Uco Bank Rep. By Chief Manager, ... vs Mr. P. Nancharaiah
2022 Latest Caselaw 9174 AP

      HON'BL SRI JUSTICE U. DURGA PRASAD RAO
                        AND
      HON'BLE SRI JUSTICE T.RAJASEKHAR RAO

                       C.M.A. No.317 of 2005

JUDGMENT: (Per Hon'ble Sri Justice U. Durga Prasad Rao)

       The challenge in this appeal is to the order dated 31.03.2004

in O.P.No.646/1998 passed by the learned Principal District Judge,

Visakhapatnam confirming the award dated 30.01.1998 passed by

the sole arbitrator.


2.     The respondent herein is the claimant and the appellant

herein is the respondent before the sole arbitrator. For convenience

sake, they are referred in this appeal as they are arrayed in the

award proceedings.

3. The matrix of the case is briefly thus:

(a) The respondent entrusted construction of UCO Bank

building at Visakhapatnam Steel Plant Township to the claimant,

who is a Contractor. The building was stipulated to be constructed

between September 1991 and February 1993. The claimant

completed the construction in the first week of February 1993 vide

exhibits C16 and C.19 certificates issued by the Bank in this

regard. The value of the work was Rs.19,94,000/- and contractor

was paid Rs.17,71,293.83 ps leaving a balance of Rs.2,22,706.17

ps as mentioned in Ex.C.19. As per agreement, the maintenance

period of the building was for one year i.e., from 08.02.1993 to

08.02.1994.

(b) While so, on 31.03.1994, the respondent Bank instructed

the claimant to execute certain works and they were executed by

him as per the proceedings under Ex.C.21. As those works were

entrusted to him after expiry of the period of maintenance, he

claimed for payment of the extra works. However, the bank

repudiated his claim on the ground that it issued Completion

certificates under Exhibits P15, P16 & P19 and thereafter

contractor cannot make any claim. In view of the said dispute, the

matter was referred to the sole arbitrator Sri J.Rajulu Reddy, Chief

Engineer, Railways (Retd.) and Panel Member of the Indian

Council of Arbitration, Visakhapatnam. Before Arbitrator, the

claimant made 13 claims in his claim statement and interest

separately. Claim No.11 contains sub-heads (a) to (k). The

respondent Bank also made counterclaim of Rs.1,34,133/- towards

liquidated damages, Rs.70,900/- towards cost of rectification of

leakages and Rs.7,500/- towards cost of rectification and repairs of

balance works. It also claimed interest. After hearing both parties,

the arbitrator settled the claims of the claimant as follows:

    Claim          Particulars of the            Amount          Amount
     No.                 claim                   claimed        awarded /
                                                 (in Rs.)        rejected
                                                                 (in Rs.)
       1         Dismantling of garbage           450.00         Rejected
                 bin

       2         Cutting & removing of           12400.00        7400.00
                 62 Palmariah trees
    3&4          Uprooting the Plants            3000.00        Rejected
                 and clearing the site           1200.00

       5         Earthwork excavation            7011.60         7011.60
                 beyond 2 mts. depth
       6         Well portion works             1,19,459.15     66,849.60
                 viz., removal of soil         (Restricted to
                 slurry and treatment of        66,849.60)
                 sand filling
       7         Claim for water tank            12012.00       Rejected
                 repair
       8         Fabrication of UCO              10000.00       10000.00
                 Bank logos, windows
                 etc.
       9         PVC pipes to drain out          1000.00        Rejected
                 water
      10         Enamel paints for two           10000.00        5000.00
                 coats for doors and
                 windows
      11         Final bills : (a)                              6648.00
    (a) to (k)                (b)                               5840.27
                               (c)                              6515.43
                               (d)               17500.00       7500.00
                               (e)                              Rejected
                               (f)                              5000.00





                      (g)                                2400.00
                      (h)                                3600.00
                      (i)                                 600.00
                      (j)                                 325.00
            (k) Fixing of       MC                      20000.00
            boards

      12      EMD                       16500.00          16500.00
      13      Security Deposit         120000.00         113099.00

Interest @ 18% per annum is awarded in respect of above amounts

(c) So far as the counterclaim of Rs.1,34,133/- towards

liquidated damages is concerned, the arbitrator observed that as per

Exhibits C15, C16 & C19 the contract work was completed by

08.02.1993 and the subsequent correspondence after the expiry of

the maintenance period of one year i.e., 08.02.1994 amounts to

redoing of the works as per the letter of the respondent dated

31.03.1994 which naturally constitute extra work. The claim for

liquidated damages does not stand the test of any extension of the

period of the original contract and there was no correspondence

from the respondent pointing out any extension of the contract

period inviting penal action in terms of the contract at that time.

(d) He further observed that after completion of the work by

08.02.1993, one full monsoon period passed off without any

complaint during the year 1993 and there was no documentary

evidence that the roof slab of the bank building was leaking. It was

only in March 1994, the respondent brought to the notice of the

claimant about the leakage i.e., more than a year after certificate of

completion. Learned arbitrator further observed that on inspection

of the bank building by him, he noticed that there was no indication

of any structural distress of the slabs etc. and in his opinion,

fundamentally no water proof weathering course with the specified

slopes of the roof drainage was provided as per engineering

standards and the leakage must have been taken place due to acute

stagnation of rain water over the roof slab during heavy monsoon

and the rain water downfall pipes provided to drain away the rain

water from the roof slab were found to be grossly inadequate and

were not provided as per basic technical requirements as is seen

from the drawings of the bank building produced before him and as

such the leakage of the roof slab could be attributed to lack of

provision of specified weathering course as per the standards with

requisite slops. Hence, the counterclaim of the respondents

towards leakage of Rs.70,900/- was rejected. Similarly, the cost of

rectification of defects to a tune of Rs.7,500/- is concerned, learned

Arbitrator observed that the said claim does not stand the test as

those works were to be taken up after the completion of the

maintenance period of one year. Thus, in essence, the arbitrator

rejected the counterclaim entirely.

(e) Aggrieved, the respondent filed O.P.No.646/1998 in the

Court of the learned Principal District Judge, Visakhaptnam under

Section 34 of the Arbitration & Conciliation Act, 1996. After

hearing both parties, learned Judge while approving the award in

toto, dismissed the O.P. with costs.

Hence, the CMA.

4. Heard learned counsel for the appellant Sri E.Sambasiva

Pratap and Sri M.Bala Naga Srinivas, counsel representing M/s.

Bharadwaj Associates for the respondent.

5. Learned counsel for the appellant during his arguments fairly

submitted that his main plank of argument is on two aspects i.e.,

firstly with regard to the claim No.6 and secondly with regard to

the award of interest at 18%. In expatiation, learned counsel

argued that claim No.6 relates to removal of the soil slurry from the

well existing in the site and the claimant made a claim of

Rs.1,19,459.15 ps and to establish his claim, the claimant filed

certain documents on the last date of hearing without giving prior

notice to the respondent and therefore, the respondent had no

occasion to give effective reply in respect of the said claim and

documents. However, without rejecting the documents the

arbitrator has accepted them and allowed the claim on the strength

of those documents. Therefore, the said claim and award are unjust

and illegal. Nextly, he argued that the arbitrator awarded high rate

of interest of 18% p.a. without any reason. In the normal course,

the rate of interest would not exceed 8%. In this regard, he placed

reliance on Oriental Structural Engineers Private Limited v.

State of Kerala1. He would submit that the learned District Judge

has not appreciated the contention of the respondent in right

perspective in this regard.

6. Per contra, learned counsel for the respondent while

supporting the award and the order in O.P., argued that both the

(2021) 6 SCC 150

orders were based on sound reasoning and require no revisit. He

thus prayed to dismiss the appeal.

7. The point for consideration is whether there are merits in the

CMA to allow?

8. Point: We gave our anxious consideration to respective

arguments. Claim No.6 relates to the execution of the work of

removal of soil slurry from the well existing in the construction site

at a depth of 6 meters. The claim was made for Rs.1,19,459.15 ps.

However, after deducting the amounts received from the

respondent, the claimant restricted his claim to Rs.66,849.60 ps.

Regarding this claim, the arbitrator noted that as per the

instructions of the respondent, the claimant undertook the removal

of soil slurry from the well at a depth of 6 meters by making the

treatment with sand filling etc. The arbitrator observed that the

execution of the said work involved several difficult works such as

lifting of slurry, bailing of water by deploying 5 H.P. motor and

filling the same with sand as per the specifications and the details

of the work executed was given in Ex.C11 dated 28.11.1991. The

arbitrator further observed that the claimant gave notice to the

respondent under Order XII Rule 8 CPC for furnishing certain

documents with respect to the said work. The claimant filed

certain documents on the last date of hearing which were not given

any exhibit marks. However, he (arbitrator) referred them in his

proceedings. The arbitrator further observed that the respondent in

his affidavit admitted about the existence of the well and filling up

of the same as an additional item of work and made payments to

the tune of Rs.29,303.61 ps. However, the claimant admitted that

he received Rs.41,800/- and also Rs.10,810.95 ps and thus

restricted his claim to Rs.66,849.60 ps. The arbitrator observed

that the respondent has not denied or rejected the claim of the

claimant by sending any reply to Ex.C11. The arbitrator has finally

stated that after going through the documents and hearing the

arguments of both sides and also considering the practical

engineering problems in executing the work relating to the well as

per the specifications to ensure the stability to the main structure,

he was allowing the claim for balance amount of Rs.66,849.60 ps.

(a) In the above context, learned Principal District Judge,

rejecting the contention of the respondent that the arbitrator

without any basis approved the claim and he unjustly accepted the

documents filed on the last day of hearing, observed that the

arbitrator has not completely relied upon the documents by

ignoring the arguments as well as the case of the bank and passed

the award. On the other hand, after considering the practical

engineering problems in executing the work relating to the well as

per specifications to ensure stability of the main structure, awarded

the amount. Learned Principal District Judge further observed that

the arbitrator has taken into consideration the affidavit submitted

by the bank also. Learned Principal District Judge concluded that

the finding of the arbitrator was sound and do not require any

interference. We have meticulously scrutinized the findings of the

arbitrator and observations of the learned Principal District Judge

in respect of claim No.6. We unhesitatingly say, we agree with

their findings. True that certain documents were filed by the

claimant on the final hearing date. However, the approval of the

claim No.6 by the arbitrator was not on the sole basis of those

documents but on considering the practical engineering problems

involved in bailing out the slush and slurry from the well and

filling up of the same with sand to ensure the stability of main

structure. Hence, we find no merit in the contention of the

appellant in this regard.

(b) Then, interest is concerned, the claimant claimed interest

@ 24% p.a. on the ground that the respondent bank had charged

him the same rate of interest on the overdraft cash credit account of

the claimant. The respondent did not deny but stated that the

interest rates would fluctuate from time to time as per the RBI

guidelines. Though the claimant issued notice to the respondent

bank to produce the records of RBI guidelines pertaining to the

interest rates charged by the banks from time to time during the

relevant period, however, the respondent did not produce those

circulars. Taking these aspects into consideration, the arbitrator

awarded 18% interest.

(c) It is a case where the arbitrator awarded interest on

delayed payment. Since the respondent which is a banking

institution was charging interest on the overdraft facilities of the

account of the claimant, it is needless to emphasize, he too

deserves interest on the delayed payments. The rate is concerned,

in similar circumstances, in Oriental Structural Engineers

Private Limited case (1 supra) the Apex Court awarded simple

interest @ 8% p.a. on the sum left unpaid considering the same as

just and equitable. In that view, we hold that in the instant case

also, the claimant deserves simple interest at 8% p.a. instead of

18% p.a. as awarded by the arbitrator.

9. In the result, while upholding the award passed by the

Arbitrator and confirmed by the learned Principal District Judge,

Visakhapatnam, we, however, modify the rate of interest to 8% p.a.

simple on the claims approved by the arbitrator. The C.M.A. is

disposed of accordingly. No costs in the C.M.A.

_________________________ U.DURGA PRASAD RAO, J

______________________ T.RAJASEKHAR RAO, J 29.11.2022 mva