Bombay High Court
Yeturu Rama Chandra Reddy, ... vs Exe. Director, Godavari M.Wada ... on 17 April, 2017
Bench: T.V. Nalawade
Arb.Appeal Nos.6 & 5/16
1
IN THE HIGH COURT AT BOMBAY
APPELLATE SIDE, BENCH AT AURANGABAD
ARBITRATON APPEAL NO. 6 OF 2016
WITH
CIVIL APPLICATION NO. 8990 OF 2016
WITH
CIVIL APPLICATION NO. 14314 OF 2016
Executive Director,
Godawari Marathawada Irrigation
Development Corporation
Aurangabad Through its
Executive Engineer, Majalgaon
Canal Division No. 7, Gangakhed,
Dist. Parbhani (M.S.) ....Appellant.
Versus
M/s. Y.R. Reddy Engineers and
Builders, 843, Banjara Avenue,
Banjara Hills, Hyderabad-34. ....Respondent.
Mr. A.C. Dharmadhikari h/f. Mr. B.R. Surwase, Advocate for
appellant.
Mr. S. Rajan h/f. Mr. M.D. Narwadkar, Advocate for respondent.
WITH
ARBITRATON APPEAL NO. 5 OF 2016
WITH
CIVIL APPLICATION NO. 14313 OF 2016
Yeturu Rama Chandra Reddy
Engineers and Builders,
843, Banjara Avenue,
Banjara Hills, Hyderabad-34. ....Appellant.
Versus
Executive Director,
::: Uploaded on - 25/04/2017 ::: Downloaded on - 27/08/2017 23:38:39 :::
Arb.Appeal Nos.6 & 5/16
2
Godawari Marathawada Irrigation
Development Corporation
Aurangabad Through the
Executive Engineer, Majalgaon
Canal Division No. 7, Gangakhed,
Dist. Parbhani (M.S.) ....Respondent.
Mr. S. Rajan h/f. Mr. M.D. Narwadkar, Advocate for appellant.
Mr. A.C. Dharmadhikari h/f. Mr. B.R. Surwase, Advocate for
respondent.
CORAM : T.V. NALAWADE, J.
DATED : April 17, 2017.
JUDGMENT :
1) Both the appeals are admitted. Notice after
admission is made returnable forthwith. By consent, heard both
the sides for final disposal.
2) Arbitration Appeal No. 5/2016 is filed by the
Contractor, at whose instance Arbitrator was appointed by this
Court under section 11 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as 'the Act' for short). The other
appeal is filed by the Employer, which is State Government,
Corporation. Arbitrator had allowed all the claims of the
Contractor and this decision was challenged by filing Misc.
Application (RJE) No. 77/2011 by the Employer in the Court of
Principal District Judge, (hereinafter referred to as 'P.D.J.' for
Arb.Appeal Nos.6 & 5/16
short) Parbhani under the Act. By the decision dated
31.12.2015, the proceeding filed under section 34 of the Act by
the Employer is partly allowed and the award given in respect of
few claims is set aside. In view of these circumstances, both the
sides have challenged the decision given by the District Court,
Parbhani.
3) For deciding the challenges raised by both the sides
in the appeals, the nature of work and also the history of
previous arbitration proceedings in respect of the same work
needs to be mentioned.
4) The work of Majalgaon Right Bank Canal was a part
of Jaikwaid Project. This project was in respect of construction of
dam on river Godavari at Paithan, District Aurangabad and at
various places, the canals were to be constructed. Tender notice
of the work of Majalgaon Right Bank Canal from k.m. 72 to 87
and k.m. 88 to 99, which included earthwork (excluding
earthwork at k.m. 78 to 87) lining structure, tunnel at k.m. 90
and enroute reservoir at k.m. 91 was published by the
Corporation. The work was allotted to the appellant from
Arbitration Appeal No. 5/2016.
Arb.Appeal Nos.6 & 5/16
5) The cost of the work as per the tender was
Rs.700.84 lakh. The work order was issued on 20.1.1990 and
the period of work was fixed as 36 months from the date of
work order. From time to time, the Contractor applied for
extension of the period and extensions were granted by the
Employer. The total extension of 47 months was granted, which
expired in December 1996. Prior to that the Contractor
abandoned the remaining work. Initially pre-final bill was
prepared and it was finalised on 14.3.1998. The amount
mentioned in the final bill was accepted by the Contractor
without raising any protest.
6) During the execution of the work, the Contractor had
raised disputes as provided by General Conditions of Contract
(hereinafter referred to as 'G.C.C.' for short) and particularly, as
per the Clause No. 56. These disputes were raised in the year
1995. On most of the disputes, the incharge Engineer gave the
decision and it was communicated to the Contractor on
15.7.1995.
7) The Contractor was not satisfied with the decision
Arb.Appeal Nos.6 & 5/16
given by the incharge Chief Engineer and he referred the dispute
to Board of Arbitrators which was constituted as per Clause No.
57 of the G.C.C. As per the agreement, the Board was expected
to deliver reasoned award. The Contractor made claims under
eleven heads before Board of Arbitrators and all the claims were
contested by the Employer. In all 13 claims were made by the
Contractor before the department, but he prosecuted 11 claims
before the Board of Arbitrators. It is the case of Contractor that
the decision on claim Nos. 12 and 13 was likely to be taken
departmentally as per the terms and conditions of the contract
and so, he had preferred not to take decision on these claims
from Board of Arbitrators. The Board of Arbitrators gave award
in respect of 11 claims on 27.5.1998.
8) The reference was made to Board of Arbitrators as
per the procedure given in the agreement between the parties
and the provisions of Indian Arbitration Act, 1940 were
applicable. The award was filed as per the old provisions in the
Court and rule was made by the Court on the award. The award
and the decision of the Court have become final. The award of
amount of Rs.2,61,14,396/- was given in favour of the
Contractor and the cost of Rs. 1,21,721/- was also awarded in
Arb.Appeal Nos.6 & 5/16
favour of the Contractor. This amount was deposited in the Court
when the Employer failed in appeal which was filed in this Court
to challenge the award. The appeal was dismissed on 8.7.1999.
9) No decision was given by the Chief Executive
Engineer on the aforesaid two claims which were made with the
Department and which were not prosecuted before the Board of
Arbitrators by the Contractor. By the letter dated 6.2.2002, first
time the Contractor informed to the Department that he wanted
to refer the dispute to Arbitrator. Prior to that, the incharge
Executive Engineer and Superintending Engineer had rejected
these claims also.
10) The Contractor then gave the name of his nominee
for constitution of Board of Arbitrators by letter dated
21.3.2002. The Employer did not give the name of it's nominee
who was to work as the second Arbitrator. In the letter dated
21.3.2002 itself, the Contractor had informed to the Employer
that if the Employer does not appoint Arbitrator, the Arbitrator
appointed by the Contractor will work as the sole Arbitrator. As
per the procedure given in Clause 57 of the agreement, G.C.C.,
the Contractor had already requested the Chairman of the
Arb.Appeal Nos.6 & 5/16
Central Water Commission (C.W.C.) to see that the Board of
Arbitrators is constituted. However, by the letter dated
25.3.2002, the Contractor informed to the Chairman that his
letter dated 8.2.2002 made in aforesaid regard be ignored and
action should not be taken by the Chairman for constitution of
the Board of Arbitrators. Then the Contractor filed a proceeding
in the High Court bearing No. 5/2002 for appointment of
Arbitrator under the provision of section 11 of the Arbitration
and Conciliation Act, 1996. Due to the aforesaid correspondence
made by the Contractor, the Chairman of C.W.C. did not take
further action.
11) The Chairman of C.W.C. was not made party in the
proceeding filed under section 11 of the Act in the High Court.
This application was opposed by the Employer by contending
that the High Court had no power and the Board of Arbitrators
needs to be constituted as per the agreement. This Court
appointed retired Justice Shri. A.S. Bhate as the sole Arbitrator
by the order dated 10.7.2003. The Employer filed review
application by contending that it was necessary to create the
Board of Arbitrators as per the provisions of agreement and the
sole Arbitrator appointed by the High Court cannot get
Arb.Appeal Nos.6 & 5/16
jurisdiction to decide the dispute. In the review application, the
High Court again asked the parties to supply three names by
each of them. In the meantime, retried Justice Shri. Bhate
informed to the High Court that he was not willing to work as
sole Arbitrator. This Court then made appointment of one retired
District Judge Shri. R.G. Karmarkar as the sole Arbitrator. The
Employer had objection to appointment of Arbitrator under
section 11 of the Act, but he did not raise objection to the name
of Shri. Karmarkar. It is the case of Employer that it had not
given consent for appointment of sole Arbitrator and only
objection was not taken to the name suggested by the High
Court. After making of the appointment of Shri. Karmarkar, as
there was mention of consent of the Employer in the order,
application was moved by the Employer for making correction
and to remove that mention. The High Court did not accept that
contention. The application filed for correction was rejected by
the High Court on 4.3.2004. The order of appointment of Shri.
Karmarkar dated 9.10.2003 and the order dated 4.3.2004 were
challenged by the Employer in the Apex Court by filing Special
Leave to Appeal.
12) The Hon'ble Apex Court granted stay to the orders of
Arb.Appeal Nos.6 & 5/16
Hon'ble High Court on 14.3.2005. Before that date, Shri.
Karmarkar had started the proceeding. The claim statement was
filed and the written statement was also filed by the Employer.
The Employer took the defence that the Arbitrator had no
jurisdiction and he was not competent as his appointment was
not as per the agreement. Other objection was taken that the
claims were barred by the principle of res-judicata and they
were time barred. On merits also, the claims raised before the
sole Arbitrator were opposed.
13) Due to stay granted by the Apex Court, the
proceeding before Shri. Karmarkar remained stayed from
14.3.2005 to 28.11.2007. On 28.11.2007, the Apex Court
disposed of the Special Leave to Appeal with observations that
the point of jurisdiction can be decided by the Arbitrator himself
in view of the position of law prevailing at that time. Shri.
Karmarkar then expressed his enability to act as an Arbitrator.
Prior to that, in the year 2004, he had passed order on objection
of jurisdiction taken by the Employer. The names of retired
Justice Shri. S.C. Malte and retired Justice Shri. S.G. Mutalik
were suggested by High Court this time. The Employer
contended that such persons cannot be appointed as Arbitrator
Arb.Appeal Nos.6 & 5/16
in view of the agreement made by the parties. This Court then
appointed Shri. Mutalik as the sole Arbitrator. Before Shri.
Mutalik also, the Employer took aforesaid defences and
objections. The request was made to decide the point of
jurisdiction first, but Shri. Mutalik, Arbitrator expressed that this
point will be decided along with the dispute. Shri. Mutalik fixed
his fees as Rs.1,00,000/- for reading the papers and
Rs.70,000/- per meeting. The order with regard to aforesaid
charges and fees was also challenged by the Employer, but the
Employer did not succeed.
14) The learned Arbitrator has allowed all the claims of
the Contractor (7 +1 Claims). It is held by the learned Arbitrator
that there is no bar of principle of res-judicata to the claims.
Though issue was framed on the point of limitation and it was
clubbed with the issue of res-judicata, the award delivered by
the learned Arbitrator does not show that he had touched this
point. The learned Arbitrator has held that in view of the order
made by this Court under section 11 of the Act, he has
jurisdiction. The learned Arbitrator has held that the Contractor
is entitled to recover the amount of Rs. 11,24,60,651/- with
interest at the rate of 16% p.a. and has held that the interest
Arb.Appeal Nos.6 & 5/16
will be payable up to the period ending on 30.9.2003 and then
the interest will be payable from 4.2.2004 the date of filing of
the claims on the awarded amount then till the date of
realisation. The cost of Rs.10,00,000/- was imposed by the
learned Arbitrator on the Employer. This award was delivered on
3.4.2011.
15) In the decision given by the learned P.D.J., Parbhani
in Application (RJE) No. 77/2011, the learned P.D.J. has set
aside the award of Arbitrator in respect of claim Nos. 2 [2A and
2B], 3, 4 and 5. The award in respect of claim Nos. 1 and 6 is
confirmed by the P.D.J. The claim No. 7 was in respect of
interest and so, it can be said that interest is allowed in respect
of the claim Nos. 1 and 6. The learned P.D.J. has held that the
claim Nos. 2A, 2B, 4 and 5 cannot be allowed as they are hit by
the principle of res-judicata. The learned P.D.J. held that claim
No. 4 was time barred. The claim No. 3 is set aside by holding
that there is virtually no evidence and there is no justification in
awarding this claim when the award was required to be
reasoned award.
16) In the present matter, in view of the contentions
Arb.Appeal Nos.6 & 5/16
made and the arguments advanced, following points need to be
decided.
(i) Whether the present matters need to be decided
by Commercial Appellate Division constituted under the
Commercial Courts, Commercial Division and
Commercial Appellate Division of High Court Act,
2015 ?
(ii) Whether the learned Arbitrator Shri. Mutalik,
Retired Judge of this Court was competent in view of
the agreement ?
(iii) Whether claim Nos. 1, 2, 3 & 6 could have been
considered by the Arbitral Tribunal in view of the terms
and conditions of the contract ?
(iv) Whether the aforesaid claims [2A, 2B, 4 and 5]
are hit by the principle of res-judicata ?
(v) Whether claim Nos. 1, 4 & 6 are time barred?
(vi) Whether claim No. 3 was substantiated ?
(vii) Whether the award delivered by the learned
Arbitrator and the decision given by the learned P.D.J.
need to be interfered with in the appeals ?
Point No. 1 :-
Effect of the provisions of the Commercial Courts,
Arb.Appeal Nos.6 & 5/16
Commercial Division and Commercial Appellate Division of
High Court Act, 2015 on the jurisdiction of this Court :
17) The learned counsel for Contractor submitted that
for Aurangabad Bench of this Court, Commercial Appellate
Division of High Court is created under the aforesaid enactment
and so, the present matters need to be placed before the said
Court. For ascertaining as to whether this Court has jurisdiction,
this Court has seen the scheme of the aforesaid Special
Enactment carefully. It is true that the dispute of the present
matters falls under the definition of 'commercial dispute' given
under section 2(c) and the value of the dispute is more than Rs.
28 Crore.
18) Aurangabad Bench of Bombay High Court has no
ordinary original civil jurisdiction and so, there is no Commercial
Division of the High Court at Aurangabad Bench. Commercial
Appellate Division for Aurangabad Bench came to be constituted
under the aforesaid Act with effect from 30.6.2016. The present
proceeding was filed on 31.3.2016. The proceeding under
section 34 of the Act was decided by the learned P.D.J., Parbhani
on 31.12.2016 as "Court" under the Act. This is because first
Arb.Appeal Nos.6 & 5/16
time by Government notification dated 30.6.2016, the
Government constituted commercial Court at district levels
including for district Parbhani and High Court under letter dated
14.7.2016 appointed the Judges of District Court as Commercial
Courts. From the record, it can be said that for Parbhani district
and other districts, the Commercial Court actually started
functioning for district places on 16.7.2016. The aforesaid
Special Enactment was published by notification in official
gazette on 31.12.2015, but the Courts were constituted
subsequently and the proceeding under section 34 was decided
by the learned P.D.J. as the "Court" under section 34 of the Act
on 31.12.2015.
19) The matters which are required to be decided by
Commercial Appellate Division are mentioned in section 13 of
the aforesaid Special Enactment and the provision runs as under
:-
"13. Appeals from decrees of Commercial
Courts and Commercial Divisions.- (1) Any
person aggrieved by the decision of the
Commercial Court or Commercial Division of a
High Court may appeal to the Commercial
Appellate Division of that High Court within a
period of sixty days from the date of judgment or
Arb.Appeal Nos.6 & 5/16
order, as the case may be:
Provided that an appeal shall lie from such
orders passed by a Commercial Division or a
Commercial Court that are specifically enumerated
under Order XLIII of the Code of Civil Procedure,
1906 (5 of 1908) as amended by this Act and
section 37 of the Arbitration and Conciliation Act,
1996 (26 of 1996).
(2) Notwithstanding anything contained in
any other law for the time being in force or Letters
Patent of a High Court, no appeal shall lie from
any order or decree of a Commercial Division or
Commercial Court otherwise than in accordance
with the provisions of this Act."
20) Section 3 of this Special Enactment shows that the
State Government is expected to constitute the Commercial
Courts by notification. It is required to be published in official
gazette and that was done on 30.6.2016. On the date of
decision of the matter filed under section 34 of the Act,
Commercial Court was not in existence and similarly,
Commercial Appellate Division was also not in existence when
the present appeals were filed in this Court. The provision of
section 15 takes care of the pending matters and this provision
shows that only the matters which are filed or were filed under
section 34 of the Act and which were still pending can be
Arb.Appeal Nos.6 & 5/16
transferred under the provision of section 15 and they are
required to be transferred either to Commercial Court or
Commercial Division. Neither in section 15 nor in any other
provision of the Special Enactment, there is provision for
transferring the appeals, which are filed against the decisions
given by the Courts as mentioned in section 34 of the Act to
Commercial Appellate Division of this Court. In view of this
position of law, it needs to be held that present appeals need to
be decided by this Court as appeals filed under section 37 of the
Act and not by Commercial Appellate Division of the High Court.
So, the point is answered accordingly.
21) On the aforesaid point, the learned counsel for
Contractor placed reliance on the observations made by
Commercial Appellate Division of this Court at Principal Seat in
Judgment of Commercial Appeal No. 7 of 2016 [Hubtown
Limited Vs. IDBI Trusteeship Service Limited] decided on
24.10.2016. This Court has carefully gone through the facts of
this case and observations made by the Commercial Appellate
Division. The facts were totally different and the order made by
the Commercial Division in Summons for Judgment was taken in
appeal before the Commercial Appellate Division. It was held
Arb.Appeal Nos.6 & 5/16
that appeal filed under section 13 of the Commercial Courts,
Commercial Division and Commercial Appellate Division of High
Courts Act, 2015 was tenable and the order of learned Single
Judge of Commercial Division in Summons for Judgment was set
aside. The maintainability of Commercial Appeal was in
question, but as the order of Commercial Division was taken
in appeal such decision was given. Thus, the observations made
in this case are of no use to the Contractor in the present
matter.
Point No. 2 - Compentency of the Arbitrator :-
22) To ascertain, whether the retired Judge of the High
Court Shri. Mutalik could have been appointed as Arbitrator
under section 11 of the Act, the provision of section 11 (relevant
portion) needs to be considered first. The relevant portions are
section 11(1) to 11(6), 11(8) of the Act and they run as under :-
"11. APPOINTMENT OF ARBITRATORS. -(1) A
person of any nationality may be an arbitrator,
unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties
are free to agree on a procedure for appointing
the arbitrator or arbitrators.
(3) Failing any agreement referred to in
sub-section (2), in an arbitration with three
Arb.Appeal Nos.6 & 5/16
arbitrators, each party shall appoint one arbitrator,
and the two appointed arbitrators shall appoint the
third arbitrator who shall act as the presiding
arbitrator.
(4) If the appointment procedure in sub-
section (3) applies and-
(a) a party fails to appoint an arbitrator
within thirty days from the receipt of a request to
do so from the other party; of
(b) the two appointed arbitrators fail to
agree on the third arbitrator within thirty days
from the date of their appointment,
the appointment shall be made, upon request of a
party, by the Chief Justice or any person or
institution designated by him.
(5) Failing any agreement referred to in
sub-section(2), in an arbitration with a sole
arbitrator, if the parties fail to agree on the
arbitrator within thirty days from receipt of a
request by one party from the other party to so
agree the appointment shall be made, upon
request of a party, by the Chief Justice or any
person or institution designated by him.
(6) Where, under an appointment
procedure agreed upon by the parties, -
(a) a party fails to act as required under
that procedure; or
(b) the parties, or the two appointed
arbitrators, fail to reach an agreement expected of
them under that procedure; or
Arb.Appeal Nos.6 & 5/16
(c) a person, including an institution, fails
to perform any function entrusted to him or it
under that procedure,
a party may request the Chief Justice or any
person or institution designated by him to take the
necessary measure, unless the agreement on the
appointment procedure provides other means for
securing the appointment.
(7) ........
(8) The Chief Justice or the person or
institution designated by him, in appointing an
arbitrator, shall have due regard to-
(a) any qualifications required of the
arbitrator by the agreement of the parties; and
(b) other considerations as are likely to
secure the appointment of an independent and
impartial arbitrator."
23) In the present matters, the application under section
11 of the Act was filed in the year 2002 and the appointment of
retired Judge of this Court was made first time in the proceeding
on 10.7.2003. The subsequent appointments of sole Arbitrator
mentioned above were made only to replace the first sole
Arbitrator appointed by this Court. This decision was taken up to
Supreme Court by filing Special Leave Petition by the Employer.
The Apex Court referred the case of M/s. S.B.P & Co. Vs. M/s.
Patel Engineering Ltd. and Anr. [AIR 2006 SUPREME
Arb.Appeal Nos.6 & 5/16
COURT 450] and held that it will be open to raise the challenge
to jurisdiction of Arbitrator appointed by High Court before the
Arbitrator himself as provided in the Act. In the case of S.B.P. &
Co. cited supra also, the Apex Court had made it clear that if the
applications filed under section 11 of the Act were already
decided, it is to be presumed that in those cases, the
appointments were made as per the ratio of previous case of
Apex Court reported as M/s. Konkan Railway Corporation
Ltd. and Anr. Vs. M/s. Rani Construction P. Ltd. [AIR 2002
SUPREME COURT 778]. As the contrary view was taken in the
case of S.B.P. & Co., cited supra, the Apex Court made it clear
in the case of S.B.P. & Co. itself that in the matters in which
Arbitrators were already appointed as per the case of Konkan
Railway Corporation cited supra, in those cases all objections
with regard to jurisdiction of the Arbitrator need to be decided
under section 16 of the Act. This position of law needs to be
kept in mind while applying the provisions of section 11(1) to
11(6) of the Act to the present matters. Thus, the point of
competency of the Arbitrator is open in the present matter. In
view of the provision of section 16 (6) of the Act read with
provision of section 34 (2) (v) of the Act, this point could have
been considered by the Arbitrator and also the District Court. In
Arb.Appeal Nos.6 & 5/16
the appeal, this point can be again considered.
24) If the provisions of section 11(2) and 11(6) of the
Act are read together, they show that if there is agreement over
the procedure for appointment of arbitration and the procedure
provides other means for securing the appointment, the power
under section 11(6) of the Act cannot be used.
25) The provision of section 11(2) of the Act shows that
this provision is subject to the provision of section 11(6) of the
Act and so, if there is already agreement on procedure, there
cannot be new agreement on procedure by the parties to
appoint the Arbitrator. Similarly, if there is agreement on
procedure available, the provisions of sections 11 (3), 11 (4), 11
(5) cannot be used as those provisions are to take care of the
situation where there is no agreement on the procedure to
appoint Arbitrator. It needs to be kept in mind that in section
11(6) of the Act, there are two parts. The first part relates to
the lacuna in the procedure agreed. Due to such lacuna, if even
after following the procedure the Arbitrator cannot be appointed,
then the Court can take necessary measures as mentioned in
those provisions of law to see that Arbitrator is appointed.
Arb.Appeal Nos.6 & 5/16
However, the second part relates to the situation where there is
the procedure, and due to the failure on the part of the one or
more parties or due to other situation mentioned in clauses (b)
(c) of section 11(6) of the Act, the Arbitrator is not appointed,
but there is the procedure to take care of such situation and by
following that procedure the Arbitrator can be appointed. In the
present matters, procedure mentioned in second part of section
11(6) of the Act was available.
26) Clause No. 57 of the G.C.C. between the parties
reads as under :-
"57. ARBITRATION :
(1) All disputes or differences in respect of
which the decision, if any, of the Engineer or
Employer has not become final and binding as
aforesaid, shall on the initiative of either party in
dispute be referred to the adjudication of three
arbitrators. One arbitrator is to be nominated by
the Employer, one by the Contractor and the third
by the President of the International Chamber of
Commerce, in the case of foreign contractors and
Chairman, Central Water Commission in the case
of local contractors. If either of the parties fail to
appoint its arbitrator within sixty days after receipt
of notice for the appointment of an arbitrator then
the President of the International Chamber of
Arb.Appeal Nos.6 & 5/16
Commerce or the Chairman, Central Water
Commission as the case may be, shall appoint an
Arbitrator. A certified copy of the appointment
made by the 'President'/'Chairman' shall be
furnished to both parties.
(2) The arbitration shall be conducted in
accordance with the Rules of Conciliation and
Arbitration of the International Chamber of
Commerce, Paris in the case of foreign contractors
and provisions of Indian Arbitration Act 1940 or
any statutory modifications thereof in the case of
local contractors and shall be held in either case at
such place and time in India as the Arbitrators
may determine. The decision of the majority of the
Arbitrators shall be final and binding upon the
parties and the expenses of the Arbitrators shall
be paid as may be determined by the Arbitrators.
(3) The said arbitrator/s shall have full
power to open up, revise and review any decision,
opinion, direction, certificate or valuation by the
Engineer, Neither party shall be limited in the
proceedings before such arbitrator/s to the
evidence or arguments put before the Engineer for
the purpose of obtaining his said decision. No
decision given by the Engineer in accordance with
the foregoing provisions shall disqualify him from
being called as a witness and giving evidence
before the arbitrator/s on any matter whatsoever
relevant to the dispute or difference referred to
the arbitrator/s as aforesaid. The reference to
Arb.Appeal Nos.6 & 5/16
arbitration may proceed notwithstanding that the
works shall not then be or be alleged to be
complete provided always that the obligations of
the Employer, the Engineer and the Contractor
shall not be altered by reason of the arbitration
being conducted during the progress of the works.
(4) Performance under the contract shall,
if reasonably possible, continue during the
arbitration proceedings and payments due to the
Contractor by the Employer shall bot be withheld,
unless they are the subject matter of the
arbitration proceedings.
(5) All awards shall be in writing and in
case of claims equivalent to Rupees one hundred
thousand or more, such awards shall state reason
for the amounts awarded.
(6) Neither Party is entitled to bring a
claim to arbitration if its Arbitrator has not been
appointed by thirty days after the expiration of the
Maintenance period.
(7) The Term 'Indian Contractor' shall
include Indian firm or group of Indian firms and
Joint Venture consortia eligible for price preference
as domestic tenderer."
Clause No. 57 (1) shows that the authority mentioned in the
Clause viz. the Chairman of C.W.C. was having power to appoint
the sole arbitrator if both or either party had failed to nominate
Arb.Appeal Nos.6 & 5/16
the Arbitrator as provided in first part of this clause. In the first
arbitral proceeding, both the sides had appointed their nominees
and the third Arbitrator was appointed by Chairman of C.W.C.
Thus, in the present matter also, it was possible to use this
procedure. Infact reference was already made to the Chairman
of C.W.C. and the matter was pending before the Chairman for
consideration. It is the Contractor, who had written to the
Chairman of C.W.C. to inform that he was not interested in
getting the Arbitrator appointed as per this clause as he wanted
to move High Court under section 11 of the Act. This fact of the
present matter and the position of law already quoted are
sufficient to hold that retired Justice Shri. Mutalik could not have
been appointed as Arbitrator under section 11 by this Court.
Both the learned Arbitrator and the Court under section 34 of
the Act have committed error in holding that retired Justice Shri.
Mutalik was appointed as per the provisions made in law. This
single ground is sufficient to set aside the entire award delivered
by the learned Arbitrator. So, the point No. 2 is answered
accordingly.
27) On the aforesaid point, the learned counsel for
Employer placed reliance on the observations made by the
Arb.Appeal Nos.6 & 5/16
Supreme Court in the case reported as 2016 (4) Mh.L.J. 101
[Huawei Technologies Company Ltd. Vs. Sterlite
Technologies Ltd.]. In this case, the Apex Court has
considered the provisions of section 11 and 15 (2) of the Act
and has laid down that the term 'Rules' mentioned in section 15
(2) relates to the provisions made in the agreement for
appointment of Arbitrator. It is laid down that on every occasion
including for occasion of filling vacancy of Arbitrator, the Rules in
that regard need to be followed. There cannot be dispute over
this proposition and this Court has quoted the relevant portion
of the agreement mentioned in the procedure for appointment of
Arbitrator.
28) The learned counsel for respondent/Contractor
placed reliance on the observations made by the Supreme Court
in Civil Appeal No. 6275/2014 [North Eastern Railway &
Ors. Vs. Tripple Engineering Works] decided on
13.8.2014. In this case and also in the case reported as 2013
(2) Arb.L.R. 105 (SC) [M/s. Deep Trading Company Vs.
M/s. Indian Oil Corporation and Ors.], the Apex Court has
discussed the provision of section 11 and has laid down that
when one party forfeited right to appoint his nominee for
Arb.Appeal Nos.6 & 5/16
constitution of Arbitral Tribunal, it is not open to the said party
to say that the Arbitrator cannot be appointed under section 11
of the Act. The facts of the two reported cases show that due to
failure of one party to nominate his Arbitrator, it was not
possible to constitute the Arbitral Tribunal. In view of that
circumstance, the Apex Court laid down that the provision of
section 11 can be used. The facts of the present matter are
totally different and this Court has already observed that even
after failure of one or both the parties, the Arbitrator could have
been appointed by the agency mentioned in the agreement. In
the present matter, the Contractor avoided to get constituted
the Tribunal from the said agency, the Chairman of C.W.C. The
relevant portion of section 11 of the Act is also discussed in this
regard and so, the observations made by the Apex Court in
these two cases are of no use to the Contractor.
Point No. 3 :-
29) Under this point, this Court is discussing all the
remaining points like point of limitation, point of res-judicata,
point of excepted matters and to some extent the merits of the
claim.
Arb.Appeal Nos.6 & 5/16
30) The relevant facts of the dispute between the parties
are already quoted and they show that while before December
1996, the Contractor had abandoned the work, though the
period for execution of work was expected by the department till
December 1996. In the year 1995, only 13 claims were raised
by the Contractor before the Employer as per the procedure
given in Clause 56 of G.C.C. Out of the said 13 claims, the
Contractor preferred to get decision from Board of Arbitrators on
11 claims. As per the record, pre-final bill was prepared on
30.6.1996 and then the final bill was prepared and singed on
14.3.1998. In view of the aforesaid facts, it can be said that no
more work was expected when pre-final bill and final bill were
signed by the parties. These bills were accepted by the
Contractor without raising any protest. These circumstances
need to be kept in mind while deciding the point of limitation,
and the point of res-judicata. In spite of these circumstances,
the Contractor raised new claims which were five in numbers
before the second Arbitrator. It can be said that there is no
record with the Contractor in respect of these new five claims to
show that they were made under the procedure given under the
agreement and particularly, Clause No. 56 of the agreement.
The award prepared by the learned Arbitrator in the present
Arb.Appeal Nos.6 & 5/16
matter shows that the learned Arbitrator considered one way
correspondence allegedly made by the Contractor with the
department for presuming that these new claims were raised
and they were pending with the department. It is already
observed that only 13 claims were raised as per the procedure
and the Contractor had preferred to take final decision on two
claims departmentally and he had filed claims statement in
respect of remaining 11 claims before the Board of Arbitrators
(first arbitration). The award delivered by the learned Arbitrator
in the present matter shows that there was virtually non
application of mind and the learned Arbitrator virtually accepted
all the contentions made by the Contractor as they were without
considering the effect of the principle of res-judicata, limitation
and also the presence or absence of the material with regard to
actual work done. There are many points, on the basis of which
it can be said that the Arbitrator had not considered the basic
concepts like res-judicata and for instance issue No. 6A can be
quoted in that regard.
"6A] Does the claimant prove that he is entitled
to for payment of interest @ 16% p.a. from 13-
02-1993 to 15-7-1995 on all sums awarded under
the Award dated 27-05-1998 ?"
Fortunately, in the reasoning other point is considered and
decided.
Arb.Appeal Nos.6 & 5/16
31) The provision with regard to the procedure to raise
the claims and to make reference to arbitration can be found in
Clause Nos. 56 and 57 of G.C.C. Clause No. 57 is already
quoted. Clause No. 56 runs as under :-
"56. SETTLEMENT OF DISPUTES :-
If any dispute or difference of any kind
whatsoever shall arise between the Engineer or
Employer and the Contractor in connection with,
or arising out of the Contract, or the execution of
the works, whether during the progress of the
works or after their completion and whether or
after the termination, abandonment or breach of
the Contract, it shall, in the first place, be referred
to and settled by the Engineer-in-charge who
shall, within a period of thirty days after being
requested by the contractor to do so give written
notice of his decision to the Contractor. Upon
receipt of the written notice on decision of the
Engineer the Contractor shall promptly proceed
without delay to comply with such notice for
decision.
If the Engineer-in-charge fails to give notice
of his decision in writing within a period of thirty
days after being requested, or if the Contractor is
dissatisfied with the notice of decision of the
Engineer-in-charge the Contractor may within
thirty days after receiving notice of decision
Arb.Appeal Nos.6 & 5/16
appeal to the Superintending Engineer, who shall
afford an opportunity to the Contractor to be
heard and to offer evidence in support of his
appeal. The Superintending Engineer shall give
notice of his decision within a period of thirty days
after the Contractor has given the said evidence in
support of his appeal. Subject to arbitration, as
hereinafter provided, such decision of the
Superintending Engineer in respect of every
matter so referred shall be final and binding upon
the Contractor and shall forthwith be given effect
to by the Contractor, who shall proceed with the
execution of the works with all due diligence
whether he requires arbitration, as hereinafter
provided, or not. If the Superintending Engineer
has given written notice of his decision to the
Contractor and no claim to arbitration has been
communicated to him by the Contractor within a
period of thirty days from receipt of such notice,
the said decision shall remain final and binding
upon the Contractor. If the Superintending
Engineer shall fail to give notice of his decision as
aforesaid within a period of thirty days after being
requested as aforesaid, or if the Contractor be
dissatisfied with any such decision, then and in
any such case the Contractor within thirty-days
after receiving notice of such decision, or within
thirty days after the expiration of the first-named
period of thirty days, as the case may be, appeal
to Chief Engineer who shall afford an opportunity
Arb.Appeal Nos.6 & 5/16
to the Contractor to be heard and to offer
evidence in support of his appeal. The Chief
Engineer shall give decision within a period of
thirty days after the Contractor has given evidence
in support of his appeal. If the Contractor is
dissatisfied with this decision, the contractor
within a period of thirty days from receipt of
decision shall indicate his intention to refer the
dispute to Arbitration, failing which the said
decision shall be final and conclusive."
In view of the wording of Clause No. 56, it was necessary for the
Contractor to presume that his two claims, out of aforesaid 13
claims, were not accepted by the department. This presumption
is necessary as for every stage, the period is fixed in Clause No.
56. If he had taken the matter up to Chief Engineer and the
decisions were given against him by the incharge Engineer and
Superintending Engineer, then after expiry of period of 30 days
from raising the grievance before the Chief Engineer, it was
necessary for the Contractor to presume that the department
was not accepting the remaining two claims. It can be said that
the Contractor took the risk by presuming that he will be getting
the remaining two claims settled departmentally and the
Contractor did not stake claims under the two heads before the
Board of Arbitrators.
Arb.Appeal Nos.6 & 5/16
32) It is already observed that so far as the remaining
five claims are concerned from the present matter, they were
not prosecuted as per the procedure given in Clause No. 56 and
so, it can be said that these claims were never raised during the
execution of the work. Even if it is presumed that in the year
1995, the Contractor had made correspondence with regard to
new claims, in that case also the Contractor ought to have
prosecuted the matter under Clause No. 56 of G.C.C. Thus, it
needs to be inferred that the cause of action had already arisen
at the end of year 1995 in respect of the new claims also.
33) Clause 57 (6) of G.C.C. shows that matter needs to
be referred to arbitration within 30 days after expiration of the
maintenance period. Clause 5 of G.C.C. provides for
maintenance and defect liability period. This period was 180
days from the certified date of completion. It is already
observed that Contractor had abandoned the work and there
was no question of issuing certificate of completion. The record
shows that the Contractor never attempted to obtain completion
certificate to get absolved himself from the liability mentioned in
Clause 5 of G.C.C. If the work was not completed, then it can be
Arb.Appeal Nos.6 & 5/16
said that the period mentioned in Clause 5 can be counted from
the date of final bill. As final bill was signed by the Contractor
without protest on 14.3.1998, the period of limitation started to
run after expiry of 180 days from 14.3.1998.
34) The amendment to section 28 of the Contract Act,
which made agreement void if the agreement was limiting the
limitation period provided by General Law came in to force with
effect from 8.1.1997. In view of Clause No. 5 of G.C.C. if it is
presumed that benefit of amended provision of the Contract Act
needs to be given to the Contractor, in that case also, the period
of limitation started to run after completion of 180 days from
14.3.1998. If this amendment is not made applicable, then the
period had started to run as provided in Clause 56 of G.C.C.
Thus, even if the best possible case for the Contractor is
accepted, he ought to have raised the dispute within three years
from 14.9.1998 (14.3.1998 + 180 days).
35) For all the claims decided in the present matter, it
can be said that the Contractor took steps first time in the year
2002 by filing proceeding under section 11 of the Act. He filed
the claim before Arbitrator appointed by this Court in the year
Arb.Appeal Nos.6 & 5/16
2003. Due to these circumstances, this Court has no hesitation
to hold that all the claims decided by the learned Arbitrator in
the present matter were time barred.
36) So far as the point of res-judicata is concerned,
following points need to be kept in mind. Not only the principle
of res-judicata, but the principle of constructive res-judicata also
needs to be used in such matters. The contention of waiver was
made at all the stages for the Employer.
(i) The Board of Arbitrators came to be constituted
on 17.1.1996 and it had given direction to both the
sides to file statement of claims.
(ii) The first meeting of Board of Arbitrators was held
on 4.11.1996 and on that date, the decision was taken
as to which claims will be decided. Thus, it was open to
the Contractor to file the claims decided in the present
matter before the Board of Arbitrators also. In spite of
these circumstances, the Contractor preferred not to
file the claims before the Board of Arbitrators in the
first arbitration.
37) The Board of Arbitrators had given award on
Arb.Appeal Nos.6 & 5/16
following claims :-
(i) Revised rates for work executed after the original
scheduled period viz. for the work executed after
20.1.1993. The new rate was fixed by the Board of
Arbitrators as per the contract formula accepted in the
agreement by the parties viz. as per the price indices
as on 20.1.1993. This additional amount was given as
compensation for delay caused for execution of the
work.
(ii) Revised rates for extra items exceeding 30% of
the work over the tender quantities. The revised rates
were given in respect of this work done also even prior
to 20.1.1993. Similarly, under this head the revised
rate was given in respect of work done after
20.1.1993.
(iii) Damages on account of recovery of amount as
security deposit from running bills and interest at the
rate of 16% p.a. is given on such amount. Thus, the
claim of compensation in respect of retension of money
by the department during the work period was placed
before the Board of Arbitrators for consideration. The
Board of Arbitrators could have considered the present
Arb.Appeal Nos.6 & 5/16
claim of getting interest on amount of bank guarantee
for the period starting from 20.1.1993. But, this point
was not raised.
(iv) The payment of Rs.1.5 per bag cement was
awarded as the difference of rate as there was contract
to supply cement in jute bags to the Contractor by the
Employer and the cement was supplied in polythene
bags.
(v) Interest on all the amount due and demanded in
claims at the rate of 16% p.a. from the date of
occurrence till the date of realisation. The Board of
Arbitrators has awarded interest on the amount which
was due to the Contractor prior to 10.7.1995 and also
on the amount which became payable on 15.7.1995.
These dates are with regard to the demands made by
the Contractor under Clause 56 of G.C.C. Similarly past
and pendente-lite interest with reference to the date
4.11.1996, the date of first hearing of the Board of
Arbitrators is granted at the rate of 16% p.a. Further,
the order was made by Board of Arbitrators that if the
amount was not paid within two months from the date
of the award delivered by the Board of Arbitrators, the
Arb.Appeal Nos.6 & 5/16
department was liable to pay the interest at the rate of
18% p.a. This item again shows that it was open to the
Contractor to claim interest in respect of all the
amounts which were due to him, according to him,
before the Board of Arbitrators.
38) The Board of Arbitrators had rejected the following
claims made by the Contractor :-
(i) Loss of over heads and profits due to delay. This
was done as revised rate was given for entire work
done after 20.1.1993 by the Board of Arbitrators.
(ii) The compensation for extra lead charges for cut
spoils disposed of at the distant location. This claim
was rejected with reference to clauses of G.C.C. and
special terms and conditions of the contract.
(iii) The extra rate for hard rock excavation in canal
section. This claim was rejected as the Contractor
failed to prove that there was any such agreement.
Under this item, the present claim of control blasting
could have been considered and it can be said that it
needs to be presumed that such claim was considered.
(iv) Compensation for idle machinery and idle labour
Arb.Appeal Nos.6 & 5/16
charges due to stoppage of work for the same period.
This claim was rejected as the Contractor failed to
prove that at any time, his labour and machinery
remained idle and so, on merit it was rejected.
(v) Payment of rehandling charges for casing
material of k.m. 90 spoils used for embankment of
entire reservoir. This claim was rejected on the basis of
the material available and terms and conditions of the
contract.
(vi) Extra item of every overcuts of hard rock at k.m.
89 and 90 beyond normal pay line and also back filling
of the same. This is also rejected on merits and it can
be said that present item and control blasting could
have been raised under this claim also by the
Contractor.
39) Aforesaid circumstances show that all the so called
extra items except the two claims which were specifically
withdrawn by the Contractor were placed before the Board of
Arbitrators, first arbitration. The following were the two items
which were specifically withdrawn by the Contractor.
(i) Hard rock excavation involving controlled
Arb.Appeal Nos.6 & 5/16
blasting. It was the case of Contractor that radius was
changed due to geography and existence of the
structures in the vicinity. On this point also, it needs to
be observed that as per the terms and conditions of
contract, it was necessary for the Contractor to visit
the site and make assessment, estimate before quoting
rate. These things ought to have been inspected by the
Contractor. The learned Arbitrator in the present
matter has not considered this aspect of the matter.
The Board of Arbitrators had considered this aspect.
(ii) Extra quarrying and transport charges for stone
and metals for concrete work and also for work of
filling. It is the case of Contractor that useful stones
were not available along with canal line and he was
required to bring that material from the other place,
k.m. 91. The work was to be done from k.m. 72 to 87
and 88 to 99. Here only it needs to be observed that
the learned Arbitrator has not touched the record of
sites already informed by the Employer. The learned
Arbitrator has decided this point only on the basis of
quantities used in the work and it is presumed that
these quantities were brought from distant place when
Arb.Appeal Nos.6 & 5/16
no material whatsoever was produced by the
Contractor to show that this material was in fact
brought from distant place.
40) The discussion already made and the material show
that the work of controlled blasting was executed in the year
1994-95. It is already observed that it was necessary for the
Contractor to presume that the department was not accepting
this claim as extra item and so, it was necessary for the
Contractor to refer this claim to arbitration. This opportunity was
there to the Contractor when the Board of Arbitrators was
constituted, but he preferred to virtually withdrawn the claim.
Same can be said in respect of the other claim, extra item of
stone and metals.
41) Before the learned Arbitrator from the present
matter, the Contractor had made in all 7 claims which included
the aforesaid two claims. The department took the defence that
already revised rate was given to the Contractor by the Board of
Arbitrators in the past and the new claims were not raised
before the Arbitrator. It was submitted for the Employer that the
agreement did not provide for separate or additional charges
Arb.Appeal Nos.6 & 5/16
even in respect of the controlled blasting. The defence was
taken that there was no prior approval of incharge Engineer with
regard to controlled blasting. As already observed, like point of
res-judicata, the point of limitation was also there.
42) So far as the item of controlled blasting is
concerned, the attention of the learned Arbitrator was drawn to
the Clause 2.16 of second volume of agreement. This clause
provides for execution of hard rock chiseling/control blasting. It
is the case of Employer that the tender rates were fixed after
preparing estimates on the basis of survey done by the
department and the contractor had accepted the rate and so, it
was not open to him to claim additional rate or as extra item.
The attention of the learned Arbitrator was drawn to clause No.
2.16.2 of the second volume showing that when the control
blasting was not permissible in the zone of 100 meters directly
below transmission line, the Contractor ought to have resorted
to pneumatic rock breakers or chiseling. In view of this clause, it
was necessary for the Contractor to first take permission of the
Employer if he wanted to do the control blasting under
transmission lines. It is not the case of Contractor that such
permission was granted by the Employer to him. For this reason
Arb.Appeal Nos.6 & 5/16
also, nothing could have been given by the learned Arbitrator
under this head to the Contractor. It can be said that it was not
agreed item. Even when Arbitral Tribunal has held that
permission was not granted by the Employer, the claim is
allowed by the Arbitrator.
43) So far as the claim No. 2 which was withdrawn by
the Contractor in the past when the Board of Arbitrators was
constituted is concerned viz. the claim of extra quarrying and
transport of stones/metals, the attention of the learned
Arbitrator was drawn to Clause No. 20 of G.C.C. and Clause No.
5.6 of the special terms and conditions of the contract. The sites
where quarries could have been taken were already informed
and it was made clear that if the material available at those
quarries was not sufficient, the Contractor was to make his own
arrangement at own cost of such material. The clauses show
that the Contractor was expected to spend for construction of
road also for transport of such material. Even if the case of
Contractor that he was required to Collect the material at k.m.
91 could have been considered by ignoring the aforesaid clauses
of agreement, then also it was necessary for the Contractor to
substantiate that claim. The award delivered by the Arbitrator
Arb.Appeal Nos.6 & 5/16
shows that he did not refer to the drawings and maps annexed
with the tender record showing the quarries. The learned
Arbitrator did not ask the Contractor to produce the record
which is ordinarily created like payment of royalty in respect of
such material to the revenue department. Surprisingly, the
learned Arbitrator has granted the claim by presuming that the
quantities actually used was required for work and so, the
Contractor must have transported this quantity from the place
which he has contended. The Contractor himself has admitted
that some material was available at the other quarries which
were not that away from the site of work, but the Contractor has
not given the exact quantity of the material recovered from
those sites by producing record of royalty and other record.
These circumstances show that most casual approach was
shown by the learned Arbitrator and even when there was no
material to substantiate the claim, the learned Arbitrator has
granted the claim and so award on such claim cannot sustain in
law. The Arbitral Tribunal has not referred Clause No. 5.7 of the
special terms and conditions. Thus, there was no material with
the Contractor to substantiate the claim under this head and the
Contractor had virtually failed to substantiate this claim and the
Court has rightly set aside the claim under this head.
Arb.Appeal Nos.6 & 5/16
44) The decision of the learned Arbitrator of granting
claims under issue No. 3A, 3B, 4A and 4B viz. revised rates for
entire quantities of work executed after 20.1.1993 and for
quantities which were less than 70% of the tender quantity
show that there was virtually non application of mind. It is
already mentioned that the Board of Arbitrators had given
revised rates to the Contractor by presuming that delay was
caused to the employer, but the learned Arbitrator has again
given compensation under this head. Even if, the Board of
Arbitrators had not given such compensation, in that case also,
the decision of the Board of Arbitrators had become final on that
point as this point was raised before the Board of Arbitrators and
so, there was bar of principle of res-judicata for granting these
claims. From this angle, the learned Arbitrator has not
considered these claims. Thus, the award on such claims cannot
sustain in law.
45) The claim in respect of excess price allegedly paid by
the Contractor for sand mentioned in issue Nos. 5A and 5B is
similar to the claim in respect of other material like rubble,
Arb.Appeal Nos.6 & 5/16
metal etc. It was the responsibility of the Contractor as per the
Clause 20 of G.C.C. and Clause 5.6 of special terms and
conditions of the contract to procure the sand. This aspect of the
agreement is not at all considered by the learned Arbitrator and
compensation is granted under this head. Such award cannot
sustain in law.
46) The claim in respect of interest under issue No. 6A
viz. interest on bank guarantee could not have been awarded by
the Arbitrator. Clause No. 10.3 of the special terms and
conditions of the contract shows that it was necessary for the
Contractor to keep such bank guarantee with the employer
during the period of execution of work. As per this clause, bank
guarantee was to remain with the Employer and it was to be
released only after completion of the work and settlement of the
account. Thus, the learned Arbitrator has committed grave error
in awarding interest on the bank guarantee in the present
matter. If issue Nos. 6A, 6B and 7 are read, which were framed
by the learned Arbitrator, it can be said that the learned
Arbitrator had not applied mind even for framing the issues. For
these reasons, the award on claims under this head needs to be
set aside.
Arb.Appeal Nos.6 & 5/16
47) Issue No. 12 framed by the learned Arbitrator was
about entitlement of the Contractor to get compensation,
revision of rates and specific relief at the same time. As already
observed, claims were considered by the Board of Arbitrators
and decision was given by the Board of Arbitrators on this point.
This point appears to be separately considered by the learned
Arbitrator and it can be said that it was not necessary for the
learned Arbitrator to decide this issue in view of the decision
given by the Board of Arbitrators. This issue could not have been
considered separately as it had connection with other claims.
48) The decision given under section 34 of the Act by the
learned P.D.J., Parbhani shows that the award in respect of claim
Nos. 2 to 5 is set aside and for the reasons given by the 'Court'
and by this Court, it is not possible to interfere in the said
decision of the P.D.J. The P.D.J. has however confirmed the
award given on claim Nos. 1 and 6. But the award given in
respect of those claims also cannot sustain in law in view of the
discussion already made.
49) The learned counsel for Employer placed reliance on
Arb.Appeal Nos.6 & 5/16
the observations made by the Apex Court in the case reported
as 2016 (8) SCALE 779 [Union of India and Anr. Vs.
Indusind Bank Ltd. and Anr.]. This case is on the
interpretation of provision of section 28 of the Contract Act as
amended in the year 1997. The Apex Court has laid down that
the provision has prospective effect. This Court has quoted the
relevant terms and conditions of the agreement and the best
possible case for Contractor is considered. In spite of such
consideration, this Court has come to the conclusion that it is
not possible to hold that the Contractor took action for
enforcement of his so called right within prescribed period of
three years from the date of cause of action. Thus, even if the
observations made in this case are ignored in view of the terms
and conditions of the Contract, the Contractor cannot succeed in
the matter. However, there cannot be dispute over the
proposition made by the Hon'ble Apex Court in this matter.
50) On the point of interest claimed on the bank
guarantee amount, the learned counsel for Employer placed
reliance on the observations made by the Apex Court in the case
reported as 2016 (3) Mh.L.J. 1 [Union of India Vs. Bright
Power Projects (India) Pvt. Ltd. In the case decided by three
Arb.Appeal Nos.6 & 5/16
Hon'ble Judges of the Apex Court, it is made clear that when
there is agreement that no interest would be awarded to the
Contractor, the Arbitral Tribunal cannot award interest. The Apex
Court has referred the provision of section 31 (7)(a) of the Act,
which runs as under :-
"31(7)(a) Unless otherwise agreed by the
parties, where and in so far as an arbitral award is
for the payment of money, the Arbitral Tribunal
may include in the sum for which the award is
made interest, at such rate as it deems
reasonable, on the whole or any part of the
money, for the whole or any part of the period
between the date on which the cause of action
arose and the date on which the award is made."
51) The facts of the reported case show that there was
the claim in respect of interest on security deposit, earnest
money and also on other amount, but in view of the agreement
that no interest would be payable, the Apex Court held that
Arbitral Tribunal could not have awarded interest. On the other
hand, the learned counsel for respondent placed reliance on the
observations made by the Apex Court in the case reported as
AIR 1985 SC 607 [Hyderabad Municipal Corporation Vs.
M. Krishnaswami Mudaliar]. In this case decided by two
Hon'ble Judges of the Apex Court, the work was abandoned and
Arb.Appeal Nos.6 & 5/16
in view of the claim made by the Contractor under the Interest
Act, in that case, the Apex Court held that granting of interest
was possible. The facts were different and further, there is the
case cited supra viz. 2016 (3) Mh.L.J. 1 [Union of India Vs.
Bright Power Projects (India) Pvt. Ltd. decided by the three
Judges of the Honble Apex Court showing that Arbitrator is not
expected to give award which will be against the terms and
conditions of the agreement. In the present matter, relevant
facts are considered by this Court and relevant portion of the
agreement is already quoted and so, the finding is given that the
Contractor is not entitled to get interest on the bank guarantee.
52) The learned counsel for respondent placed reliance
on the observations made by the Apex Court in the cases
reported as 2014 (4) Arb.LR 307 (SC) [Associate Builders
Vs. Delhi Development Authority] and 2014 (4) Arb.LR 1
(SC) [Swan Gold Mining Ltd. Vs. Hindustan Copper Ltd.].
The Apex Court has laid down that ordinarily when view
expressed by the Arbitrator on facts is possible view, the
decision of the Arbitrator given on factual aspect cannot be
disturbed by the Court. However, the observations show that
such award needs to be based on evidence given to substantiate
Arb.Appeal Nos.6 & 5/16
the claim and it should be in accordance with the terms and
conditions of the Contract and it should not be against the law.
There cannot be dispute over the proposition. Only to that
extent, this Court has considered the challenge against the
award.
53) In view of the aforesaid discussion made by this
Court, this Court holds that point Nos. (iii), (iv), (v), (vi) and
(vii) need to be answered against the Contractor and they are
answered accordingly.
54) So, this Court holds that the proceeding filed by the
department, Employer needs to be allowed and entire award of
the learned Arbitrator needs to be set aside. Similarly, the
decision given by the learned P.D.J. of conforming the award in
respect of claim Nos. 1 and 6 needs to be set aside. In the
result, following order :-
ORDER
(I) Arbitration Appeal No. 6/2016 of the Employer is
allowed. The entire award delivered by the learned Arbitrator is
hereby set aside and the claims stand rejected. The decision
given by the learned P.D.J., Parbhani in proceeding filed under
Arb.Appeal Nos.6 & 5/16
section 34 of the Act, by which award in respect of claim No. 1
and 6 is confirmed, is also set aside and the entire proceeding
filed under section 34 of the Act by the Employer stands
allowed.
(II) Arbitration Appeal No. 5/2016 of the Contractor
stands dismissed.
(III) Civil Applications filed in both the matters are
disposed of.
(IV) Parties to bear their own cost throughout.
[ T.V. NALAWADE, J. ]
ssc/
