Virendra Singh & Co. vs Central Warehousing Corporation
1988 Latest Caselaw 348 Del

JUDGMENT

Y.K. Sabharwal, J.

(1) On 29th February. 1980 Central Warehousing Corporation (Corporation) entered into an agreement with the petitioner (contractor) for construction of 15000 metric tonnes capacity godowns with ancillaries at Central Warehouse, Ghaziabad (U.P.) The work was required to be completed as per terms of the agreement on 24th August, 1980. The work was declared as actually completed on 1st October, 1981.

(2) Certain disputes arose between the contractor and the Corporation. The contract contained an arbitration clause. Disputes and differences between the parties were referred to the sole arbitration of Mr. B.S. Mathur. Admittedly, it was a term of the agreement that in all cases where a total amount of the award exceeds Rs. 50.000.00 the arbitrator shall give reasons for the award. On 10th August, 1984 Mr. B S. Mathur made and published his award. The award and the proceedings have been filed in this Court. The Corporation has filed objections to the award (1.A. 7339/84). On objections of the Corporation, following issues were framed : 1. Whether the award is liable to be set aside on the grounds mentioned in the petition? 2. Relief.

(3) The Corporation has filed affidavit of Mr. M.C. Khairari, its Executive Engineer by way of evidence." The contractor has filed affidavit of one Mr. Tek Chand by way of evidence. The Corporation has raised objections to claims No. 2,7, 8,10, Ii, 13,15 and additional claims No. 2, 3 and 5.

(4) Claim No. 2 of the contractor for Rs. 2000.00 was allowed by the arbitrator The reason given is that levy of compensation has not been done by the Competent Authority in confirmity with clause 2 of the contract agreement. Under clause 2 of the contract agreement the authority to levy compensation is Manager (Engineiring). According to the award the compensation was levied by the Executive Engineer. The objection raised by the Corporation is that the arbitrator is guilty of misconduct inasmuch as he has ignored the material document Ex. R-39 dated 18th April, 1983 showing that in accordance with clause 2, the compensation was levied by the Manager (Engineer). It is submitted that letter dated 9th May, 1983 referred by the arbitrator was only the decision which was conveyed by the Executive Engineer. The letter Ex. R-39 shows that the Member Engineer had granted time extension up to 1st October, 1981 which the levy of penalty of Rs. 2000.00 . Letter dated 9th May, 1983 (Ex. R-21) is a communication sent by Executive Engineer to the contractor intimating about the said levy of Rs. 2000.00 and a copy of this letter was also endorsed to Member Engineer with reference to his letter dated 18th April, 1983. The award under claim No. 2 is thus contrary to material document on record and the error is apparent on the face of the award inasmuch as reference is made to 9th May, 1983 letter which in turn refers to letter dated 18th April, 1983 (Ex. R-39) showing the levy to be by competent authority inconformity with clause 2 of the agreement. The objection of Corporation is well founded and the award in respect of claim No. 2 is liable to be set aside.

(5) The objections in respect of claims No. 7, 8 and additional claim No. 2 can be conveniently dealt with together. Under claim No. 7 recovery ofRs.21.060.00 made by the Corporation was held to be wrongful being not in conformity with the contract agreement provisions and said sum was held payable to the contractor. Admittedly claim No. 8 and additional claim No. 2 are similar to claim No. 7. The objection raised by Mr. K.C. Mittal, learned counsel for the Corporation, to these claims is, that the arbitrator was not justified in holding that the recovery was wrongful being not inconformity with clause 3(c) of the contract as on account of noneupply of wooden crates by the contractor, the Corporation was entitled to recover from the contractor the amount of compensation under section 73 of the Contract Act. Learned counsel did not dispute that purchase of wooden crates had not been made by the Corporation and strictly speaking clause 3(c) was not applicable. However, according to the learned counsel, the non-applicability of clause 3(c) is of no consequence, as the rights under clause 3, are without prejudice to the rights of Corporation to recover from the contractor damages under the provisions of Contract Act. Learned counsel is right in his submission that rights under clause 3 are ^without prejudice to any rights or remedies that may be available to the Corporation under law. Clause 3(c) provides that after giving notice to the contractor to measure up the work of the contract and to take such part thereof as shall be unexecuted out of hands and to give it to another contractor to complete it in which case any expenses which may be incurred in excess of the sum which would have been paid to the original 00^1^0^ if the whole work had been executed by him (of the amount of which excess the certificate in writing of the Engineer in charge be final and conclusive) shall be borne and paid by the original contractor and may be deducted from any money due to him by the Corporation under the contract or on any other account whets over or from his security deposit or the proceeds of the sales thereof or sufficient part thereof as the case may be. Clause 3 is - in the nature of risk purchase contract and provides the difference in case of a risk purchase to be recovered from the original contractor. It cannot be disputed that for a claim under clause 3(c) it is necessary for the Corporation to get the work done from some other contractor and in case excess amount is paid, it has a right to recover from the original contractor. Turning now to the disputes, subject matter of these claims, from the stand of the Corporation as taken in the objection-petition it is evident that the Corporation was claiming the deduction on account of difference of expenditure which had been incurred in purchasing of wooden crates from the market in excess of which would have been paid to the contractor had he supplied the said crates. In the objection-petition the case set up is not that the Corporation is entitled to difference of the prevailing market rate and the rate at which the crates were to be supplied by the contractor under section 73 of the Contract Act. Admittedly, no evidence was produced before the arbitrator to show that wooden crates had been purchased from the market)

(6) The next objection of the Corporation relates to claim No. 10. Under this claim certain statutory increases in respect of steel and labour had been allowed by the arbitrator. The objection of the Corporation is that no reasons have been stated for allowing claim Ne. 10. It is well settled that arbitrator is not required to write an elaborate judgment even when he is required to give reasons in the award in terms of the agreement between the parties or terms of reference. The reasons for allowing these increases are increase in the prices of a steel 6xed by Government Constituted Committee having statutory force and increase in minimum wages of labour under Minimum Wages Act. It cannot accordingly be said that no reasons have been given for allowing this claim. Another objection taken to this claim is that the contractor has not produced evidence before the arbitrator showing the incurring of expenses as is mandatory under clause 10(c) of the agreement between the parties. It is also submitted that the contractor did not produce books of accounts before the arbitrator but only certain bills such as Ex.C-l,Ex.C-2,Ex.C-4andEx.C-13 were filed before the arbitrator besides Ex. C-7 which is an order of assessment. Objection was also raised that Schedule showing wages payable to labour at Ghaziabad was not filed by the contractor but only a Schedule showing minimum wages payable to labour at Delhi was filed. It was also contended that the contractor did not produce any evidence that expenses incurred under these two heads were more than l0/o as according to clause 10(c) statutory increases, if any, up to the extent of 10/, are to be borne by the contractor and to that extent the amount could not recover from the Corporation. I am afraid all these objections cannot be gone into in the present proceedings. The arbitrator is the final Judge both of facts and law. It is not the scope of proceedings under section 30 of the Arbitration Act to go into the merits of the controversy as a Court of appeal and delve into the arbitration record to find out the correctness or otherwise of the award of the arbitrator. The sufficiency of evidence cannot be gone into. It cannot be said that there is any error apparent on the face of the award or that the finding of the arbitrator is without evidence and perverse. Even if two views are possible, the Courts have to accept the view of the arbitrator. It is well settled Court has to lien in favor of upholding the award and not setting it aside. I do not find any substance in any of the objection raised to clai.m No. 10.

(7) Under claim No. 11 the contractor claimed Rs. 16.025.00 towards extra transportation charges due to increase in diesel oil and raised rates paid for the material supplied by the Corporation. The amount as claimed was awarded by the arbitrator. The reason given is that it is an admitted fact that there was a sharp rise in fuel prices during the period 1979-81 due to Government Notification. Rs.l6,025.00 was claimed by the contractor for transportation of building materials from Corporation godown to site work and other incidental expenses. The objection of the Corporation to grant of this claim is that the contractor is only entitled to such statutory increases as agreed between the parties in terms of the agreement. The relevant clause again is 10(c). Clause 10(c) reads as under : "If during the progress of the works, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 thereof) and/or wages of labour increases as a direct result of the coming into force of any fresh law. or statutory rule or order (but not due to any changes in sales tax) and such increase exceeds ten, per cent of the price and/or wages prevailing at the time of receipt of the tender for the work, and the contractor thereupon necessarily and properly pays in respect of that material (incorporated in the works) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied provided always that any increase so payable is not, in the opinion of the Manager Engineering (whose decisions shall be final and binding) attributable to delay in the execution of the contract within the control of the contractor. Provided however, no reimbursement shall be made if the increase is not more than 10%of the said prices/wages, and if so, the reimbursement shall be made only on the excess over 10% and provided further that any such increase shall not be payable if such increase has become operative after the contract or extended date of completion of the work in question. If during the progress of the works, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 thereof) and/or wages of labour is decreased as a direct result of the coming into force of any fresh law or statutory rules or order (but not due to any changes in sales tax) and such decrease exceeds then per cent of the price and/or wages prevailing at the time of receipt of the tender for the work, the Corporation shall in respect of materials incorporated in the works Not being materials supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof) And/or labour engaged on the execution of the work after the date of coming into force of such law, statutory rule order be entitled to deduct from the dues of the contractor such amount as shall be equivalent to difference between the prices of materials and/or wages as they prevailed at the time of receipt of tender for the work minus ten per cent thereof and the prices of materials and/or wages of labour on the coming into force of such law, statutory rule or order. The contractor shall, for the purpose of this condition, keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorised representative of Corporation and further shall, at the request of the Engineer-in-Charge furnish, verified in such a manner as the Engineer-in-Charge may require any documents so kept and such other information as the Engineer-in-Charge may require. The contractor shall, within a reasonable time of his becoming aware of any alteration in price of any such material and/or wages of labour, give notice thereof to the Engineer-in-Charge slating that the same is given pursuant to this condition together with all informations relating thereto which he may be in a position to supply"

(8) It is evident from the aforesaid clause that statutory increase in respect of material, incorporated in the works is to be given to the contractor and not in crease in the rates of any material not incorporated in the agreement. Diesel oil, admittedly, is not the material incorporated in the works and in my opinion, the objection of the Corporation that award under claim No. I I is contrary to clause 10(c) is well founded. The arbitrator is required to decide the disputes and differences between the parties in accordance with law and contract between the parties and cannot act contrary thereto. Mr. Sharma, learned counsel for the contractor did not seriously dispute that the contractor is not entitled to increase in the price of the diesel but sought to justify the claim on the ground that the contractor is entitled to the claimed amount as a general increase even though he may not be entitled to increase of transportation on account of the increase in the price of diesel I cannot accept this explanation. The award of Rs. 16,025.00 is contrary to terms of clause 10(c) and cannot be upheld.

(9) Under claim No. 13, Rs. 30,000 was awarded to the contractor on the basis of unrebutted evidence produced before the arbitrator. No substantial ground of objection was brought to my notice and accordingly award under this claim has to be upheld.

(10) Under claim No. 15, the arbitrator has awarded interest which is contrary to the law laid down by the Supreme Court in Executive Engineer (Irrigation) BaUmela & Others v. Abdul Jena & Ors. . It is now well settled that the arbitrator has no power to award interest up to the date of the award when there is no specific agreement between the parties to that effect. Learned counsel for the contractor did not seriously dispute the legal position in regard to the power of the arbitrator to award interest. Accordingly, award under claim No. 15 has to be set aside.

(11) On behalf of the Corporation no substantial objection could be brought to my notice with regard to additional claims No. 3 and 5 The arbitrator has given reasons for award of the amounts under the said claims. It is i to for me to go into the reasonableness of the reasons given by the arbitrator. There is neither any error apparent on the face of the record nor any misconduct has been shown in deciding these claims.

(12) Issue No. I is decided in the above terms and award in respect of claims No. 2, Ii and 15 is set aside. Issue No. 2 RELIEF:

(13) For the reasons stated above, I set aside the award of the arbitrator dated 10th August, 1984 in respect of claims No. 2 11 and 15 As the award in respect of claims No. 2, 11 and 15 is severable from the award in respect of all other claims, the award made and published by Mr P S Mathur dated 10th August, 1984 in respect of all other claims is upheld and made a rule of the Court and decree passed in terms thereof Incase the decretal amount is not paid within two months, the contractor will be entitled to interest at the rate of 12^ per annum from date of decree till payment.

(14) Suit No. 1784-A/84 and LA. 7339/84 stand disposed of in the above terms leaving the parties to bear their own costs.