IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 17-9-2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL O.S.A.No.39 of 2007 M/s.National Projects Construction Corporation Ltd., MTP Railways Compound Represented herein by its Present Unit Officer cum Power Agent K.Palanivelu Government Estate, Chennai 2. .. Appellant / 1st Respondent vs 1.The State of Tamil Nadu Represented by its Secretary Highways Department Fort St. George Chennai 600 009. 2.The Superintending Engineer (H) Tamil Nadu Urban Development Project TNUDP Circle (Now Renamed as Project 1 Circle) HRS Campus, Sardar Patel Road Chennai 600 025. 3.S.P.Krishnamoorthy Chief Engineer (H) Retd., Presiding Arbitrator E-2, Adyar Apartments, Kotturpuram, Chennai 600 085. 4.K.Arunachalam Chief Engineer (H) Retd. Arbitrator 27/4, Anna Street, Korattur Chennai 600 080. 5.R.Ramasamy Member, Arbitration Committee Flat No.107, SI, II Floor III Seaward Road Valmigi Nagar Tiruvanmiyur, Chennaim 600 041. .. Respondents/Petitioners 1 and 2/Respondent 2 https://hcservices.ecourts.gov.in/hcservices/ Original side appeal filed under Clause 15 of the Letters Patent Act read with Order 36 Rule 1 of O.S. Rules and Section 37 (1)(b) of the Arbitration and Conciliation Act 1996 against the order of this Court in O.P.No.179 of 2004 dated 22.8.2006. For Appellant : Mr.Amalraj S.Renkilapatti For Respondents : Mr.V.Srikanth AGP (CS) for RR1 & 2 No appearance for RR3 to 5 JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) Challenge is made to an order of the learned Single Judge of this Court made in O.P.No.179 of 2004 setting aside an arbitral award dated 30.11.2003. 2.The factual events which led the making of the arbitral award in question can be stated thus: (a) The first respondent Highways Department flouted tenders for construction of a Road Over Bridge at Royapuram. On 16.7.1992, the appellant National Projects Construction Corporation Ltd., submitted their tenders both for the department design and also for alternative design. Since the contractor's quotation was comparatively low for that alternative design, the department provisionally decided to approve the contractor's tender. In view of the fact that it was an alternative design of the bidder, there were lot of outstanding issues which were to be resolved in respect of both technical and financial matters. Hence the department issued a conditional letter of acceptance on 9.6.1994 informing the contractor to attend a meeting on 23.6.1994 to resolve the said issues before signing the contract. The same was also referred to in the letter of acceptance dated 9.6.1994. After receiving the letter of acceptance, the appellant contractor deputed their responsible officers along with their experts. A meeting was held at the Chief Engineer's Office on 23.6.1994 in which 14 issues were discussed, and important decisions as to the rates, contract value, price adjustment, etc., were all taken. Pursuant to the decision taken in the said meeting, the overall cost of the work was agreed not to exceed the accepted amount of Rs.8,38,11,083/-. It was further agreed that the contract price would not be paid over and above the said accepted contract price. On any reason, it will not be increased. The price adjustment effected during the execution would be limited to actuals or the accepted contract value namely Rs.8,38,11,083/- whichever was less. Subsequent to the meeting on 23.6.1994, a copy of the minutes was also despatched to the contractor on 27.6.1994. On 30.6.94, the contract was entered into duly incorporating the minutes of the meeting as part and parcel of the said contract. (b) The contractor commencing from the letter dated 30.7.1994, sent number of communications to the department making specific reference to various decisions arrived at the said meeting. The contract price for construction of road over bridge at Royapuram was fixed at Rs.8,38,11,083/- including the contractor's demand dated 23.9.1992 for provisional increase in https://hcservices.ecourts.gov.in/hcservices/ cost of Rs.43,14,270/- due to the redesigning of foundation. Thus, the demand of increase in cost due to the redesigning of the foundation was only tentative and provisional figure which was not a fixed amount payable to the contractor. According to the contract, the project has to be completed within a period of 18 months. The site was handed over to the contractor on 30.6.1994, and hence the contractor should have completed the project on or before 30.12.1996. However, due to various lapses, incompetency, and poor management, the work was prolonged. The department considering the circumstances, granted valid extension of time, and finally the work was completed on 31.12.1999 after a period of 36 months. The completion certificate was issued by the department on 31.3.2000. (c) Before the completion and during the execution of the work, the contractor raised a dispute to the tune of Rs.34,63,839/- on 10.3.1998 claiming escalation for the special material contending that the price of the special material originally given in the tender had been increased and the revised rate had been incorporated in the agreement and claimed the difference between the price quoted in the tender and the revised rate incorporated in the agreement; but, the same was rejected by the department on the ground that the prices incorporated in the concluded agreement would hold good. The contractor had claimed the payment for a sum of Rs.34,63,839/- by letter dated 10.3.98 and requested the department to invoke the arbitration clause. Considering the request of the contractor, the Government appointed 3 member arbitral committee who are arrayed as respondents 3 to 5 herein. The Committee was actually constituted on the basis of the recommendation of the Chief Engineer's letter dated 6.7.1998. When the arbitral committee convened their meeting on 30.4.1999, the contractor had lodged their claim to the tune of Rs.3,28,33,962/- under seven heads. The department filed a suitable counter on 10.4.2000, along with documents. The contractor also filed a reply counter on 5.8.2001. A rejoinder was also filed by the department. The Arbitral Committee mad an award on 30.11.2003, allowing Claims No.1, 2 and 7 and rejected the other claims. 3.Aggrieved over the said award, the department filed the said O.P. seeking to set aside the same on the grounds that the award is vitiated by error apparent on the face of the records besides there were several and serious legal misconducts on the part of the arbitral committee and their decision are against the basic fundamental principles of law. The appellant/contractor filed a detailed counter. On enquiry, the learned Single Judge set aside the award on the reasons adduced in the order. Aggrieved, the contractor has brought forth this appeal before this Court. 4.The only question that would arise in this appeal is whether the order of the learned Single Judge setting aside the award is liable to be set aside on the grounds urged by the appellant herein. https://hcservices.ecourts.gov.in/hcservices/ 5.Advancing arguments on behalf of the appellant, the learned Counsel would submit that the case of the appellant was not merely rested on allegations of fraud; that the only issue that arose before the tribunal was the interpretation of the contract strictly as per the clauses found in the contract itself; that after discussing various technical aspects like the designs, specifications, etc, the three representatives of the appellant/contractor affixed the signature only in the "Details of participants (Attendance)"; that the second respondent Highways Department failed and neglected to draw any detailed minutes of the meeting/statement of the decisions unanimously arrived at and communicate to the contractor till 1.7.1994; that even as on 30.6.1994, when the General Manager of the appellant signed the contract documents, neither the contractor as an organisation nor any of its three representatives were served with any minutes of the meeting; that the copy of the alleged unsigned minutes of the meeting was furnished to the appellant contractor only after the signing of the contract dated 30.6.1994; that even the copy of the minutes of the meeting filed by the second respondent in its typed set of documents, was also an extract from the compiled contract document and did not contain the signature of any of the participants; that the contract dated 30.6.1994, was executed and managed by the second respondent in a deliberate violation of all mandatory values and ethics insofar as it pertains to the insertion of the 'unsigned minutes of meeting dated 23.6.1994'; that the agreement dated 30.6.1994 was a compilation of various documents; that the Clause III of Volume III of the contract dated 30.6.1994 laid down in clear and unambiguous terms as to how the said contract must be interpreted; that the said clause reads that the said documents should be taken as complimentary and mutually explanatory of one another, but in the case of ambiguities or discrepancies, shall take precedence in the order set out therein; that in view of the above, the unsigned minutes of the meeting dated 23.6.1994 was onerous and contrary to the letter and spirit of the instant agreement and ought to be disregarded at least insofar as it pertains to the base price of the special materials, price adjustment clause seeking to limit the over all cost of the work to just Rs.8,38,11,083/- inclusive of the price variation and seeking to change the value and the very nature of contract from that of the lump sum contract to an item rate contract or a contract on the bills of quantities; that Clause III of the contract dated 30.6.1994 laid down in clear terms that the letter of acceptance and the tender and appendix would take precedence over and above the unsigned minutes of the meeting dated 23.6.1994 and hence the contents of the said unsigned minutes of the meeting should be disregarded as onerous. 6.Added further the learned Counsel that the second respondent employer was bound to act strictly as per the terms of the contract dated 30.6.1994 and disregard the contents of the said unsigned minutes of the meeting dated 23.6.1994; that the appellant/contractor must only legitimately believe and understand that the contract dated 30.6.1994 must only be interpreted as per https://hcservices.ecourts.gov.in/hcservices/ the principles of interpretation laid down in the contract itself; that the second respondent was estopped from contending that it should not be interpreted and construed as per its own terms and conditions; that the insertion of the alleged unsigned minutes of the meeting dated 23.6.1994 was an illegal attempt made by the second respondent employer to reduce the value of the contract by about Rs.2,46,55,717/-; that the contents of the minutes of the meeting dated 23.6.1994 was in violation of the Clause 2.25 of the contract which speaks of the notification of the award; that the unsigned minutes of the meeting was complied by the second respondent in an improper manner and the same would seek to unilaterally change the value and the very nature of the instant contract from that of the lump sum contract to item rate contract. 7.The learned Counsel would further contend that the appellant had written number of letters to the employer Highways, and it clearly pointed out the various ambiguities contained in the contract dated 30.6.1994 and sought for its rectification as strictly provided for under the said contract itself; that it is specifically provided in the agreement that if the contractor discovered any ambiguities, commissions, errors, faults and other defects in the drawings or in contract documents, he should immediately notify the same in writing to the Engineer who would resolve the ambiguity or correct the error and would notify the contractor of the interpretation to be adopted; that the arbitral proceedings were pending for more than 4 years and had reached the final stage; that even the stamp papers were deposited to the tribunal as per the directions for the publication of the award; that while the matter stood thus, the second respondent employer had suddenly impugned the jurisdiction of the arbitral tribunal at the final stage, but did not challenge the arbitral proceedings at the initial stage which was commenced by the appointment of an earlier tribunal; that by a letter dated 10.3.1998, the appellant made the demand for arbitration proceedings referring to the documents; and that in view of the different vexatious attempts made by the department to constrict the scope and ambit of the arbitral tribunal, the appellant contractor was constrained to point out that it had raised on different occasions various issues like the resolutions of ambiguities in the contract due to the unsigned minutes of the meeting. 8.Added further the learned Counsel that the respondents 1 and 2 employers had never even questioned the tribunal's competency or the jurisdiction to adjudicate the disputes for the first three years and also filed their counter claims; that the second respondent in the course of the few hearings, raised vexatious allegations; that after filing the counter, the second respondent employer was estopped from alleging that the tribunal lacked jurisdiction to adjudicate the disputes; that the parties had also jointly averred before the tribunal that all submissions and pleadings were complete, and the respective counsel also submitted that no further submissions were to be made; that the learned Single Judge has not considered either the factual or the legal position, but has set aside the award; that the reasons https://hcservices.ecourts.gov.in/hcservices/ adduced by the respondents 1 and 2 before the learned Single Judge were not sufficient in the eye of law or as one envisaged under the provisions of the Arbitration and Conciliation Act, 1996, to set aside the award, and under the circumstances, the order of the learned Single Judge has got to be set aside and the award be restored. 9.Contrary to the above contentions, the learned Counsel for the respondents 1 and 2 in his sincere attempt of sustaining the order of the learned Single Judge would submit that when the tender was made, the appellant contractor's quotations were for the alternative designs; but, there were lot of outstanding issues to be decided in respect of both technical and financial; that under the circumstances, what was issued was only a conditional letter of acceptance on 9.6.1994 wherein it was clearly referred that a meeting was to be conducted on 23.6.1994 to solve the dispute; that accordingly, a meeting was conducted; that it was attended by three responsible officers of the appellant; that 14 items were discussed in that meeting; that as could be seen from the minutes of the meeting, the rates, contract price, price adjustment, etc., were all considered; that minutes were drawn; that as per the agreement between the parties, which was followed by the decision in the meeting on 23.6.1994, it was clearly agreed that the overall cost of the work should not exceed Rs.8,38,11,083/-; that it was also clearly understood that the price adjustment effected during the execution would be limited to actuals or the said accepted contract value whichever was less and hence it would be quite clear that the contract price should be the actuals or Rs.8,38,11,083/- whichever was less; that at the same time it should not at any rate exceed the said amount; that apart from the fact that the meeting was attended by three of the officials from the appellant company on 23.6.1994, the minutes were actually passed in their presence; that a copy of the minutes of the meeting was also despatched to the contractor on 27.6.1994; that when the contract was actually entered into between the parties on 30.6.1994, the minutes dated 23.6.1994 were actually incorporated; and that it was made as part and parcel of the contract. 10.Added further the learned Counsel that the arbitral tribunal was not correct in holding that beyond the letter of acceptance, nothing had taken place between the parties and thus the minutes of the meeting dated 23.6.1994 had no role to play; that it is evident that it was inseparable part of the contract; that it is pertinent to point out that the appellant contractor had also counter signed in each and every page of the contract wherein it is clearly found that the minutes of the meeting dated 23.6.1994 would form part and parcel of the contract; that the contractor addressed number of communications to the department making specific reference to the various decisions arrived at the meeting; that those communications were addressed by the appellant prior to and during the time of the contract, and hence the appellant cannot be permitted to say that he did not have any knowledge about the minutes of the meeting; that to the knowledge https://hcservices.ecourts.gov.in/hcservices/ of the appellant, several decisions were taken in the said meeting in which the appellant and the respondents had the consensus ad idom; that it was only before the arbitral tribunal, the contractor alleged that the department has played fraud on them; and that after deputing three officials to attend the meeting held on 23.6.1994, the appellant should not be permitted to say that they did not have any role to play either, or did not give consent to the decision that had been taken. 11.The learned Counsel would further submit that the General Manager of the appellant/contractor had signed the agreement dated 30.6.1994; that the contention that he had mechanically signed without applying his mind and therefore the minutes of the meeting incorporated in the contract agreement, would not be binding on them was to be discountenanced; that these contentions were actually considered by the learned Single Judge; that when the appellant came forward with the serious allegations of fraud, surreptitious inclusion of certain clauses in the minutes of meeting and in the agreement and they were detrimental to them, the department was constrained to file O.A.Nos.1817 and 1818 of 2002 invoking the provisions of Sec.9(C) of the Arbitration and Conciliation Act, 1996; and that apart from this, O.P.No.677 of 2002 had also been filed before this Court to revoke the mandate given to the arbitral committee. 12.Added further the learned Counsel that the specific case of the department is that since the arbitral committee was not bound by the principles of evidence and the C.P.C. and does not contain any legally qualified member, it would be incompetent to adjudicate a complicated issue as complaint of fraud; that only after rendering a finding as to whether any fraud had been played by the department on the contractor, the first two claims made by the contractor could be entertained and decided by the arbitral committee; that the arbitral committee was not only incompetent, but also has no authority to decide as to the validity of the inclusion of the minutes of the meeting in the agreement and thus, the two claims could not be entertained as the minutes of the meeting having been incorporated in the contract and given effect to; that it is pertinent to point out that the appellant contractor resisted the applications on the ground that the arbitral committee could rule on its own jurisdiction; but, the said applications were dismissed on 14.1.2003; that the review application filed by the department was heard by this Court, and time was granted to the department to move an appropriate application before the arbitral committee itself, and the arbitral committee had to dispose of the same on merits without being influenced by the observations made in O.P.No.677 of 2002; that accordingly, an application was moved before the arbitral committee; that the department contended that the arbitral committee had no jurisdiction to entertain the claims of the contractor; that the arbitral committee instead of accepting the stand of the department on the ground that it had no jurisdiction to decide the allegation of fraud, misrepresentation on inclusion of minutes of meeting, had without any discussion, proceeded with https://hcservices.ecourts.gov.in/hcservices/ the arbitration; that the department had no option than to participate in the proceedings; and that the arbitral committee has not appreciated the various contentions raised by the department with regard to the maintainability of the arbitration and jurisdiction of the arbitrators to entertain the claim of the contractor. 13.It is the further submission of the learned Counsel that the contractor originally claimed only Rs.3,28,33,952/-, but revised the claim to the tune of Rs.5,10,35,387/-; that the arbitral committee made an award on 30.11.2003, allowing Claims No.1, 2 and 7 and rejected the other claims; that as far as the claims 1, 2 and 7 were concerned, they were allowed by the arbitral proceedings in view of its finding that the minutes of the meeting dated 23.6.1994, had nothing to do with the case on hand or the contract; that the view taken by the arbitral tribunal is thoroughly incorrect; that when these aspects were placed before the learned Single Judge, the same were considered and a reasoned order setting aside the arbitral award has been made, and under the circumstances, the order of the learned Single Judge has got to be set aside. 14.As could be seen above, pending the execution of the work, the appellant contractor raised a dispute pursuant to which the arbitral committee was constituted. Before the arbitral committee, the appellant put forth seven claims. On enquiry, the arbitral tribunal passed an award allowing claims 1, 2 and 7, while the other claims were rejected. The appellant did not challenge the rejection of those claims. The department challenged the award allowing claims No.1, 2 and 7. On enquiry the learned Single Judge set aside that award. Under the circumstances, the contractor has brought forth this appeal. 15.The contentions put forth on either side and all the materials and in particular, the award under challenge are looked into. 16.The case of the claimant before the arbitral tribunal was that changes were made in the scope of the contract incorporated in the agreement after the issue of the letter of acceptance. According to the claimant, the changes were made in respect of the scope of the contract from lump sum contract to item rate contract and also restricting the total payment to Rs.8,38,11,083/- and change of basic rates of special materials to be considered for escalation. Admittedly, the claimants submitted the tender on 16.7.1992 for the department design and for the alternative design. The alternative design tender of the claimants opened on 16.7.1992 and evaluated based on further particulars obtained upto 23.9.1992 amounting to Rs.8,38,11,083/- for the work, was accepted by the respondents 1 and 2 by the letter of acceptance dated 9.6.1994. Paragraph 8 of the Letter of Acceptance (LOA) reads as follows: https://hcservices.ecourts.gov.in/hcservices/ "8)It is necessary to sort out certain outstanding issues as a preliminary to finalise the contract agreement so that difficulties during course of execution can be avoided. It is therefore proposed to convene a meeting on 23.6.94 by 3 P.M. at Chief Engineer's (H) TNUDP Chamber..." 17.As rightly pointed out by the learned Counsel for the appellant, in the said LOA no indication was given as to the specific outstanding issues proposed to be discussed in the meeting. At this juncture, it is pertinent to look into paragraph 10 which reads as follows: "10)The written lumpsum agreement to be executed by the contractors and accepted by the department shall form the foundation of all rights of both the parties and the contract shall not deemed to be complete unless and until the agreement is signed by the contractors first and accepted by the "Engineer" on behalf of the Government of Tamil Nadu." 18.If paragraphs 8 and 10 referred to above are read together, it would clearly indicate that there were issues which were to be discussed by the parties to finalise the contract agreement. It is not in controversy that the appellant deputed their representatives. A letter was addressed on 20.6.1994 even before the meeting dated 23.6.1994 as noted in paragraph 8. The letter so addressed would indicate that the representatives were to have discussion with the department officials regarding the technical aspects. It is also not in controversy that there was a meeting that was held on 23.6.1994. According to the appellant, what were discussed in the presence of the representatives were only regarding the technical aspects and thus, the minutes speaking of the different items touching the financial aspects were not discussed at all, and they were subsequently inserted, which stood detrimental to the interest of the appellant. At this juncture, the