[Cites 24, Cited by 0]
Bombay High Court
The Chief Engineer And Chief ... vs Hule Constructions Private Limited Thr ... on 29 January, 2026
2026:BHC-AUG:3707-DB
1 CARBA2.2022
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
COMMERCIAL ARBITRATION APPEAL NO. 2 OF 2022
01. THE CHIEF ENGINEER AND
CHIEF ADMINISTRATOR
Command Area Development Authority,
Garkheda Parisar, Aurangabad,
Taluka & District: Aurangabad
02. THE SUPERINTENDING ENGINEER
AND ADMINISTRATOR,
Command Area Development Authority,
Beed, District: Beed
03. THE EXECUTIVE ENGINEER,
Jayakwadi Irrigation Division No.3,
Beed, District: Beed .. Appellants
(Original Respondents NO.2, 3 and 5)
Versus
01. HULE CONSTRUCTIONS PRIVATE LIMITED
Through its Managing Director,
Mr. Vishwanath Dagdoba Hule,
Head Office at Ashwini, Shivaji Chowk, Patoda,
Taluka Patoda, District: Beed
02. THE STATE OF MAHARASHTRA
Water Resources Department,
Through its Secretary,
Mantralaya, Mumbai - 400032
03. THE COLLECTOR AND CHAIRMAN
District Level Implementation Committee
(DLIC) Beed
Through Executive Engineer and Member Secretary
Minor Irrigation Division
Headquarter at Ambajogai,
Distirct: Beed .. Respondents
(Original Respondents No.1 & 4)
2 CARBA2.2022
...
Advocate for Appellants : Mr. Amit A. Yadkikar
Advocate for Respondent No.1 : Mr. J. N. Singh
AGP for Respondent No.2: Mr. A. R. Kale
...
WITH
...
CIVIL APPLICATION NO. 10992 OF 2022
IN
CARBA/2/2022
THE CHIEF ENGINEER AND CHIEF ADMINISTRATOR COMMAND
AREA DEVELOPMENT AUTHORITY AURANGABAD AND ORS
VERSUS
HULE CONSTRUCTIONS PRIVATE LIMITED THR ITS MANAGING
DIRECTOR VISHWANATH DAGDOBA HULE AND ORS
...
Advocate for Applicants : Mr. Amit A. Yadkikar
Advocate for Non-applicant No.1 : Mr. J. N. Singh
AGP for Non-applicant / State: Mr. A. R. Kale
...
CORAM : ARUN R. PEDNEKER &
VAISHALI PATIL-JADHAV, JJ.
Reserved on : 19.01.2026
Pronounced on : 29.01.2026
Judgment (Per Arun R. Pedneker, J.):
1. By the present Commercial Arbitration Appeal, the
Appellants are challenging the Award dated 02.02.2019, passed by
the sole Arbitrator and the order dated 12.04.2022, passed by the
learned District Judge in Commercial Civil Miscellaneous
Application No.53 of 2019 under Section 34 of the Arbitration and
3 CARBA2.2022
Conciliation Act, 1996, thereby, dismissing the application filed by
the Appellants.
2. Heard Mr. Amit A. Yadkikar, learned counsel for the
Appellants, Mr. J. N. Singh, learned counsel for Respondent No.1
and Mr. A. R. Kale, learned AGP for Respondent No.2.
FACTS:
3. Brief facts leading to the filing of this commercial
appeal are noted below:-
The Appellant floated a tender for work of repair,
renovation and restoration of 19 minor irrigation tanks in District
Beed, Maharashtra. The estimated value of the work was
Rs.29,55,47,811/-.
The offer of the respondent / claimant being the lowest
i.e. 0.11% below the estimated cost was accepted and the claimant
was called upon for negotiations and, ultimately, it was agreed that
the cost shall be 0.50% below the estimated cost.
It is stated in the claim petition that there were further
negotiations and the estimated costs of the work was accepted for
Rs.29,40,70,072/- and, accordingly, after completing the necessary
formalities, the agreement bearing no.B-1/23 was executed
between the parties and work order dated 17.11.2006 came to be
issued by the Executive Engineer Jayakwadi Irrigation Division
4 CARBA2.2022
No.3 / Appellant No.3 herein to the claimant / Respondent No.1
herein. The same was to be completed by 16.11.2007.
Due to prolongation of work for about 3 years from the
due date of completion, dispute arose and, accordingly, the
claimant issued notice under Clause 30(1) of the General
Conditions of Contract for settlement of disputes to Superintending
Engineer on 16.02.2009. The Superintending Engineer failed to
address the issue, as such, an appeal under Clause 30(2) of the
General Conditions of Contract was preferred to the Chief Engineer
on 01.10.2011 which was also not decided. Thereafter, under Clause
30 (3) of the General Conditions of Contract, further, appeal was
filed before the Secretary, Water Resources Department, on
31.10.2011, which was also not addressed. As such, the contractor
issued statutory notice under Section 80 of the CPC on 19.12.2011.
Thereafter, Special Civil Suit No.26 of 2012 was filed in the court of
Civil Judge Senior Division, Beed for recovery of the dues with
interest. In the year 2016, Special Civil Suit No.26 of 2012 was
transferred to the Commercial Court and registered as Special Civil
Suit No.6 of 2016. On 24.08.2017, the Commercial Court with
consent of the parties referred the dispute to arbitration as per
Section 89 of the CPC.
The Appellants submits that only the Advocate for
Appellants had consented for referring the claim to arbitration
5 CARBA2.2022
without the consent of the party. However, the Appellants
proceeded with the arbitration.
On 27.12.2017, original claimant filed statement of
claim before the sole arbitrator and raised claims as under:
a) claim no. 1 - For loss of Business profit at Rs.
695.59/- Lakhs contending that the claimant
contractor anticipated business profit at 15% of the
contract value, however because of absolute breach of
contract on the part of the respondents the claimant
could not earn the business profit as anticipated and
would have earned if the contract work would have
been allowed to be executed and completed. - Rejected
b) Claim no. 2 - for Rs. 494.98/- lakhs towards loss of
overhead, contending that because of breach of
contract committed by the respondents the execution
of the work was prolonged and the claimant was
required to spent more amount towards over - head
charges as specified in Annexure no. 2 - Partly
allowed of Rs.67.35 Lakhs
c) Claim no. 3 - for Rs. 621.82/-lakhs, the losses due to
reduction in the productivity of men, machineries and
equipments, contending that the claimant had deployed
huge machinery on the work site and due to
prorogation of work the claimant could not utilize the
men, machinery and equipment to their optimum level
and suffered huge losses. - partly
allowed of Rs.335.20 Lakhs
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d) Claim no. 4 - for Rs. 335.95 lakhs the losses due to
reduction in the productivity of the site staff and
camping labourers which remained idle due to non
availability of the work resulting in huge losses to the
claimant. - Partly
allowed of Rs.166.28 Lakhs
e) Claim, no. 5 - for Rs. 209.58 lakhs towards the loss of
interest on account of delayed payment of work done
under the running bills, on the contentions that the
claimant submitted running bills regularly, however
the Executive Engineer failed to make payment of
running account bills in time which act amounts a
breach of contract. Because of delayed payment the
claimant who has borrowed huge loan could not repay
the same and required to pay huge interest on the loan
to the bank. - Partly
allowed of Rs.167.66 Lakhs with interest of 12% per
annum
f) Claim no. 6 - for Rs. 245.23 lakhs towards the price
escalation This claim is preferred on the contention
that as per terms and conditions of the contract, the
claimant contractor entitled to get price escalation as
the work was prolonged beyond the stipulated period,
because of default on the part of the respondents, which
amounts breach of terms and conditions of contract
committed by the respondents. - Allowed
of Rs.245.23 Lakhs
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g) Claim no. 7 - for Rs. 907.23 lakhs is preferred
towards revision of rates on the contention that
because of breach or default on the part of the
respondents the work was prolonged, hence the
respondents are liable to revise the rates of the
quantity of work executed beyond the stipulated
period. - Rejected
h) Claim no. 8 - Interest on delayed refund of security
deposit. It is contended that the claimant was entitled
for refund of initial security deposit as well as fixed
security deposit, however this refund was not made on
demand but was made after institution of the suit,
hence respondents are liable to pay interest for the
period of delayed payment. - Rejected
i) Claim no. 9 - is for Rs. 72.82 lakhs, the amount of
royalty charges which was deducted and recovered
from the running bills, though there was no provision
to pay or deduct royalty amount from the bills hence
respondent are liable to refund the amount which has
been illegally deducted. - Allowed
of Rs.72.82 Lakhs
j) Claim no. 10 - is for Rs. 14 lakhs which was the
amount of additional security deposit illegally withheld.
According to the claimant the total amount of security
was of Rs. 298.18 lakhs and out of it Rs. 284.18 lakhs
was refunded during pendency of the suit and Rs. 14
lakhs remained to be refunded. - Rejected
8 CARBA2.2022
k) Claim no. 11 - is preferred for interest @ 15% p.a. on
all the dues for which the claimant preferred the
claims. - Partly
Allowed with interest at 12% per annum
1) Claim no. 12 - is for cost. According to the claimant,
the claimant was unnecessary dragged in the court
proceeding and arbitral proceeding hence entitled to
claim cost of Rs. 50,00,000/- from the respondents.
- Partly allowed to Rs.20,00,000/-
The claims were opposed by the appellants primarily on
the ground that the claims are time barred and that the contractor
is not entitled for any claims being the defaulting party.
The issues framed by the arbitrator and the findings
thereon are noted as under:
Issues
1) Whether the time was essence of contract? -No
2) Whether it is proved by the claimant that the
respondents have committed fundamental and material
breach of the contract during execution of the work?-
Yes
3) Whether in terms of Contract (clause 38 of G.C.C.)
the claimant is entitled to revision of rates? -No
4) Whether it is proved by claimant that the
respondents failed to conduct survey of silt site and the
work of removal of silt was delayed because of default
on the part of the respondents? -Yes
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5) Whether it is proved by claimant that the
respondents failed to hand over work site within time
to the claimant and the execution of work was delayed?
-Yes
6) Whether it is proved by the claimant that the
respondents have not made payment of running bills in
time and thus committed breach of terms of the
contract? -Yes
7) Whether respondents act to demand insurance cover
for additional work was legal and valid in terms of the
contract? -No
8) Whether it is proved by the claimant that the
respondents used to release water in canal without
notice/intimation to the claimant and this act caused
delay in execution of work as well as loss to the
claimant? -Yes
9) Whether the claimant is entitled to price escalation
in terms of the contract/ and in terms of government
Resolution? -Yes
10) Whether the act of respondents to deduct amounts
except statutory deductions from running bills is
illegal? -Yes, illegal and invalid
11) Whether the act of the Respondents to impose
penalty or fine is justified? -Not justified
(12) Whether respondents authorities failed to take
action and settle the dispute under clause no. 30 and
it's Sub Clause of G.C.C.? -Yes
13) Whether the respondents illegally retained the
amount of additional deposits and security deposit?-
Yes, but refund was made during pendency of the suit
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14) What amount the claimant is entitled for under
claim no. 1 to 10? -Claim Nos.1,7,8 and 10
stands rejected, Claim nos. 2,3,4,5,6 and 9 are allowed,
for total amount of Rs.10,54,54,600/-only
15) Whether the Respondents prove that the claims are
barred by limitation? -No
16) Whether the claimant waived his claims by not
challenging the decision of Chief Engineer and
Secretary under clause 30 of G.C.C? -No
17) Whether the claimant is entitled to interest as
claimed vide claim no. 11 and at what rate? -Yes
@ 12%
18) What order about cost? -Yes Rs.20,00,000/-
The sole arbitrator passed the award on 02.02.2019 and
allowed the claims partly. The arbitrator in all allowed 6 claims i.e.
Claims no.2, 3, 4, 5, 6 and 9 for total amount of Rs.10,54,54,600/-.
The appellants challenged the award by filing Civil Miscellaneous
Application No.53 of 2019 under Section 34 of the Arbitration and
Conciliation Act before the learned Principal District Judge, Beed
and later on the same was transmitted to the learned Commercial
Court. The same was dismissed and, accordingly, the present
Commercial Arbitration Appeal under Section 13 of the
Commercial Courts Act, 2015 read with Section 37 of the
Arbitration and Conciliation Act, 1996 is filed.
11 CARBA2.2022
SUBMISSIONS ON BEHALF OF THE APPELLANTS HEREIN:
4. Mr. Amit A. Yadkikar, learned counsel for the
appellants primarily makes two fold submissions, that the award is
contrary to the substantive provisions of law and the provisions of
the Arbitration and Conciliation Act and against the terms of the
contract.
The arbitral tribunal has not followed the terms and
conditions prescribed under tender agreement and, thus, has acted
beyond its jurisdiction and thereby the arbitral award is patently
illegal and should be set aside.
It is further submitted that the work order came to be
issued on 17.11.2006 and the stipulated time for completion of
work was 12 months i.e. 16.11.2007. The work order reflects
condition that the contractor shall not proceed with the work till
the silt survey is completed and report is prepared by the
authorities. This condition was to be followed by the contractor
and, thereafter, the men and machinery shall be moved to the work
site. The contractor has failed to intimate the mobilization of men
and machinery which he was bound to do. The claim of the
claimant that he has mobilized the machinery, material,
equipments and men before the silt survey and started the work is
without any evidence. The claimant has not submitted the report
as per condition no.6 of the tender under which it was obligatory
12 CARBA2.2022
on the part of the claimant to submit daily progress report to
engineer in charge and was to specify skilled and unskilled labours
engaged on site. The applicant had sent various letters intimating
very slow work progress and directed to speed up the work. There
was shortage of men and machinery and, as such, the contractor
was directed to increase men and machienry. The de-silting was to
be done once the survey is completed. As such, there was no
occasion for the contractor to keep the machinery present and as
per condition no.10 of the tender document the list of machinery
possessed by him and also a list of machinery procured by him was
to be submitted by the contractor. The contractor did not
completed the work although various letters were given to him.
The claim regarding release of the water in canal is frivolous. The
claim petition is bereft of details of dates for release of water and
for how many days water remained in the canal. So also, it cannot
be said that in all the 19 canals, there was release of water. The
allegations regarding delay in payment of running bills is not at
fault of the applicant and the same is on the part of the claimant.
As per clause 11 of tender document the claimant / contractor was
required to submit the bill regularly for the work executed,
however the contractor did not submit such bills, as such, there
was no delay in making payments. After granting 12 months
extension the work was still not completed. By letter dated
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23.10.2008, fine of Rs.1,000/- per day was imposed on the
contractor for delayed work.
5. Mr. Amit A. Yadkikar, learned counsel for the
appellants relied upon the following Judgments:
i) Sepco Electric Power Construction Corporation Vs
GMR Kamala Energy Ltd. decided on 26.09.2025, 2025
INSC 1171: MANU/SC/1359/2025
ii) Union of India and Ors Vs Bharat Enterprises
Decided on 23.03.2023, 2023 INSC 277:
MANU/SC/0335/2023
iii) PSA Sical Terminals Pvt Ltd Vs The Board of
Trustees of V.O. Chidambranar Port Trust and Others,
Decided on 28.07.2021, 2021 INSC 365:
MANU/SC/0485/2021
iv) Steel Authority of India Ltd Vs J.C. Budharaja,
Decided on: 01.09.1999, 1999 INSC 375:
MANU/SC/0542/1999
6. Argument of the Appellants is primarily on the ground
that there is no clause for escalation of price of material and labour
provided in the contract. The contract specifically provides that
there shall be no escalation of price for delay and, thus, the
escalation of price of material and labour granted is thus
erroneous, and, secondly, de-silting work was to be carried out
after the work of survey, as such, there was no occasion to bring
14 CARBA2.2022
labour and machinery to the site before the survey was conducted
and, thirdly, the delay is attributable to the contractor.
SUBMISSION ON BEHALF OF THE RESPONDENT HEREIN:
7. Per contra, Mr. J. N. Singh, learned counsel appearing
for the respondent has submitted that only Claims No.1, 4, 6 and 7
were partly allowed and reject the other claims and interest is
granted at the rate of 12.10% . The appellants have neither
challenged the the composition nor jurisdiction of the the arbitral
tribunal as per Sections 12,13 and 16 of the Arbitration and
Conciliation Act, 1996. The arbitrator has interpreted the contract
and the correspondence between the parties and has considered
the oral and documentary evidence and allowed the claims, as
such, this court cannot travel into the work of re-assessing the
evidence. The District Judge-2, Beed i.e. the Commercial Court has
gone through the record and proceedings and passed the impugned
order with detailed reasoning and confirmed the said award. The
arbitrator was appointed with the consent of the parties.
CONSIDERATION:
8. The first issue raised is of consent to refer the dispute to
arbitration. It is submitted that consent was given only by the
Counsel and not by party. However, this objection to the
constitution of the arbitral tribunal is not raised in defence
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statement at the earliest under Section 16 of the Arbitration and
Conciliation Act. The tribunal was not called upon to rule on it's
jurisdiction and the appellants have participated in the proceeding
before the tribunal.
The Hon'ble Supreme Court in the case of Narayan
Prasad Lohia Vs. Nikunj Kumar Lohia and others, (2002) 3 SCC
585 has observed that objection to the constitution of the tribunal
has to be raised as provided in Section 16 and if the same is not
raised the same is deemed to have been waived.
The Hon'ble Supreme Court in the case of Madhya
Pradesh Rural Development Authority and another Vs. L. G.
Chaudhary Engineers and Contractors, (2018) 10 SCC 826 has
observed that when no objection has been raised by the respondent
under Section 16 at the appropriate stage within time stipulated
the award could not have been annulled.
The Hon'ble Supreme Court in the case of Krishna
Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy and another,
(2007) 2 SCC 720, while considering a case, where plea was raised
as regards there being no arbitration clause in the agreement and
the constitution of the arbitral tribunal was void, the court
observed that the objection was not raised in the written statement
before the arbitrator. The court did not permit the objection to be
raised later after completion of arbitration proceeding. The Hon'ble
16 CARBA2.2022
Supreme Court observed that the respondent had participated in
the arbitration proceedings, as such, the respondent had not
invoked Section 16 of the Arbitration Act and did not challenge the
competence of the arbitral tribunal and the arbitral tribunal was
not called upon to rule on it's jurisdiction in such situation when
the parties have accepted that there was an arbitration agreement,
the respondent was not permitted later to contend that the clauses
in the contract did not constitute arbitration agreement.
In the instant case, in the defence statement, the
objection to the constitution of the arbitral tribunal being not
raised under Section 16(2) of the Arbitration and Conciliation Act,
the same cannot be permitted at this stage.
As regards the issue of limitation, the work is
completed in 2009 and the suit is filed after exhausting the
internal remedy provided in Clauses 30(1), 30(2) and 30(3) of the
contract. Although, the dispute was raised in terms of above
clauses before, the Superintending Engineer on 16.02.2009 and the
Superintending Engineer by letter dated 01.10.2011 (Annexure-
XXIII) had intimated to the Contractor giving him the final notice
under Clause 30(1) of the General Conditions of Contract for
settlement of various disputes, differences and claims arising out of
captioned subject contract, however, there was no final settlement
of claim. Thereafter, claim was raised before the appellate forum
17 CARBA2.2022
i.e. to the Chief Engineer on 01.10.2011 and again further before
the Secretary, Water Resource Department on 31.10.2011 under
Clause 30(3) of the contract, which was not addressed i.e. formally
accepted or rejected and, thus, statutory notice under Section 80 of
the CPC is given on 19.12.2011 and the suit is filed in the year 2012
which is within limitation. The above facts are not disputed by the
appellants, as such, no case is made out to dismiss the suit on
limitation.
Considering the submissions of the parties, the next
issue that arises for consideration is, whether the arbitrator has
acted beyond jurisdiction and against the specific contractual
provision.
LAW ON THE SUBJECT:
9. Before we deal with the issue raised i.e. whether the
arbitrator has traveled beyond jurisdiction and against the
provisions of the contract, it is necessary to examine the law on
this subject. The Hon'ble Supreme Court in the case of Mc Dermott
International v. Burn Standard Co. Ltd. , (2006) 11 SCC 181 has
held that the construction of the contract agreement is within the
jurisdiction of the arbitrators having regard to the wide nature,
scope and ambit of the arbitration agreement and they cannot be
said to have misdirected themselves in passing the award by taking
18 CARBA2.2022
into consideration the conduct of the parties. Interpretation of a
contract is a matter for the arbitrator to determine, even if it gives
rise to determination of a question of law.
10. The Hon'ble Supreme Court in the case of National
Highways Authority of India Vs. ITD Cementation Indian Ltd.,
(2015) 14 SCC 21 has held that the arbitral tribunal shall decide in
accordance with the terms of the contract but if an arbitrator
construes a term of the contract in a reasonable manner, it will not
mean that the award can be set aside on this ground. Construction
of the terms of a contract is primarily for an arbitrator to decide
unless the arbitrator construes the contract in such a way that it
could be said to be something that no fair minded or reasonable
person could do. The arbitrator is entitled to take the view which
he holds to be the correct one after considering the material before
him and after interpreting the provisions of the contract.
11. Having observed the law as above with regard to the
interference with the arbitral award, when the submission is that
the arbitrator has traveled beyond the contract, we now proceed to
deal with the contentions of the parties. The contention raised is
that clause in the contract prohibit grant of escalated prices for
delay in work. In this regard, relevant clauses of contract can be
examined as under:
19 CARBA2.2022
CLAUSE 3B
b) To carry out the work or any part to the work
departmentally debiting the contractor With the cost of
the work, expenditure incurred on tools and plant and
charges on additional supervisory staff including the
cost of work charged establishment employed for
getting unexecuted part of the work completed and
crediting him with the value of the work done
departmentally in all respects in the same manner and
at the same rates as if it had been carried out by 'the
contractor under the terms of his contract. The
certificate of the Executive Engineer as to the costs and
other allled expenses so incurred and as to the value of
the work so done departmentally shall befinal and
cornclusive against the contractor
CLAUSE 6
If the contractor shall desire an extension of the
completion of work on the ground of his having been
unavoidably hindered in its or on any other ground he
shall apply in writing to the Executive Engineer before
the expiry of the period stipulated in the tender or
before the expiration of 30 days from the date on which
he was hindered as aforesaid or on 'Vvhich the cause
for asking for extension occurred, whichever is earlier
and the Executive Engineer may if in his opinion there
was reasonable grounds for granting an extension,
grant such extension as he thinks necessary or proper.
The decision of the Executive Engineer in this matter
shall be final.
CLAUSE 6(A)
In case of delay in hading over the land required
for the work due to unforeseen causes the contractor
shall not be entitled for any compensation whatsoever
from Government on the ground that the machinery or
labour was for certain period remained idle, contractor
may however apply for extension of time limit which
may be granted on the ment of the same.
20 CARBA2.2022
The contractor will not have any claim in the case
of delay by. the Department of removal of trees or
shifting arising, removing of telephone or electrical
lines (overhead or underground) or other structure it
any which may come in the way of work. However
suitable extension can be granted to cover such delay.
CLAUSE 38
1) Quantities in respect of the several items shown in
the tender are approximate and no revision in the
tendered rate shall be. permitted in respect any of the
items so long as subject to any special provision
contained in the specification prescribing a different
percentage of permissible variation the quantity of the
Item does not exceeds the tender quantity by more
than 25 percent and so long as the value of the excess
quantity beyond this limit at the rate of the item
specified in the tender, is not more than Rs.5000.
2) The contractor shall, if ordered in writing by the
Engineer so to do also carry out any quantities in
excess of the mentioned in sub-clause [i] hereof on the
same conditions as and in accordance with the
specification in the tender and at the rates [ii] derived
from the rates entered in the current schedule of rates
and in the absence of such rates [ii] at the rate
prevailing in the market the said rates being increased
or decreased as the case may be by the percentage
which the total tendered amount bears to the estimated
Gost of the work as put to tender based upon the
schedule of rates applicable to the year in which the
tenders were invited for the purpose of operation of this
clause, this cost shall be taken to be ........in words.
3) Claim arising out of reduction in the tender quantity
of any itern beyond 25 percent will be governed by the
provision of clause 15 only when the amount of such
reduction beyond 25 percent at the item specified in the
tender is more than Rs.5000.
CLAUSE 40
No compensation shall be allowed for any delay caused
in the stating of the work on account of acquisition of
21 CARBA2.2022
land, or in the case of clearance of Works on account of
any delay in according sanction to estimates.
CLAUSE 41
No compensation shall be allowed for any delay in the
execution of the work on account of water, standing in
borrow pits or compartments. The rates are inclusive
for hard or cracked soil, excavation in mud, subsoil,
water standing in borrow pits and no claim for at an
extra rate shall be entertained, unless otherwise
expressly specified.
CLAUSE 45
Any contractor who does not accept conditions shall
not be allowed to tender for works.
12. From the aforesaid clauses of the contract, it would be
gathered that the contract does not provide for escalatory price.
Clause 6(A) particularly provides that the contractor shall not be
entitled for any compensation on the ground that the machinery
and labour for certain period remained idle. However, the
contractor may be granted extension of time if applied and on
merits. Clause 41 provides that no compensation shall be allowed
for any delay in execution of work on account of water standing in
borrow pits or compartments. Clause 38 provides that there shall
be no revision in rates except when the prices exceed 25% of
original value. Clause 45 also provides that the contractor also has
to accept all the conditions.
22 CARBA2.2022
13. In the instant case, we find that the arbitrator has
discussed all the clauses above in detail and, particularly, has
observed that the work order was issued on 17.11.2006 and the
contract period was for 12 months which was to expire on
16.11.2007. The work order was itself conditional and the silt
survey was required to be completed by the department. However,
the survey work was not completed at least till May-2007 and,
thereafter, the rainy season commenced and it was not possible for
the contractor to carry out the work of silt removal in the rainy
season of four months. As such, out of contract period of 12
months, the silt survey was not done of 6 months and after six
months sites of 9 tanks out of 19 tanks were made available by the
end of May 2007 but within a period of one month of availability of
site, rainy season had commenced and it was not possible for the
contractor to complete the work of removal of silt from 9 tanks or
from the canals. For this delay, the appellants herein are held
responsible by the arbitrator. Since, the appellants herein are held
responsible for the delay and they having committed breach of the
contract, the arbitrator has proceeded to grant some of the claims
partly. Once the breach of the contract is noticed at the instance of
the appellants herein, the appellants cannot thus fall back upon the
clause of contract which provides that there shall be no escalatory
price for delayed work. It is well settled in the Judgment of the
23 CARBA2.2022
Hon'ble Supreme Court in the case of Assam State Electricity
Board and Others v. Buildworth Private Limited, ( 2017 ) 8 SCC
146, so also, in the case of P.M. Paul v. Union of India, 1989 Supp
(1) SCC 368, that the escalation is a normal incident arising out of
gap of time in this inflationary age in performing any contract. So
also, the Hon'ble Supreme Court in the case of K.N. Sathyapalan v.
State of Kerala, (2007) 13 SCC 43 has observed that ordinarily, the
parties would be bound by the terms agreed upon in the contract,
but in the event one of the parties to the contract is unable to fulfil
its obligations under the contract which has a direct bearing on the
work to be executed by the other party, the arbitrator is vested
with the authority to compensate the second party for the extra
costs incurred by him as a result of the failure of the first party to
live up to its obligations.
14. The arbitrator has also taken into consideration that
there were certain running bills made for the period between
March-2016 to July-2016, as such, it cannot be stated that there
was absolutely no activity for that period.
15. The claim granted with respect to loss of overhead and
reduction in productivity of men, machineries and equipments,
cannot be interfered with by this court. The same is based on
evidence before the arbitrator and extensive discussion is made by
24 CARBA2.2022
the arbitrator on this aspect. The same is particularly examined by
the District Court in an application under Section 34 of the
Arbitration and Conciliation Act. The jurisdiction of this court
under Section 37 of the Arbitration and Conciliation Act cannot
exceed beyond the limit prescribed under Section 34 of the
Arbitration and Conciliation Act. This court, while examining an
order rejecting to set aside an Arbitral Award cannot examine the
award on merits and has to confine itself to ascertaining, whether
the court exercising jurisdiction under Section 34 has acted within
the boundaries of that provisions [C & C Constructions Limited Vs.
Ircon International Limtied, (2025) 4 SCC 234]. An arbitral award
may be set aside on the ground of patent illegality only, when such
illegality goes to the root of the matter, however, reappreciation of
evidence is impossible under the guise of patent illegality [Somdatt
Builders - NCC - NEC (JV) Vs. National Highways Authority of
India and others, (2025) 6 SCC 757].
16. The primary contention of the appellants that the
arbitrator could have not travelled beyond the terms of the
contract, more particularly, that there can be no grant of
escalatory price or any amount for idling of machinery and labour,
cannot be accepted as there is breach of the contract by the
appellants, as such, the liability is fixed by the arbitrator.
25 CARBA2.2022
Notwithstanding the clauses in the contract, when the party has
failed to standby it's part of the contract, it is not available for the
defaulting party to insist upon implementation of the Clauses of the
contract providing for no claim for idling of machinery or
escalation of price. The argument raised is, thus, rejected. We find
no error in the impugned order of the Commercial Court dismissing
the application under Section 34. As such, Commercial Arbitration
Appeal No.02 of 2022, stands dismissed. Interim relief granted in
Civil Application No.10992 of 2022 is vacated and, consequently,
the civil application also stands dismissed.
[VAISHALI PATIL-JADHAV, J.] [ARUN R. PEDNEKER, J.]
17. At this juncture, learned counsel appearing for the
Appellants seeks stay of this Judgment. He submits that 50% of the
award amount is deposited and that the respondent may withdraw
the said amount and, therefore, it is necessary to stay the
operation of this Judgment.
18. Considering that the Arbitral Award and the remedy
provided for setting aside the award under Section 34 of the
Arbitration and Conciliation Act, 1996 are against the Appellants,
26 CARBA2.2022
so also, the Commercial Arbitration Appeal being dismissed today,
no case is made out for stay of this Judgment.
[VAISHALI PATIL-JADHAV, J.] [ARUN R. PEDNEKER, J.]
marathe
