dept.
Chennai 9.
2. The Director of Fisheries
Anna Salai
Teynampet
Chennai 6.
3.The Superintending Engineer
Fisheries & Harbour Circle
Nagercoil
now at the office of
the Director of Fisheries
D.M.S. Office
Anna Salai
Chennai 6. ..Appellants/Petitioners
Vs.
1. K.Ramachandran
Proprietor
Complex Pile Foundations
Chennai 600 014.
2. Justice K.M.Natarajan (Retd.)
No.117/1
L.B. Road
Kamaraj Nagar
Thiruvanmiyur
Chennai 600 041. ..Respondents/Respondents
O.S.A. No.407 of 2000 (Application No.1221 of 2000 in O.P. No.326 of 1999):
1. The State of Tamilnadu
represented by its Secretary to Govt.
Animal Husbandry & Fisheries Dept.
Chennai 9.
2. The Director of Fisheries
Anna Salai
Teynampet
Chennai 6.
3. The Superintending Engineer
Fishing Harbour Project Circle
Nagercoil
now at the office of the
Director of Fisheries
D.M.S. Office
Anna Salai
Chennai 6. ..Appellants/Respondents
Vs.
K.Ramachandran
Proprietor
Complex Pile Foundations
Chennai 600 017. ..Respondent/Applicant
Both O.S. Appeals are filed under Order XXXVI, Rule 1
of the High Court Original Side Rules read with Clause 15 of
the Letters Patent against the Common Order dated 26.4.2000
passed by a learned single Judge of this Court in O.P.No.908
of 1999 and A.No.1221 of 2000 respectively in O.P.No.326 of
1999.
For Appellants in O.S.A.Nos.406 and 407 of 2000 :
Mr.S.Senthilnathan, Government Advocate
For first respondent in O.S.A.406/2000 and respondent in O.S.A. No.407/2000:
Mr.G.R.Swaminathan
For second respondent in O.S.A. No.406 of 2000:
No appearance
COMMON JUDGMENT
(The Judgment of the Court was delivered by R.SUDHAKAR,J.)
Original Side Appeal No.406 of 2000 is filed by the
appellants/petitioners in O.P.No.908 of 1999 challenging the
common order dated 26.4.2000 passed by the learned single
Judge, rejecting their claim for setting aside the Award
dated 27.3.1999 passed by the sole Arbitrator in Application
No.76 of 1995 in C.S.No.263 of 1987.
2. Original Side Appeal No.407 of 2000 is filed by the
appellants/respondents in A.No.1221 of 2000 in O.P.No.326
of 1999 challenging the common order of learned single Judge
dated 26.4.2000 allowing O.P.No.326 of 1999 to receive and
confirm the award and A.No.1221 of 2000 to pass decree in
terms of the Award dated 27.3.1999.
3. The parties, viz., the appellants are referred to
as Department and the first respondent is referred to as
claimant/ contractor in both the appeals for the sake of
convenience.
4. The sole Arbitrator was appointed in C.S.No.263 of
1987 and he passed an award dated 27.3.1999. The Arbitrator
filed O.P.No.326 of 1999 before this Court to receive and
confirm the award dated 27.3.1999. The first respondent, the
claimant filed Application No.1221 of 2000 in the said
O.P.No.326 of 1999 to pass a decree in terms of the award.
The appellants herein filed O.P.No.908 of 1999 challenging
the award dated 27.3.1999. The learned single Judge by a
common order dated 26.4.2000 in both O.P.Nos.326 of 1999 and
908 of 1999 and the A.No.1221 of 2000 allowed the
Application No.1221 of 2000 and O.P.No.326 of 1999 and
dismissed the O.P.No.908 of 1999. It is against this common
order dated 26.4.2000, present appeals are filed.
5. The brief facts of the case as stated by the
claimant is as follows:- The appellants floated a tender
for the formation of R.C. Jetty at Valinokkam Fishing
Harbour in Ramanad District. The nature of work was
precasting and driving of R.C.C. Piles. The last date of
receipt of tender was fixed on 30.12.1983 as per the tender
schedule. The tender will be valid upto six months from
30.12.1983 to 29.6.1984. During the opening of the Tender,
the first respondent/claimant made the following conditions:
(1) Mobilisation charges of Rs.2 lakhs and Electric
Power and Water Supply should be made available at the
site by the Department and
(2) Required cement and steel for the casting yard
should be supplied by the Department free of cost
The first respondent/claimant submitted the lowest quote.
On the request made by the Department by its letter dated
1.8.1984 claimant revalidated the tender and finally, it is
stated that the claimant received the work order dated
26.3.1985. Since the work order was issued after lapse of
15 months, claimant sent a letter dated 28.3.1985 claiming
30% escalation as against 20% claimed earlier. At the
request of the Superintending Engineer that the escalation
amount will be paid on receipt of formal orders from the
Government, claimant/contractor accepted the contract work
on 20.4.1985. After accepting the agreement in the presence
of Mr.G.Kaliasundaram, the then Superintending Engineer, the
claimant brought all Pile Driving Equipment and machinery
and the construction materials necessary for this project
work in the site. Some portion of Pile Driving machinery,
were hypothecated under the hypothecation agreement with the
then Superintending Engineer Mr.G.Kaliasundaram on 18.5.1985
and received the recoverable mobilisation charges of Rs.2
lakhs as mentioned in the tender condition dated 30.12.1983.
However, it is only on 4.7.1985 that the Department handed
over the site. On 4.7.1985 itself casting of Pile work was
started. During the casting of piles, the Department did
not supply the required cement and steel and proper
instructions were not given. However, the claimant has
completed the casting of piles. Due to the aforesaid delay,
the claimant incurred loss as the machinery and labour were
kept idle. Further, 3rd appellant did not pay the full
bill amount for the work done upto October, 1985 and has not
prepared the escalation bill amount according to letter
dated 6.4.1984. Due to non-payment of escalation bill
amount as promised, the claimant was unable to make any
progress in the driving of piles. After many oral
representations and several letters, 3rd appellant arranged
a Dredger in October, 1985 for the above work. The Dredger,
however, sunk on its way near Pamban Bridge at Rameswaram on
30.12.1985. After several oral representations and
reminders, made by the claimant, the Superintending Engineer
G.Kaliasundaram sent a letter dated 12.1.1986 stating that
the approval of the Government regarding escalation charges
will be obtained within a month, however, even after lapse
of four months the Department did not pay the escalation
bill amount. By letter dated 12.7.1986, claimant
requested the third appellant to settle claim amount
including the pending bill amount and also to release the
machinery and equipment, in default to pay simple interest
at 18% per month from 15.9.1986. claimant further
intimated that failure to settle the claim before
31.12.1986, the claimant will seek remedy as per law.
Inspite of this, the Department had not released pending
bills, escalation bill amount and further did not release
machinery and equipment, and thereby crippled the claimant
from taking any other contract work. Claimant stated that
he was incurring loss day by day. The claimant, therefore,
prayed for arbitration in terms of Clause 39 of General
Conditions of the contract. Since the department refused to
appoint an Arbitrator, claimant approached this Court by
filing C.S.No.263 of 1987 for appointment of an Arbitrator
to settle the claim amount and for release of machinery and
equipment and other construction materials. Mr.C.R.Gopal,
the then Superintending Engineer promised to arrange for a
Dredger and instructed the claimant to start Pile Driving
work. The Department paid 20% escalation amount on
27.7.1987 in G.O.No.791. However, by letter dated
14.1.1988, the Executive Engineer directed the claimant to
refund the above said escalation amount. Trusting the
words of the third appellant, claimant started the Pile
Driving work for which the bill amount was not paid to the
claimant inspite of several requests and reminders. The
pile driving work could not be proceeded as the third
appellant failed to arrange for a Dredger during 1988.
Since the area was covered by sea sand, the jetty was not
constructed as the seabed was not dredged. Instead of
supplying a Dredger to enable the claimant to complete the
work, the then 3rd appellant terminated the contract on
11.4.1989 while the piling work was in progress. Because of
the failure on the part of the appellants Department for
arranging a Dredger and dredging the seabed, the claimant
was unable to proceed further with the Pile Driving work.
Aggrieved by the termination of the contract without paying
the claimant the Pile Driving Bill amount, Pile Casting Bill
amount, Escalation Bill amount and other claims made
earlier, as illegal and arbitrary, the first
respondent/contractor sought for arbitration of the dispute.
According to the first respondent/claimant due to delay at
various stages he suffered huge loss and the non-use of
machinery, equipment and other materials from 30.12.1983 to
11.4.1989, he suffered further loss. First
respondent/contractor made a claim for Rs.2,46,42,498/-
under various heads as follows:-
"CLAIM No.1:
Value of work done not yet paid - Claim according to
agreement rates
Casting of 160 numbers of Piles:
1. Shuttering, Centering, Seafolding,
Steel Rods Bending & Building &
Oiling the shuttering & concreting
and curing all the works:
Lumpsum Rate for each Pile: Rs.5160/-
For 160 numbers of Piles : Rs.5160 x 160 Piles = Rs.8,25,000/-
2.Handlying & Driving the Precast Piles:
Lumpsum Rate for each Pile: Rs.5870/-
For 10 Piles : Rs. 5,870 x 10 = Rs. 58,700/-
-----
——–
Total amount = Rs.8,83,700/-
Minus the Bill amount paid = Rs.2,20,000/-
---------------
Balance to be billed: Net amount due =
Rs.6,63,700/-
---------------
Balance to be billed: Net amount due = Rs.6,63,700/-
CLAIM No.2:
Escalation Lumpsum @ 180% on the
compelled work during the extended
period beginning from 4.7.1984 to
11.4.1989
Completed work : Rs.8,83,700/-
Escalation @ 180% : Rs.8,83,700 x 180
——————- =Rs.15,90,660/-
100
CLAIM No.3:
Non Recoverable Mobilisation charges not paid = Rs.3,00,000/- CLAIM No.4: Compensation for Losses suffered on account of overheads & Loss of profit during the stipulated period of contract from 4.7.1985 to 3.1.1986 = 6 months a) Amount of contract = Rs.33,25,500/- b) Overheads component of (a) 20% worked out during quoting of tender: = Rs.6,65,100/- c) Value of work done upto 3.1.89
(contract period of six months) = Rs.8,25,000/-
d) Prorate (b) on (c)
20% on Rs.8,25,000/- being
overhead & profit
for 6 months = Rs.1,65,000/-
e) Net loss on overheads
profits on = (b) - (d) = Rs.5,00,000/- Rs.5,00,000/-
CLAIM No.5:
Losses suffered during
the extended period
from 4.1.86 to 11.4.89
on account of overheads &
loss of profits for
39 months:
(a) Provision for overheads
& profits
made by the claimant while
working out the revalidated
tender amount is = Item (b) in claim No.4
----------------------
6 months
Contract period 6 months: Rs.6,65,100/-
————-
6 months
Overheads & Loss of Profit
for each months : Rs.1,10,850/-
(b) Overheads & Loss of profit
during the extended period
per month : Rs.1,10,850/-
for 39 months : Rs.1,10,850/- x 39=Rs.43,23,150/-
CLAIM No.6:
Damages due to Idle of Machinery, Equipment &
other construction materials withheld by the
respondents from 4.1.1986 to 22.6.93; Total 89 months:
Machinery Component : 35%
Contract value : Rs.33,25,500/-
For 35% for 6 months in
the value of contract : Rs.11,63,923/-
--------------
6 months
Loss on account of idle of machinery
for each month : Rs.1,93,987.50
For 89 months : Rs.1,93,987.50 x 89 = Rs.1,72,64,888/-
CLAIM AMOUNTS
Claim No.1 : Rs. 6,63,700/-
Claim No.2 : Rs. 15,90,660/-
Claim No.3 : Rs. 3,00,000/-
Claim No.4 : Rs. 5,00,000/-
Claim No.5 : Rs. 43,23,150/-
Claim No.6 : Rs.1,72,64,888/-
------------------
Total claim amount Rs.2,46,42,498/-
------------------
Thus, claimant prayed for passing of award for
Rs.2,46,42,498/-.
6. Respondents/Department filed a counter with counter
claim as follows:- The value of the claimant’s tender as
submitted on 30.12.1983 was Rs.34,33,200/- and the same was
reduced to Rs.33,25,500/- to secure the work for himself.
After the reduction of rates, the Superintending Engineer
recommended the tender to Director of Fisheries on
9.2.1984. The recommendation of the Superintending Engineer
was considered at various other Departments and placed
before the Tender Committee. The Tender Committee
consisting (i) The Commissioner and Secretary to
Government, Forest and Fisheries Department (ii) The Deputy
Secretary to Government, Public Works Department (iii) The
Director of Fisheries and (iv) Thiru G.Kaliyasundaram, the
Superintending Engineer, Fishing Harbour Projects Circle
considered the question of mobilisation advance and decided
that a mobilisation advance of Rs.2 lakhs may be granted on
the usual terms and conditions, which amount is to be
recovered from the claimant’s bills, while accepting the
lower tender of the claimant for Rs.33,25,500/- with an
excess of 2.90% over the estimate amount. Government in
their G.O.Ms.No.268 P & F Department, dated 7.3.1985
accepted the tender offer of the claimant for Rs.33,25,500/-
with excess percentage of 2.90% over the estimate and
mobilisation advance was also sanctioned under usual terms
and conditions. In the G.O. there was no mention of
acceptance either to pay escalation at 20% of the tender
rates or to grant Rs.3 lakhs (non-recoverable) mobilisation
charges. During the interim period after the expiry of
revalidation on 28.12.1984, the Superintending Engineer
again requested the claimant in his letter dated 19.12.1984
to extend the tender rates for a further period of one month
from 29.12.1984. Promptly, the claimant in his letter dated
21.12.1984 revalidated his tender rates for a further period
of one month from 29.12.1984 to 28.1.1985. Claimant
referred only to his earlier revalidation letter dated
2.10.1984 without any preconditions and not to his letter
dated 31.8.1984 wherein preconditions had been stipulated.
The Superintending Engineer in his letter dated 9.1.1985
submitted revalidation letter of the claimant for the
further period from 29.12.1984 to 28.1.1985 to the Director
of Fisheries. The Director of Fisheries in turn submitted
the copy of letter dated 21.12.1984 of the claimant to the
Government revalidating the claimant’s tender upto
28.1.1985, whereas the claimant has alleged that the
claimant had not accepted for giving further revalidity of
tender, because there was further escalation in the prices
of materials and labour. The allegation that the then
Superintending Engineer Thiru G.Kaliasundaram promised to
give work order within one month’s time is denied. The work
order was issued by the Superintending Engineer on 26.3.1985
after the Government accepted the tender vide G.O.Ms.No.268
dated 7.3.1985. There was no mention and no stipulation
made either in respect of grant of non-recoverable
mobilisation charges of Rs.3 lakhs in the work order. The
claimant on receipt of the work order dated 26.3.1985 raised
objection vide his letter dated 28.3.1985. The
Superintending Engineer in his letter requested the claimant
to execute the agreement and introduce a change in the
agreement that escalation charges will be paid to the
claimant on receipt of formal orders of Government “if
approved”. There was no whisper that the non-recoverable
mobilisation charges of Rs.3 lakhs as wanted by the claimant
will be paid to the claimant. Claimant requested the
Superintending Engineer to delete the word “if approved” so
as to pressure the Superintending Engineer to accept the
escalation stipulation of claimant for 30% enhanced rates
while the Superintending Engineer had no power or authority
to grant escalation of rates. Once the negotiated tender
offer was accepted by Government, the claimant may only
accept the work order and execute the agreement or he may
reject the work order and refuse to sign the agreement
whereupon the Department may forfeit the EMD. Claimant
added a further demand that the non-recoverable mobilisation
charge of Rs.3 lakhs which had so far not been raised either
in the claimant’s revalidation upto 28.12.1984 or upto
28.1.1985 in his letters dated 2.10.1984 and 21.12.1984
respectively and also in the minutes of meeting of the
tender committee on 4.12.1984 and G.O.Ms.No.268 dated
7.3.1985. The agreement dated 10.5.1985 was registered as
CR.No.5/85-86. No special conditions were stipulated in the
agreement except to state that mobilisation advance of Rs.2
lakhs shall be paid for procuring machinery and making
preliminary arrangements at the site against hypothecation
of machinery to the Government. This advance was to be
recovered in ten equal instalments with interest at
commercial rates from the first 10 consecutive bills after
20% work is done. G.O.Ms.No.268 dated 7.3.1985 provided for
the grant of mobilisation advance of Rs.2 lakhs on
hypothecation of machinery. Accordingly, on the claimant
bringing his machinery to site and hypothecating the same,
claimant was sanctioned the mobilisation advance of Rs.2
lakhs. Thus, it will be clearly seen there was no breach by
the appellants Department in either accepting the
negotiated tender of the claimant as per G.O.Ms.No.268 dated
7.3.1985 or in the sanction of the mobilisation advance by
the Department on 18.5.1985 as per the hypothecation deed
and insurance cover at pages 117 to 135 of the agreement.
The mobilisation advance was paid to the claimant on
19.5.1985.
7. It is also stated that the claimant did not by any
letter during the period in question before 4.7.1985 state
that the appellants Department delayed handing over the
site. The claimant did not withdraw from the contract on
the basis that site had not been handed over timely. The
agreement was signed by claimant on 10.5.1985 and the
claimant took over the site on 4.7.1985. With regard to
supply of steel, cement and other materials, the Department
contended that there was no delay on their part and the
claim of the first respondent/ contractor was misconceived.
The fault was stated to be on the part of the
contractor/first respondent. The Department also gave the
details of payments made to the contractor refuting the
claim that amounts were not paid for the work done. The
amount claimed by the first respondent was disputed by the
Department.
8. After October, 1985 the claimant did not carry out
any work till November and December, 1988 when 10 piles were
driven by claimant. There is no justification for this kind
of delay and piece meal work in the sense even the 10 piles
driven have not been fully driven and cut off. For handling
10 piles, payment is due to claimant. The payment due is
Rs.15,000/- only. This works was not carried out in
October, 1985 but only later during November and December,
1988 and in February 1989. The claimant has further falsely
stated that third appellant has not prepared the escalation
bill amount according to the letter dated 6.4.1985. As per
the letter of Superintending Engineer addressed to the
claimant, it was informed that the representation is being
submitted to the Government. The Government considered the
repeated request of claimant for escalation charges of 20%
over tender rates and sanction escalation charges in
G.O.Ms.791 F& F Department dated 17.7.1987. After
20.10.1985 no work had been done by the claimant till date
of the said G.O. On issue of the said G.O., the escalation
charges for work done until then by the claimant was paid on
27.7.1987. The payment so made was Rs.1,65,439/-. Thus
there was no breach committed by the appellants Department.
The above payment has been accepted by the claimant without
demur and protest. Having been satisfied by such payment it
is not left open to the claimant now to seek escalation.
Hence the claim of the claimant under Claim No.2 for
escalation once again at 180% for work already done and
fully paid is not maintainable and liable to be rejected.
9. The payment escalation charges was not a condition
stipulated in the contract or in the agreement. Even if it
were, non-payment of escalation charges for any duration is
not a cause on the basis of which the claimant may stop
work. Claimant failed to discharge his duties as a lumpsum
contractor and breached the contract by his failure to
complete the work. Claimant further breached the contract
by his failure to adhere to the rate of progress stipulated
in the agreement at pages 6 and 40. The averment that the
third appellant should arrange for a dredger for dredging
pile driving area is not correct. Claimant should have
driven atleast 3 piles per day, but the claimant did not do
so and by his failure claimant breached the contract. Since
claimant had carried out only 24% of the work even after
nearly 4 years, the Department had no other option but to
terminate the contract as the claimant had committed
fundamental breach of contract. The fact remains that
the contract period expired as early as on 3.1.1986 and the
same has not been extended. As such, the contractual
obligations between the parties did not extend beyond this
period and whatever work had been done by the contractor
after the efflux of the contractual period inspite of the
conduct of the parties the contractor is to be paid for the
work done as per the “Quantum Merit” enumerated in Section
70 of the Indian Contract Act 1872 (Central Act IX of 1872).
After expiry of contract on 3.1.1986 the claimant has
conveyed and driven incompletely 10 piles only in November,
1988 to February 1989. The claimant has claimed Rs.5,870/-
per pile for handling and driving the same as per the
agreement rate or his revised rate. For the purposes of
valuing the work thus carried out by him for handling and
driving 10 piles, the claimant even according to his own
claim became entitled to Rs.58,700/-. The piles have not
been driven to the set point, but have been stopped much
above the set point. Therefore, the driving is incomplete
and payment of the same cannot be made. Payment can be
limited only to the handling of the piles for which a rate
of Rs.1,500/- per pile is to be adopted as per the
stipulations in the contract as there is no other evidence
available. In view of the contract having ended on
3.1.1986 by efflux of time and further as affirmed by the
claimant himself by his letter dated 12.7.1986 the contract
has undisputedly come to end as on either of these dates and
the same was further confirmed by the claimant in his
letter dated 29.10.1986. There is no proof to show that the
contract was kept alive beyond 3.1.1986.
10. The machinery of claimant had been hypothecated to
secure mobilisation advance and the question of release of
hypothecated machinery does not arise. It is stipulated
under Clause 39 of the agreement that the contractor is
prohibited from going for arbitration till the completion of
the work. The claimant did not intimate the appellants
Department that he cannot (1) complete the contract or (2)
that he had no intention of resuming work or (iii) that he
was frustrated on account of (a) lack of finance (b) lack of
resources (c) lack of managerial and technical skill and
expertise to simultaneously manage and execute work at 3
work sites in the sea (Thondi, Valinokkam quay wall and
these RCC Jetties at Valinokkam) (d) that appropriate and
necessary machinery and equipment of good quality and (e)
efficient and effective labour, and therefore he was
withdrawing from the contract. Hence, the claimant is not
entitled to any relief at the hands of Arbitrator. However,
as the disputes referred to are outside the scope of
agreement and admittedly outside the scope of the contract
period, the claims are not arbitrable and are also liable to
be rejected in toto.
11. The Superintending Engineer by letter dated
29.10.1986 informed the claimant that the work was at a
standstill and if work was not resumed by 10.11.1986, the
contract will be terminated with forfeiture of EMD etc. To
this letter the claimant vide his letter dated 3.11.1986
replied that he has resumed work on 27.10.1986, which is not
correct. Again the Superintending Engineer issued notices
to the claimant vide letters dated 1.6.1987, 22.7.1987,
4.8.1987, 19.10.1987 and 24.11.1987 for not resuming the
work. The Director of Fisheries also issued notice to
claimant instructing the claimant to resume work vide his
letters dated 28.9.1987 and 3.11.1987. To all these letters
there was no response from the claimant. It shows that
there were no labourers at site of work from 20.10.1985 till
work was resumed in November, 1988. Hence claim made under
Claim Nos.4 to 6 are false. The claimant responded only in
his letter dated 2.9.1988 stating that he was arranging to
resume work. Earlier in letter dated 16.5.1988, the
claimant had furnished his “programme” for resuming work.
Claimant stated that he has to arrange two boats from Thondi
to Valinokkam and then set up his pile driving machine on
these boats and commence the pile driving. Review meeting
was also held on 16.5.1988, in which it is recorded at page
No.2 of the minutes that the pile driving machine and
equipment at Thondi has to be moved to Valinokkam and
assembled and thereafter 7 piles driven in the quay wall and
the work in RCC Jetty at Valinokkam resumed thereafter.
This graphically reveals that claimant neither had a working
pile driving machine could be mounted for carrying out work
of pile driving inspite of securing mobilisation advance of
Rs.2 lakhs with the tender and paid on 18.5.1985 and
escalation charges of Rs.1,65,349/- in July 1987 and the
lack of machinery, equipment resources, labour and capital
were also the reasons why claimant could not carry out work
apart from wilfully abandoning work as such the claimant is
totally ineligible for any claim (i) for idle labour and
machinery and (ii) for loss of profit (claim Nos.4 to 6).
In his letter dated 18.1.1989 addressed to the
Superintending Engineer, the claimant has furnished the
reasons as to why he did not do work after October 1985
stating “we stopped work as the escalation was granted very
late in 1988”. This is an unilateral and arbitrary action
of the claimant and a clear breach of contract without any
justification for which the claimant is solely responsible.
Hence, the claimant is ineligible for any claim (i) for idle
machinery and labour and (ii) for loss of profit (claims 4
to 6) after unilaterally and arbitrarily and wilfully
stopping work and breaching contract when claimant could
have executed the work.
12. The contract was terminated for delay and slow
progress and breach of contract on 11.4.1989 vide the letter
of the Superintending Engineer dated 11.4.1989.
13. Claimant has also secured escalation charges of
Rs.1,65,439/- on 27.7.1987 which is Rs.97,506/- in excess of
the actual amount due to claimant as escalation charges.
Considering the amounts due to the Department no amount is
payable to claimant for the driving of the 10 piles and
payment is due from claimant in respect of excess payments
received by claimant.
14. Since the work is incomplete no payment can be
made. There is no stipulation that dredging has to be
carried out first in order to carryout pile driving work.
From February, 1989 until termination of contract on
11.4.1989 the claimant did not drive any piles. Hence, the
claim Nos.3 to 6 are not maintainable and are not
arbitrable.
15. The abstract of the Department’s objection to the
claim in the counter statement before the Arbitrator, is as
follows:-
(i) In respect of Claim No.1, it is stated that full
payment of Rs.8,25,195/- has been made for the pile casting.
(ii) In respect of Claim No.2, it is stated that the
claim is purely fictitious and imaginary. Full payment has
been made for the work done then and there immediately on
completion of the work for Rs.8,27,195/-. No further work
thereafter was carried out for which payment is due. No
escalation is payable. It is also contended that no
escalation could be paid because there is no provision for
making payment for escalation in contract and agreement.
The 20% escalation was granted in G.O.No.791 dated 17.7.1987
and paid on 27.7.1987.
(iii) In respect of Claim No.3, it is denied that the
non-recoverable mobilisation charges of Rs.3 lakhs demanded
by the claimant was not a term of the contract. It was
denied by the third appellant himself at the very time it
was raised. After the absolute denial of the claim, the
claimant extended his tender validity vide his letters dated
2.10.1984 and 21.12.1984 after waiving the claim. The
Claimant also waived the claim again unilaterally and come
forward to sign agreement and execute the contract.
Therefore, the Claim No.3 is unwarranted and denied.
(iv) In respect of Claim No.4, it is stated that for
the work done and completed during the period of contract
from 4.7.1985 to 11.4.1989 the claimant has been fully paid
and no outstanding payment is due. In this contract, the
claimant is a defaulter who clearly defaulted and breached
the contract and failed to execute the work. He is
ineligible for profit on the promise that merely because he
had been awarded a contract he becomes eligible for a profit
of 20%. The claimant was not prevented from doing work.
Claimant abandoned the work and his inaction brought about
termination of contract.
(v) In respect of Claim No.5, the loss of profit
suffered during the period 4.1.1986 to 11.4.1989, it is
stated that the value is an fictitious value of
Rs.43,53,150/-. The claim is denied as entirely absurd and
in the realm of make believe. During the period from
4.1.1986 till 11.4.1989, the claimant abandoned the work and
unilaterally removed whatever machinery there was and left
the site to the wind and waves wilfully except for the
period November, 1988 to February, 1989 when he incompletely
drove 10 piles.
(vi) In respect of Claim No.6, it is stated that the
claimant brought no pile driving equipment between 4.1.1986
to November, 1988. As per the claimant letter dated
18.1.1989, the claimant brought boats from Cuddalore and
pile driving equipment from Thondi and commenced driving of
piles in November,1988. The claimant stopped work after
February 1989. It was open to the claimant to redeem his
equipment by paying up the mobilisation advance and interest
thereon. Therefore the alleged damages due to idle
machinery equipment and other construction materials
withheld by the Department from 4.1.1986 to 22.6.1993 is
entirely frivolous and absurd.
16. Counter claim of the appellants/Department are as
follows:-
Counter Claim No.1:
Claimant was paid a mobilisation advance of Rs.2 lakhs
on 18.5.1985 after the acceptance of agreement on 10.5.1985
as per the provisions of the G.O. accepting the tender
G.O.Ms.No.268, Forests and Fisheries Department dated
7.3.1985. This mobilisatoin advance amount of Rs.2 lakhs
and interest thereon at 18% from 18.5.1985 to 17.9.1993 at
Rs.3 lakhs in total Rs.5 lakhs has not been recovered from
the claimant and is due recovery.
Counter Claim No.2:
As per the provision of G.O.Ms.No.791, Forests and
Fisheries Department dated 17.7.1985 escalation charges of
Rs.1,65,439/- were paid on 27.7.1987. There has been on
overpayment of Rs.97,506/- in making this escalation
payment and the same was pointed out by the Accountant
General. This has been demanded from the claimant vide
Executive Engineer letters to the claimant dated 14.1.1988
and 19.5.1988. Since it is not paid by the claimant, the
Department is entitled to as follows:
Overpayment made on 27.7.1987 = Rs. 97,506/-
Interest at 18% there on
from 27.7.1987 to 17.9.1993 = Rs.1,07,749/-
—————-
Total Rs.2,05,255/-
----------------
Counter Claim No.3:
The contract period for the work lapsed on 3.1.1986.
The claimant did not request extension of contract and no
extension was granted. The claimant in his letter dated
12.7.1986 has stated that as on 12.7.1986 he rescinded the
contract. Such rescinding of contract without just cause
when the Department have acted faithfully and complied with
every contractual obligations stipulated in the agreement
entitles the Department to forfeit the EMD and security
deposit of the claimant. Further the claimant failed to
complete the work and also failed to maintain the rate of
progress stipulated in agreement and thus, the claimant
committed breach of contact. For such breach of contract
the EMD and Security deposit has to be forfeited to the
Department as per clause Nos.29 and 30(b) of agreement at
page 61 and clause 37(b) page 63 of the agreement and
relevant clauses of MDSS is as follows:-
Value of EMD forfeited to respondents – Rs.26,000/-
Additional EMD - Rs. 6,320/-
Value of S.D.(WHA) forfeited to
respondents - Rs.41,360/-
-------------
Total - Rs.73,680/-
-------------
Total Counter Claims
Counter Claim No.1 : Rs.5,00,000/-
Counter Claim No.2 : Rs.2,05,255/-
Counter Claim No.3 : Rs. 73,680/-
---------------
Total Rs.7,78,935/-
--------------
In view of the above, it is prayed by the Department that
the Claim of the claimant is to be rejected and the Counter
Claim made by the Department is to be allowed.
17. Before the Arbitrator on the side of the claimant
Exs.A-1 to A-207 were marked while the Department have
marked Exs.B-1 to B-31. Claimant was examined as P.W.1
and one J.Venkatesan, Special Correspondent, Hindu was
examined as P.W.2. On the side of Department one Jayaraman,
Junior Engineer, Vallinokkam, Ramnad District was examined
as R.W.1.
18. After perusing the oral and documentary evidence,
the Arbitrator awarded a sum of Rs.72,57,165/- in favour of
the claimant. However, it is stated that on return of
forfeited machinery and equipment to the claimant, the
Department is liable to pay the claimant only Rs.62,57,165/-
.
19. Aggrieved against that award, the Department filed
the Original Petition No.908 of 1999 to set aside the Award.
In the original petition it is stated that the tender of the
contractor/claimant was accepted and a formal agreement was
signed. The time for completion of the contract was
stipulated at six months from the date of handing over the
site. The claimant did not complete the work in time and so
the contract was terminated on 11.4.1999. Claimant
commenced arbitration proceedings by filing suit C.S.No.263
of 1987. The second respondent, the sole Arbitrator passed
an award on 27.3.1999 awarding a sum of Rs.72,57,165/- with
interest at 18% per annum. It is stated that the Award was
passed beyond the terms of the agreement. The Arbitrator
had exceeded the scope of contractual authority in making
the award. Claim No.1, i.e., for recovery of Rs.6,63,700/-,
it is stated that it was made on the footing that the
claimant had not been paid for the work done by him. The
Arbitrator had framed number of issues. But he failed to
appreciate the facts that the schedule of rates for each
item given in Ex.B-2 agreement is the overall limit for the
purpose of each and every item of work that is to be
complied with. As such, Rs.7,08,500/- has been shown as
the value of work done by the contractor in respect of 160
piles completed which includes cutting, bending and tying
grills with tor steel, plain M.S. Bars for reinforcement,
including the cost of binding wire. The important aspect in
this item of work as stated in the schedule is that the
steel shall be supplied by the Department to the claimant
for the execution of the work. Therefore the amount of
Rs.7,08,500/- is the overall value of the work that is
involved in the entire project as regards steel and allied
work. The Arbitrator has taken this value unnecessarily
for the purpose of arriving at the value of work done by the
claimant. The Arbitrator in page 21 of the Award dated
27.3.1999 has made reference to the said quantity of work
and has wrongly interpreted the items of work in the
contract and has applied the erroneous interpretation as
yardstick for the purpose of arriving at the value of the
work done. As such, the Arbitrator under Item No.20,
included a sum of Rs.7,08,500/- and has added the same along
with the claim made under Claim No.I(a) for making the award
in terms of Claim No.I. After deducting the departmental
recoveries, a sum of Rs.4,09,115/- has been awarded under
Claim No.I. As stated earlier, the Arbitrator had
complicated the listed items and their rates with that of
the claims made by the claimant and thereby had awarded a
sum of Rs.4,09,115/- without recourse to the actual
materials placed before him. He also failed to take into
consideration the estimated value of the particular work.
He also failed to segregate the expenditure incurred by the
Department with regard to materials supplied before arriving
at the actual value of work done. If only this distinction
in the value is made, then the exact value of work done by
the claimant could be arrived at. It is stated that Ex.A-
110 is a correspondence adjudicating upon the work involved
in Thondi Jetty, which is a separate contract. The
Arbitrator, inspite of objection raised by the Department,
had admitted the said exhibit and has placed relevance for
arriving at the conclusion upon which the award has been
passed. A sum of Rs.43,500/- has been awarded under claim
No.I in respect of item No.6 being the cost said to have
been incurred for driving 10 piles. Arbitrator has also
failed to take into consideration the various recoveries
that were to be made on the payments for the contractor.
Recoveries as regards mobilisation advance of Rs.2,00,000/-
adding interest on the same and other recoveries a sum of
Rs.4,66,470/- ought to have been recovered from the
contractor/claimant. Arbitrator has failed to take into
consideration of the exact quantum of work before deducting
the same from the overall estimated work as found in Ex.B-2
agreement. It has been pointed out to the Arbitrator that
the steel to the tune of 59 Mts. alone had been utilised.
The Arbitrator without taking into consideration the actual
expenditure, has given credit to the entire estimated
quantity of 109 Mts. and upon erroneous estimation fixed the
value of work done in a sum of Rs.11,56,250/-. The award
with regard to Claim No.I is per se excessive besides has
been passed without recourse to materials available on
record. As regards Claim No.II, it has been made for
escalation of the lumpsum contract amount at the rate of 180
per cent of the completed work during the extended period
beginning from 4.7.1985 to 11.4.1989. The contract or
agreement does not provide for any such escalation by its
express terms. The very claim itself was opposed before the
Arbitrator. It is stated that under Claim No.I, the
Arbitrator had already found and awarded for the work done
which the claimant has made claim. It is also stated that
casting of piles was completed as early as on 28.10.1985
itself. The contract awarded to the claimant could be
classified as follows:-
(a) Fabrication and casting of RCC Piles,
(b) Driving the piles into the sea at the marked
positions and
(c) To cut off the piles and lay deck slabs.
It is stated that the first part of work, viz., casting of
piles does not require much of skill and labour. As such,
the claimant had completed the casting of piles, however,
had failed to drive them in the sea and further work as
contemplated in the contract. Only 10 piles were driven
that too at the edge of the sea near to the shore. All
these aspects were explained to the Arbitrator. However,
overlooking the objections put-forward by the Department,
the Arbitrator has awarded a sum of Rs.9,17,195/- as
escalation for the work which was completed during the
extended period, viz., from 4.7.1985 to 11.4.1989. The
Arbitrator while accepting the contentions of the various
assurance and promises said to have been given by the said
Superintending Engineer, has omitted to take into
consideration the scope of the contract that was awarded to
the claimant. It is settled law that in the interpretation
of contract that too when the other party is a Governmental
agency, the written contract alone will be the basis of the
rates and liabilities of the contracting parties. Ignoring
the settled principles, the Arbitrator had accepted the
contentions put-forth by the claimant from certain
correspondences and assurances by Departmental Engineers,
who did not have the sanction to make such assurances, has
come to the conclusion about the entitlement of the various
claims by the claimant. Hence, the escalation granted on
the completed work for the extended period is de hors to
contract/ agreement and, as such, liable to be set aside.
The claimant also made claim of Rs.5 lakhs towards
compensation for the losses alleged to have been suffered on
account of overheads and loss of profit during the period of
contract. This Claim is covered under issue No.4. The
Arbitrator has considered Claim Nos.4 and 5. Claim No.5 is
with regard to losses suffered during the extended and
overheads during the said period. A claim of Rs.43,23,150/-
has been made in Claim No.5. Arbitrator has awarded a sum
of Rs.3,68,700/- under Claim No.4. The Arbitrator has
found reasons for awarding the said sum on the basis that
the Department has committed breach of contract and as such,
the Arbitrator is of the view that the claimant could not
complete the work. Arbitrator has granted 15% on the
balance of work as award under this issue and as such has
awarded a sum of Rs.3,68,700/-. However, Claim No.5 has
been rejected in total. It is stated by the Department that
under Claim No.6 a sum of Rs.1,72,64,885/- has been sought
for by the first respondent. This claim has been made as
damages due to idle machinery, equipment and other
construction materials withheld by the Department from
4.1.1986 to 22.6.1993 for 89 months. Arbitrator has laid
undue emphasis on the right of the Department to exercise
seizure of termination of the contract on the machinery that
were deployed by the contract. Arbitrator has referred to
Ex.A-31, the order of termination that the redemption of
hypothecation of machinery even on payment is ruled out. No
attempt was made by the claimant to discharge the
hypothecation. This being the case, it is ill-founded to
allege that the Department refusing to release the
hypothecation of machinery even on payment for the same. A
sum of Rs.29,48,400/- has been awarded under this head,
which is unjustified. However, adverse inference has been
drawn against the Department for the reasons that the
Engineers in-charge during the time of execution of the work
have not been examined. Such inference shall not be drawn
particularly, when the contract is entered into with
Government, since the officials in-charge of works are
subjected to transfer. The compensation amount has been
arrived at by the Arbitrator based upon Exs.A-196 and A-197,
which does not pertain to the contract work that has been
the subject matter of dispute. They relate to some other
contract and have nothing to do with the present one. The
Arbitrator has taken Rs.546/- as rate per hour for the
machinery. The award is a clear case of excess of contract.
The Arbitrator, while awarding the refund of earnest money
deposit and security deposit, has omitted to consider the
counter-claims made by the Department. The Arbitrator has
awarded the refund of mobilisation advance for the reason
that the Department has committed breach, which is
unjustified. Arbitrator has also fixed the value of
machinery at Rs.10 lakhs and has provided a concession in
the award that if the machinery are returned to the
claimant, Rs.10,00,000/- be deducted from the rest of the
award. In view of the reasons stated above, the award shall
not stand to legal scrutiny. The interest at 18% is also
thoroughly unwanted. Therefore, the Department prays for
setting aside the award dated 27.3.1999 passed by the
Arbitrator.
20. In the counter filed by the claimant in O.P.No.908
of 1999, it is contended that the Department received the
Award in April 1999. Petition for setting aside the award
should have been filed within 30 days from the date of
receipt of notice as provided under Article 119 of
Limitation Act of 1963. But the Department have taken time
till 28th October, 1999 to file this O.P. after lapse of six
months from 23.5.1999 and on this ground alone, this
O.P.No.908 of 1999 will have to be dismissed. Arbitrator
passed this Award on issue-wise and some issues were
decided in favour of the claimant and others rejected that
is to say that the claimant succeeded in five issues, viz.,
issue Nos.1, 2, 4, 5 and 10 for the amount of Rs.79,55,165/-
including interest and allowing a sum of Rs.6,98,000/- in
favour of Department including interest and after deducting
the amount of Rs.6,98,000/- from the award amount passed for
Rs.79,55,165/- the amount passed in favour of the claimant
is Rs.72,57,165/-. The claimant is entitled to get the
damages by way of hire charges for idling of plant,
equipment and machinery and other construction materials
illegally withheld by the Department as per issue No.5 and
the total claim amount in this regard is Rs.1,72,36,320/-.
This claim was worked out only based on the calculation
sheets for the hire charges for pile driving plant by the
Department’s Superintending Engineer and Executive Engineer
and the calculation sheets were marked as Exhibits in the
Arbitration proceedings as Exs.A-196 and A-197. But the
Arbitrator allowed only a sum of Rs.29,48,400/- as against
claimant’s claim amount of Rs.1,72,36,320/-. It is stated
by the claimant that he is accepting the award for
Rs.72,57,165/- with interest. The claimant prays for
dismissal of O.P.No.908 of 1999.
21. On considering the above contentions, the learned
single Judge, by a common order dated 26.4.2000 received the
Award passed by the Arbitrator and passed decree in terms of
the Award by allowing the application No.1221 of 2000 filed
by the claimant. Further, the learned single Judge
dismissed the O.P.No.908 of 1999 filed by the Department.
Aggrieved by the common order, present Original Side Appeals
have been filed by the Department.
22. Learned counsel for the appellants/Department
contended that the Arbitrator committed an error apparent
on the face of the record as he had incorrectly taken into
account the materials which have not been used for the
completion of the work and further vital documents were not
considered. It is contended by the counsel for the
appellants/Department that the award of the Arbitrator
relating to the quantum of work done cannot be accepted or
sustained. It is the further contention of the
appellants/Department counsel that the Arbitrator exceeds
his jurisdiction by awarding escalation charges which was
not contemplated and it is beyond the terms of the
agreement. Without prejudice, it was contended that even if
escalation is to be accepted, it can be only upto 20% and
that has been paid by G.O.No.791 dated 17.7.1987. It was
further contended that the Arbitrator is not correct and has
mislead himself to determine the escalation cost and the
quantum of escalation by comparing other contract. Another
factor is that the Arbitrator has not taken into
consideration the facts that the materials for the purpose
of executing the works were supplied by the Department. It
is further contended that the Arbitrator has concluded that
there is breach of contract committed by the
appellants/Department. The plea of the appellants/
Department is that the first respondent/claimant had by his
own conduct had rescinded the contract and therefore, the
award of the Arbitrator on the head, loss of profit and
charges for the period during which the contract was in
operation cannot be accepted or sustained in law. The
further contention of the appellants counsel is that the
award of the Arbitrator for the value of machinery is
unacceptable and unsustainable in law.
23. The learned counsel for the first
respondent/claimant, however, contended that the Arbitrator
had taken into consideration all relevant materials placed
before him while determining the quantum of the award. In
the facts and circumstances of the case, the learned single
Judge accepting the reasonings of the Arbitrator upheld the
award with reasons and it should not be interfered with.
The issues now raised in appeals as also before the learned
single Judge are questions of fact which should not be
reagitated in appeals.
24. The claim was made on several heads as has been
extracted above. The Arbitrator has rejected the Claim No.3
in respect of mobilisation charges and Claim No.5 for loss
suffered during the extended period from 4.1.1986 to
11.4.1989. However, the other claims were allowed in the
following manner, the details which have been set out in
para 7 of the learned single Judge’s order and the same is
extracted hereunder:-
“7. Exs.A-1 to A-207 were marked
on the side of the contractor and Exs.B-
1 to B-32 were marked on the side of
the department. About 17 issues have
been framed in the arbitration
proceedings and the arbitrator had
elaborately discussed the oral evidence
as well as the documents and given a
finding. The contractor claimed under
item No.1 a sum of Rs.6,63,700/-
towards the value of work done. The
arbitrator passed the award for a sum
of Rs.4,59,115/- with interest. In
respect of issue No.2, the contractor
claimed a sum of Rs.15,90,660/- under
the head escalation of cost and for
which, the arbitrator awarded a sum of
Rs.9,17,195/- with interest. Issue
No.4 relates compensation for loss
suffered on account of overhead and
loss of profit during the stipulated
period of contract and claimed a sum of
Rs.5 lakhs and for which the arbitrator
awarded a sum of Rs.3,68,700/- with
interest. In respect of issue No.6
relating to damages due to idle
machinery, equipments and other
construction materials withhold by the
department for a period of 18 months.
The contractor claimed a sum of
Rs.1,72,64,885/- and for which a sum of
Rs.29,48,400/- is awarded and, for non-
returning of the machinery, a sum of
Rs.10 lakhs has been awarded. In
respect of issue No.10, a sum of
Rs.32,320/- has been awarded with
interest and in all, the award is for a
sum of Rs.79,55,165/-. The amount due
to the department has been given as
Rs.6,98,000/- and if the same is
deducted, the department shall pay
Rs.72,57,165/-. If the department
returned the forfeited machineries and
equipments, the sum of Rs.10 lakhs will
be reduced and the department will be
liable to pay only Rs.62,57,165/-. The
department has preferred the petition
only in respect of the claims, wherein
the amount has been awarded by the
arbitrator viz., issues 1, 2, 4, 6 and
10. The arbitrator had also awarded
interest at 18% per annum for the
amount awarded from 10.3.92 till date
of award.”
25. In this case, the tender notification was issued
in the month of November, 1983 and it was opened in
December, 1983. The first respondent/claimant was found to
be the lowest tenderer. The validity of the tender was for
a period of six months which would have expired by
29.6.1984. Therefore, the Department by its letter dated
1.8.1984 requested the first respondent/claimant to
revalidate the tender for a further period of six months
from 29.6.1984. The first respondent/ claimant consented
by letter dated 31.8.1984 on certain conditions, viz.,
escalation charges and mobilisation charges (not
recoverable). It appears that the first respondent/claimant
gave a letter dated 2.10.1984 extending the validity of the
tender upto 29.1.1985. Thereafter, the work order was
issued on 26.3.1985 after the validity period. Since there
was no indication with regard to the demand on the
escalation of 20% sought for, the first respondent/claimant
sent a letter dated 28.3.1985 pointing out the delay in
acceptance of the tender and therefore, prayed for
escalation at 30% and for Rs.3 lakhs towards mobilisation
charges(non-recoverable). This letter dated 28.3.1985 was
responded by the third appellant stating that the first
respondent/claimant should proceed with the work and the
representation for escalation would be issued if the
Government approves the same. However, with some
objection by letter dated 20.4.1985, the work order was
accepted, with a rider that the escalation should be
considered and the words “if approved by the Government”
should be deleted. Thereafter, the first respondent/
claimant entered into hypothecation agreement and the site
was handed over on 4.7.1985. On 8.10.1985, cement and other
materials were supplied during the period October, 1985 to
December, 1985. The casting of 160 piles were taken up and
completed and that is not disputed. In December, 1985, it
appears that the first respondent/ claimant could not
complete the driving of the piles as dredging had to be
done. It is not in dispute that the dredger, which was
deputed for this work, sank near Pamban Bridge and there was
some stalemate in the work. In view of the same, the first
respondent/claimant started communicating with the third
appellant for payment of escalation charges, pending bills,
etc., which was not agreed to by the third appellant.
Therefore, the claimant sought for arbitration of his claim,
which was refuted by the third appellant. Thereafter,
C.S.No.263 of 1987 was filed by the claimant for
appointment of Arbitrator for settling the claim amount and
for releasing machineries and equipments. In the
meanwhile, on 17.7.1987 G.O.No.791 was issued by the
Government granting escalation charges of 20% and for Rs.2
lakhs as mobilisation advance (recoverable). On 27.7.1987,
the 20% escalation amount was paid. Thereafter, in July,
1988, the claimant started the pile driving work, but,
however, did not complete the same as the dredger was not
arranged by the Department. On 11.4.1989, the contract was
terminated by the Department and the machineries and
equipments were not returned.
26. In this background of the case, the Arbitrator
took up Issue Nos.12 and 13 which were relevant for the
purpose of deciding the rival claims. The issues were
whether there was delay in acceptance of the tender and
handing over the site for casting of piles and therefore,
whether the claimant was entitled for escalation and
compensation for loss of profits and damages. In paras 41
to 52, the Arbitrator has discussed the various documents
that have been filed and also the oral evidence to come to
the conclusion that the Department had taken an unusually
long period of time to conclude the contract and sought for
revalidation of the tender from time to time. In para 52,
the Arbitrator concluded that there was a delay of 16 months
and 11 days in accepting the tender and further delay of two
months in handing over the site.
27. In Issue No.14, the Arbitrator went into the
question of delay in supplying the cement and steel by the
appellants and the consequence thereof. The same was dealt
with in paras 53 to 59 and based on oral and documentary
evidence, particularly, the evidence of P.W.1, R.W.1 and
Exs.B-5 and B-32, the Arbitrator held that there was no
supply of cement from 25.8.1985 to 8.10.1985 and there was
also a delay in cement supply immediately after in handing
over the site on 4.7.1985. Insofar as the supply of steel
is concerned, the Arbitrator found that there was no delay.
28. Issue No.15 relates to supply of water and
electricity and was found in favour of the Department.
29. Issue No.16 relates to the plea whether dredging
of sand was essential for the Valinokkam Fishing Harbour
Project and if so whether the claimant was entitled to
compensation on the ground of delay. The Issue No.17 was
whether in terms of contract and plan, the Department handed
over the site in the sea for pile driving work. This has
been dealt with in paras 66 to 88 of the award. The
Arbitrator went in detail considering the various documents
and the technical material in Book “Dock and harbour
engineering” and the subject “Dredger and Dredging” to come
to the conclusion that the dredging was necessary for
completion of the project. Reliance was placed on documents
Exs.A-51 and A-52, first respondent’s letters that dredging
should be done, the genuineness of which was not disputed.
However, the Department tried to avoid the same stating that
they did not receive it. As to the genuineness of the
letter and receipt of the same by the Department, the
Arbitrator considered the same in Issue No.8 and held in
favour of the claimant. Reliance was also placed on Ex.A-
55 letter dated 18.1.1989 written by the contractor to the
Superintending Engineer that only after completion of
dredging work, the claimant would start pitching of
boulders. The Arbitrator noticed that the casting of 160
piles was over by October, 1985, but the dredging was
arranged only in 1988 and was not completed even as on
February, 1989. As has been recorded in para 85 of the
award, the Arbitrator observed that 10 piles were driven and
further work could not be completed for want of dredging.
In para 88, the Arbitrator negatived the plea of the
Department that no dredging was essential for construction
of the RCC Jetty. He, however, came to hold that there was
three years and three months delay from October, 1985 to
December, 1988 in locating and handing over the site for
pile driving and arranging the dredger.
30. In Issue No.6, the Arbitrator considered the
question of breach and recession of the agreement.
Arbitrator in para 105 observed that the Department has not
thought it fit to cancel the contract, on the contrary it
allowed the claimant to work upto 11.4.1989, the date on
which the contract was terminated. In para 109, the
Arbitrator observed that at no point of time, the Department
made a complaint about incompetency of the
claimant/contractor. The Arbitrator also noticed that in
October, 1985, the casting of 160 piles were over and if
the Department found that the claimant was not progressing
well with the work, they should have terminated the
contract. On the other hand they asked him to proceed with
the work. A doubt was raised with regard to the capacity of
the claimant, experience and ability to undertake the work.
However, it was negatived in paras 111, 112 and 113. The
Arbitrator in para 116 observing that while the pile driving
work was under progress and 10 piles were driven between
December, 1988 to February, 1989, the contract was
terminated in April, 1989 and in any event, the Department
did not pursue the construction of the project in effect
they abandoned it for some reason. For the above stated
reasons, the Arbitrator held that the Department is
responsible for the delay in executing the work. The
Arbitrator considering the inordinate delay at every stage
of the contract and also with regard to payment and the fact
that at the time when the driving of the piles were in
progress and inspite of the specific plea of the claimant to
extend the time, the Department for some reason terminated
the contract on 11.4.1989. The Arbitrator held that the
attitude on the part of the Department was responsible for
the financial crisis faced by the claimant and therefore,
came to hold that the Department had committed breach of
agreement and the claimant is entitled for damages thereon.
31. The above findings of the Arbitrator clearly
establishes that the delay is on the part of the Department.
Appellants are not able to show any material to hold
otherwise and in fact, at the time of hearing of the
appeals, the counsel for the appellants addressed his
arguments only on Issue No.1 and Issue No.2. Issue No.1
relates to claim in respect of value of work done in casting
160 piles and for 10 piles driven into the seabed. Issue
No.2 is whether the claimant is entitled to any escalation
over the agreement rates at 180% on the value of the work
done between 4.7.1985 to 11.4.1989. Therefore, the question
that has to be decided in the present appeals is whether the
award of the Arbitrator insofar as the Issue Nos.1 and 2 is
concerned is justified.
32. As far as the first claim of the first
respondent/claimant is concerned, it relates to casting of
160 piles and the cost incurred for the same. The
respondent/claimant has not been fully paid for the work
done. The Department’s contention is that the first
respondent/claimant is not entitled for any amount in excess
of the amount already paid. The Department while accepting
that the claimant had in fact cast 160 piles as per the
agreement, is disputing the award only in respect of the
cost of the casting of 160 piles on the basis of the value
of materials supplied by the Department, after giving credit
to the amounts already paid.
33. At the time of hearing of the appeals, the learned
counsel for the appellants referred to various documents
filed by the Department and the documents filed by the first
respondent/claimant to state that the Arbitrator has not
properly construed the documents and has erroneously
determined the amounts under the various heads. The first
contention was that the value of the pile was not properly
arrived and the value of cement and steel supplied by the
Department were not considered. The conclusion of the
learned Arbitrator and the order of the learned single Judge
confirming such conclusion is based on a misinterpretation
of the documents and the evidence. The second contention
on the same issue is that the number of piles cast was 160
and what was embedded or driven into the sea was only 10 and
the quantum of fabrication done was 59 MT. Considering all
these factors, the Arbitrator awarded a sum of Rs.4,59,115/-
. It is contended that the conclusion of the Arbitrator is
erroneous and he has not considered one or other documents
properly. The Issue No.1/Claim No.1, which is strenuously
disputed by the appellants, is relating to value of work
done and the consequent claim. This issue has been dealt
with in paragraphs 13 to 30 of the award, the relevant
portion of which is extracted hereunder:-
“Admittedly precasting of 160 piles
are are completed. Item No.20 relates
to the said work. According to the
claimant/petitioner, as per Item No.20,
109 Mt. of works as per the instructions
of the Engineer in-charge of the site
namely, cutting, binding, grills,etc.,
except tieing and binding and hence the
claimed the bill amount as per item
No.20 at the rate of Rs.650/- for 100
kg. and the total value for this item
No.20 i.e. Rs.7,08,500/-. Whereas the
department had valued this work at
Rs.3,82,041/-.
In view of the rates prescribed in
the Exs.B.1 for this item of work after
giving a margin of Rs.8,500/- foe tieing
and binding, I fix the value for the
item at Rs.7,00,000/-.
As regards item No.21, supply of
M.S. Angle – iron shoes for piles
including fixing charges at the rate of
Rs.250/- per pile for 160 pile shoes
comes to Rs.40,000/-.
Thus, as regards precasting of 160
piles under the above three items, I fix
the value for this work as follows:-
1) Item No.4 .... Rs. 4,16,250/-
2) Item No.20 .... Rs. 7,00,000/-
3) Item No.21 .... Rs. 40,000/-
----------------
Rs.11,56,250/-
----------------
As regards the recoveries according
to the claimant petitioner,the value of
materials like cement and steel supplied
by the department is Rs.3,47,288/-,
while according to the department’s
calculations in respect of recoveries
arrived at Department materials such as
supply of cement and steel, water
charges, withheld amount, additional
security deposit income tax, cost of
gunny bags which comes to Rs.5,87,832/-.
28. Since the claimant/petitioner
admitted the receipt of cement and
steel as per the entries in Ex.B.5,
which is supported by Ex.B.32, wherein
he had signed, but he had only disputed
the dates, I accept the valuation given
by the department towards the supply of
cement and steel which comes to
Rs.4,87,530.87 and also water charges
Rs.1,239/- and the price of empty gunny
bags Rs.2,450/- and income tax
Rs.16,544/- and under all the above
heads it comes to Rs.5,07,771.87. As
regards the recoveries with regard to
withheld amount of Rs.41,359.05 p. and
additional security amount of Rs.38,700/-
total comes to Rs.89,059.05 p. In view
of my findings that the termination is
not legal and not valid, the respondents
department are not entitled to deduct
the same out of the amount payable to
the claimant/petitioner.
29. According to the
claimant/petitioner, he had received
payment of Rs.2,20,000/- towards the
payment of bills while according to the
defendant respondents, the net payment
is Rs.2,39,369/- under various cheques.
Since even according to the
claimant/petitioner, he is unable to
give the accurate amount for want of
records not available with him. I
accept the version of the department
that they had paid Rs.2,39,369/-. Thus
the deduction works out to
Rs.5,07,771.87 p. + Rs.2,39,363/- =
Rs.7,47,134/87 p. In the result, after
deducting Rs.7,47,134.87 p. out of
amount Rs.11,56,250/- towards the value
of work for precasting of 160 piles I
find that the contractor/petitioner is
entitled to Rs.4,09,115.13 p. which is
rounded up to Rs.4,09,115/-.
30. Next we have to consider the
value of work to be paid to the
claimant/petitioner towards 10 piles
driven and the value for this item has
to be fixed as per item No.5 and 6 of
schedule specifications rates fixed in
Ex.B.1.
1) In respect of item No.5:
Handling and conveying the RCC
precast piles pile 10 Nos.
measurement according to
claimant arrived at 152 RM at
Rs.100 per R.M. 152 RM X 100
= Rs.15,200/-
While department value for this
item comes to 154 RM x 100
= Rs.15,400/-
However, the value given by the
contractor which is low, is accepted.
2) In respect of item No.6:
According to claimant, total
No.10, piles driven at 150 RM
@ Rs.290/- per RM = Rs.290 X 150
RM.
= Rs.43,500/-
Thus the contractor/petitioner has
valued both items at Rs.58,700/-. While
the department/respondents has given
under these two items as Rs.47,296.05 p.
giving allowance on exaggeration on both
sides. I fix the value for these works
at Rs.50,000/-. Thus the
claimant/petitioner is entitled for a
sum of Rs.4,59,115/- and this issue is
answered accordingly.”
From the above findings of the Arbitrator, the claim of the
appellants Department is totally without any basis as the
said amount has been determined based on Ex.B-1 agreement
and the Arbitrator has given appropriate deduction for the
value of cement and steel supplied by the Department and the
amount received by the claimant also has been deducted. It
is also pertinent to note that the Arbitrator has granted
the cost for work done only in respect of 10 piles in a sum
of Rs.43,500/-. Therefore, the contention of the appellant
that the values have been erroneously arrived, cannot be
accepted.
34. One other plea taken is that vital documents
required to be considered were not considered by the
Arbitrator and the learned counsel for the appellants
referred to the documents filed in the form of additional
typedset of papers. He referred to document Ex.B-32 USR
Slip and the memo of calculation and stated that these were
not considered. This contention has to be rejected at the
outset as we find that the USR Slip Ex.B-32 has been
discussed in more than one place in paragraphs 16, 18 and 28
of the award. The memo of calculation was submitted on
5.12.1998 belatedly and that has been dealt with in para 22
of the award. The evidence of R.W.1 on 17.6.1997 was also
relied upon for the purpose of considering Ex.B-32. It,
therefore, follows that these documents were considered by
the Arbitrator in detail and Issue No.1 was decided.
Learned single Judge also considered the same and the
Department plea was rejected. Therefore, the plea of non-
consideration of vital documents cannot be accepted. In any
event, at this stage, it will not be proper to look into
individual slip and rework the calculation. The decision of
the Apex Court in K.P.Poulose – v. – State of Kerala 1975 SC
1259, para 6 referred to by the appellants’ counsel will not
be applicable to the facts of the present case as the
Arbitrator has gone into those documents and decided the
claim. The learned single Judge has extensively dealt with
this issue and upheld the award. We are constrained to say
so only for the reason that sitting in appeal against the
order of single Judge confirming the award, the Court is not
expected to reappreciate the evidence, documents and
records unless it is shown that the conclusions are
palpably erroneous and unreasonable. Even as per the
grounds in both the appeals, the appellants’ contention is
on the quantum of work done and the value which cannot be
canvassed at this point of time. With regard to the
jurisdiction of the Court to interfere with the award the
learned single Judge has in para 15 referred to the decision
the State of U.P. – v. – Ramnath International Construction
(P) Ltd (1996) 1 SCC 18. The learned single Judge has also
referred to the decision in State of Rajasthan – v. – Puri
Constructions Co. Ltd. (1994)6 SCC 485 to state that award
cannot be set aside merely on the ground that there is a
misreading, misconstruction or misappreciation of material
on records, nor can it be set aside merely because on Courts
own assessment and an alternative view is possible. In so
far as Claim No.1 is concerned the Arbitrator appreciating
the claimant’s case and the stand of the Department based on
oral and documentary evidence extensively dealt with the
contentions in paras 13 to 30 of the award and determined
the amount. Even if there is any minor discrepancy that
cannot be a ground for the appellate Court to reconsider the
same. Therefore, the conclusion of the Arbitrator insofar
as Issue No.1 does not require reconsideration as contended
by the learned counsel for the appellants.
35. The second contention that was argued by the
counsel for the appellants was regarding escalation charges.
The claimants made a claim for escalation 180% for the work
done during the period 4.7.1985 to 11.4.1989 and a sum of
Rs.15,90,660/-. This was considered in Issue No.2 in paras
147 to 170 of the award. The main contention of the
appellants before the Arbitrator as well as before the
learned single Judge is that there was no clause for
escalation and the Arbitrator erred in granting the said
sum of Rs.9,17,195/- by referring to various other contracts
and on account of the alleged delay. It was contended that
the escalation was based on value of work done. Besides
stating that the raw material was supplied by the
Department, it is contended that in the absence of a
specific clause in the agreement providing for escalation,
the claimant is not entitled to the same. Even, the 20%
escalation charges was requested and granted by the
Government, eventhough it was not part of the agreement.
This contention of the appellants has to be accepted in view
of the decision of the Apex Court in the case of State of
Orrissa – vs. – Sri S.C. Roy (dead) by L.Rs. JT 2001 (5) SC
267. Para 4 which is relevant is extracted hereunder:-
“4. Both the issues are no longer
res-integra. Insofar as the Award of
claim of escalation is concerned, it
stands settled by this Court in
Secretary, Irrigation Department,
Government of Orissa & Ors. v. G.C.Roy
(JT 1991 (6) SC 349) wherein it has
been held that where arbitration
agreement contains no escalation
clause, the Arbitrator does not have
any jurisdiction to Award any amount
towards escalation. In the instant
case, we find that there is no
escalation clause in the arbitration
agreement and a specific objection was
raised by the appellant before the
Arbitrator in that behalf. That part
of the Award, therefore, which grants
escalation charges is not sustainable,
as it suffers from a patent error. The
decree insofar as the Award of
escalation charges is concerned,
therefore, cannot be sustained and is
hereby set aside.”
Eventhough the agreement did not provide for an escalation
cost and the Government has independently considered the
claim for escalation at 20% and granted the same, the
Arbitrator has decided the claim for further escalation.
The 20% escalation was negotiated between parties and paid
separately and it is not part of the agreement and
therefore, the claim on this head cannot be accepted in law.
The Arbitrator erred in awarding the sum of Rs.9,17,195/-
under Issue No.2. We are unable to accept this part of the
award, particularly in view of the decision of the Apex
Court stated above.
36. Insofar as counter-claim is concerned the
Arbitrator discussed the same in paras 31 to 46 of the
award and allowed counter claim No.1 for mobilisation
charges paid and rejected the other two counter claim.
Though a ground has been raised on this issue, the counsel
is not able to substantiate the Department’s plea. In any
event, counter claim No.2 is regarding over payment to the
claimant and is based on arithmetical calculation. We do
not propose to delve on the same. Counter claim No.3 is
for refund of EMD and additional EMD, the Arbitrator
rejecting it on the ground that the claimant did not breach
the agreement and the termination of the contract by
appellants is not valid. We have concurred with this
finding in Issue No.6 that the fault was on the part of
Department and the counter claim No.3 was rightly rejected.
The counsel for appellants pleaded that compensation for
loss suffered by the claimant on account of overheads and
loss suffered during the period in question and loss on
account of damage due to idle machinery, equipment and other
construction materials withheld by the department for the
period of 18 months and the Arbitrator awarded on this head
is not justified. He, further pleaded that a sum of
Rs.10,00,000/- is awarded for the machinery, which were not
returned, with a further direction that if the machinery are
returned, the same can be deducted is also not correct. All
these issues have been dealt with in detail in paras 171 to
178 and 180 to 213 in the award.
37. The whole case of the claimant is only on account
of the delay on the part of the department in not concluding
the contract in time, not providing the material and not
providing the site in time and delay in payment. The
Arbitrator has taken into consideration all these facts into
consideration and dealt with the above issues in detail and
determined the claim. Reasons have been recorded for
arriving at the amount in respect of each claim and it is
based on oral and documentary evidence. Unless appellants
can establish that the Arbitrator has misconducted himself
in terms of Section 30(a) and 30(c) of the Arbitration Act,
the award should not be interfered with. The learned
single Judge while considering the relevant issues and
considering the documents and evidence confirmed the award.
As stated earlier the learned counsel for the
appellants/Department, confined his arguments mainly to
issue Nos.1 and 2. Except the ground relating to escalation
we do not find any good reason to interfere with the award
of the Arbitrator in other respects. The order of the
learned single Judge confirming the award of the Arbitrator
is correct except insofar the claim with regard to
escalation as decided in Issue No.2.
38. In the light of the Apex Court decision and for
the reasons as above we set aside that portion of the Award
regarding Claim No.2 Issue No.2 relating to claim for
escalation as confirmed by the learned single Judge.
39. In the light of the above findings of this Court,
the award of the Arbitrator insofar as it relates to Issue
No.2 in a sum of Rs.9,17,195/- with interest is concerned is
set aside and the award on other heads are confirmed and the
order of the learned single Judge stands modified to that
extent. Both the Original Side Appeals stand partly
allowed. In the facts and circumstances of the case, there
will be no order as to costs.
ts.
To
1. The Secretary to Government
Animal Husbandry & Fisheries Department
Chennai 9.
2. The Director of Fisheries
Anna Salai
Teynampet
Chennai 6.
3. The Superintending Engineer
Fisheries & Harbour Circle
Nagercoil
now at the office of the Director of Fisheries
D.M.S. Office
Anna Salai
Chennai 6.
4. The Sub Assistant Registrar
(Original Side)
High Court
Madras 104.