State Of Odisha And Others vs M/S. B. Engineers & Builders Ltd
2022 Latest Caselaw 3377 Ori

                 IN THE HIGH COURT OF ORISSA AT CUTTACK

                                  ARBA No.4 of 2016
                                (Through hybrid mode)

            State of Odisha and others            ....                  Appellants

                                                         Mr. P.P.Mohanty, AGA

                                           -versus-

            M/S. B. Engineers & Builders Ltd.,    ....                 Respondent
            BBSR

                                         Mr. Debendra Kumar Dwibedi, Advocate.

                     CORAM: JUSTICE ARINDAM SINHA
                                    ORDER

21.07.2022 Order No.

20. 1. The appeal was moved before this Bench on 4th January, 2022.

On behalf of appellant(State) it was submitted that State had entered

into the contract with respondent. As per the contract and pursuant to

request made by respondent, there was settlement of final bill and

closure. It is only thereafter that the contractor raised dispute and

invoked the contract clause regarding appointment of adjudicator.

Being aggrieved by the ruling of the adjudicator, the contractor then

invoked the arbitration clause. The arbitrator awarded on extra items,

outside scope of the contract. This was not appreciated by the learned

District Judge in dealing with the petition made under section 34,

Arbitration and Conciliation Act, 1996. The award ought to have been

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set aside and should be set aside in appeal.

2. It was further submitted, impugned judgment dated 10th

September, 2015 should be interfered with in appeal. First ground of

challenge against the award (since appeal is continuation of the

challenge) is regarding claim no.1. There was rate fixed for extra

works, not provided by the contract. The rates were fixed by the

Supervisory Committee. The Committee cannot be said to have been a

contracting party, to have modified terms of the contract. Regarding

claim no.2 it was submitted, there should not have been interest

granted for retention of security money. No such provision was there

in the contract

3. Today Mr. Mohanty, learned advocate, Addl. Government

Advocate appearing on behalf of appellant refers to paragraph 14 in

award dated 10th December, 2010. It is in dealing with claim no.1 on

removal of bulged concrete and rectification of guides under water. He

submits, this was work outside scope of the contract. Same would

appear from recital of the claim in the award itself. The arbitrator

accepted finding of the adjudicator made before the reference that

removal of bulged in concrete occurring in the dam phase underwater,

has to be treated as extra item. He submits, this claim was rejected at

the threshold. He relies on communication dated 11th February, 1999

from Engineer-in-Chief to the Government, disclosed by his client's

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additional affidavit dated 14th March, 2022, to submit, the Supervisory

Committee was constituted to assist and solve problems of the

Executive Engineer, to take spot decision on site conditions for

ensuring strict quality control and expedite execution of the works. It

did not have authority to recommend rates for work, not contemplated

under the contract, to thereby purport to act on behalf of the employer,

to cause novation of it.

4. He submits further, all bills were paid and the security deposit

refunded as well but on delay of eight months. The contract did not

provide for payment of interest on refund of security money.

5. Mr. Dwibedi, learned advocate appears on behalf of

respondent-contractor. He had submitted, supplementary agreements

were entered into, which enlarged scope of the contract to include the

six claims that were dealt with by the award. All claims were not

awarded in favour of his client. There is no defect in the award as can

be said to be one, which falls within the grounds in section 34. The

appeal should be dismissed.

6. Controversy in the appeal is confined to aforesaid claim no.1

made by the contractor and award of interest on delayed refund of

security money. Contention of appellant has been that both the claims

awarded, were beyond four corners of the contract. The arbitrator,

therefore, travelled beyond the contract and misconducted himself.

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The contention of misconduct is based on two grounds. Firstly, the

contract did not provide for extra work or rates, and secondly, it also

did not provide for interest on refund of security money.

7. It appears from relied upon communication dated 11th

February, 1999 that two committees were constituted by the employer,

without reference to the contractor. The constitution of these

committees was in aid of working out the contract. Constitution of the

two committees, being Supervisory Committee and High Level

Technical Committee, as stated in said communication, is extracted

therefrom and reproduced below.

"A committee with the following members is constituted to function as supervisory committee to assist and solve the problems of the Executive Engineer, S&M Division, Hirakud to take spot decision on the site conditions for ensuring strict quality control and expeditious execution of the works.

     1. S.E, Hirakud Dam Circle                            Chairman
     2. S.E,Mechanical, Hirakud                            Member
     3. E.E.,H.D.R.D.Division, Burla                       Member Secretary
     4. E.E. Stores & Mech. Divn., Hirakud                 Member
     5. E.E. Main Dam Division, Burla                      Member

All spot decisions on higher technical and financial matters are to be referred to the technical committee by the member secretary.

A high level technical committee is constituted under the Chairmanship of E.I.C., Water Resource with the following members to take decisions on the technical and financial matters upon recommendation (on its receipt) from the supervisory committee.

1. Sri R.C. Tripathy, Engineer-in Chief, Water Resources

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2. Sri B. B. Mishra, Engineer-in-Chief, Planning & Design

3. Sri R.K. Kanungo C.E. & Basin Manager, Upper Mahanadi Basin, Burla

4. Sri Sanatan Deo, Chief Engineer, Mechanical"

(Emphasis supplied)

8. Agreed procedure on dispute resolution, provided in the

contract, required reference initially to an adjudicator. The dispute was

so referred and the adjudicator ruled on it. The contractor being

aggrieved on the adjudication made, sought reference to arbitration,

which was concluded by the award. The adjudicator had found that

claim no.1 was indisputably on extra work and it had to be paid. The

finding was extracted and quoted in the award and is also reproduced

below.

"As such the removal of Bulged in concrete occurring in the Dam face, Under Water, has to be treated as Extra Item and paid for....."

It appears the contractor was aggrieved by the ruling because the

adjudicator had reduced the area recorded in measurement book at 251

sqm. to 226 sqm. and the rate agreed at Rs.65,230/- per sqm. to

Rs.6688/- per sqm.. What is significant is and as pointed out by Mr.

Dwibedi, State did not challenge the ruling made by the adjudicator on

both findings. What follows is that there was extra work got done and

some rate provided therefor.

9. At instance of appellant the lower Court record was produced

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but relied upon exhibit-11 was not found therein. Mr. Mohanty then

produced copy of the exhibit with copy to Mr. Diwbedi.

10. Exhibit-11 relied upon in the reference has been perused by

Court. Extract in paragraph 18 of the award was truly made therefrom.

The exhibit is a document recording compliance to 8th meeting of the

Supervisory Committee held on 22nd January, 2002. The document

was tendered by the contractor and Court ascertained from Mr.

Mohanty that there is no dispute regarding existence of it. The extract

in the award from the document is reproduced herein as from the

exhibit.

"In additional to rectification of misalignment the work involves cutting of bulge concrete and under water welding of missing link of guides. Under water welding of missing link has already been done in the left guide of emergency gate slot no.49. Hence the committee decided to include under water cutting of bulge concrete and welding of missing link as two extra items and continue with the work. The negotiated rates of Rs.14,500/- per meter of underwater welding and Rs.65,230/- per Sqm of removal of bulged concrete as agreed by 6th supervisory committee and 4th High level technical committee was recommended by the committee. The agency also agreed to it."

(Emphasis supplied)

11. The employer was represented in the working of the contract

by its several engineers and authorized personnel. No contention has

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been made regarding constitution of the committees as were

unauthorized. The Supervisory Committee had authority to take spot

decision on higher technical and financial matters but, they were to be

referred to the High Level Technical Committee. The High Level

Technical Committee was empowered to take decision on the

technical and financial matters upon recommendation (on its receipt)

from the Supervisory Committee. The arbitrator found and there is

clear statement in the document being exhibit-11 that the Supervisory

Committee made the recommendation by its 6th meeting and in the 4th

High Level Technical Committee meeting, same was agreed to.

12. So far as the interest on delayed payment of retention money is

concerned, on query from Court Mr. Mohanty could not demonstrate

existence of any clause in the contract authorizing delayed repayment.

In the circumstances, award for interest on delayed refund of retention

money appears to be a possible view.

13. Impugned judgment is confirmed. The appeal is found to be

without merit and the same is dismissed.

(Arindam Sinha) Judge Prasant