IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA. Arb. Case No.67 of 2005 Date of Decision : March 18, 2009 Himachal Pradesh Housing & Urban Development Authority & anr. ………....Objectors Versus: K. D. Nirash …Non-objector/claimant Coram: The Hon’ble Mr.Justice Sanjay Karol, Judge. Whether approved for reporting?1 No For the objectors : Mr. C. N. Singh, Advocate. For the claimant : Mr. S. R. Sharma, Advocate. SANJAY KAROL, JUDGE (Oral) This is a petition filed under Section 34(3) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), assailing the award dated 25.7.2005 passed by Shri K.C. Singha, Arbitrator-cum-Superintending Engineer. For the purposes of adjudication of the present petition, the objector No.1, namely, Himachal Pradesh Housing & Urban Development Authority, hereinafter is referred to as ‘the authority’ and the non-objector Shri K.D. Nirash, hereinafter is referred to as ‘the Contractor’. The authority executed an agreement dated 24 of 1996-97, with the Contractor for execution of the work of 1 Whether reporters of Local Papers may be allowed to see the judgment? 2 Construction of DIET Complex at Recong Peo (SH: C/O Hostel Building WS&SI). Certain disputes having arisen between the parties in relation to the said agreement, in terms of the Arbitration Clause 25 of the agreement, the matter was referred to the arbitration to the Superintending Engineer, Arbitration. The Contractor filed his claims. No counter claims were filed by the authority. The Arbitrator passed the impugned award dated 25.7.2005 awarding certain claims in favour of the contractor. The undisputed position which has emerged from the record is that (i) the tendered work was for a sum of Rs.53,08,647.31 paise. (ii) The Contractor commenced the work within time but however, for the reasons beyond the control of the authority the Project had to be abandoned. The reason of abandonment is not an issue for adjudication in the present proceedings. (iii) As a consequence of abandonment of the Project, the contractor was asked not to execute the work. The Contractor filed claim for a sum of Rs.17,16,495/- before the Arbitrator. On the said amount, he also claimed interest @ 18% and costs of arbitration. During the pendency, he revised this claim to Rs.18,06,308/- but eventually the Arbitrator adjudicated the claim and awarded a sum of Rs.2,02,607/- towards claim 1(G) and awarded simple interest @6% per annum w.e.f. 3.9.1998 i.e the date of the closure of work till the date of award. 3 Mr. C.N. Singh, learned counsel for the authority has assailed the award by making the following submissions:- a) The findings of the Arbitrator qua claim 1(C) are contradictory, the amount awarded is in derogation of Clause 12(A) of the contract. b) Similarly Clause 1(F) has been wrongly awarded as the findings are contradictory to the findings returned qua claim No 1(H). c) Relying upon the decision of the Apex Court in State of Manipur & Ors. vs. Shangreihan Muivah {2002(10) SCC 506}, it has been submitted that no interest could have been awarded by the Arbitrator as the payments made to the Contractor were in the shape of advanced payments on running bills. Per contra, Mr. S. R. Sharma, learned counsel appearing for the contractor has supported the award for the reasons set out therein. He has, however, fairly stated that with regard to claim 1(F), the claim be restricted only qua items, CGI & PGI sheets value of which comes to Rs.25,836/-. Qua other items, the amount involved is small, hence, he would rather give it up. With regard to the second contention, Mr. Sharma has stated that he would rather restrict the claim 1(H) qua item CGI & PGI sheet than take the Court through the record with regard to other items of cement etc. as the amount involved is not large. On the question of payment of interest, he clarified that the award is with regard to extra items hence, the ratio of law 4 laid down by the Apex Court in State of Manipur & Ors (supra) would not apply. The challenge to the award is on the aforesaid grounds only. For the purposes of adjudication of the present petition, relevant clauses of the contract are reproduced:- Clause 12(A) : In the case of contract or substituted items which individually exceed the quantity stipulated in the contract more than the deviation limit except the items relating to foundation work which the contractor is required to do under Clause 12 above the contractor shall within 7 days from the receipt or order claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit, notwithstanding the fact that the rates for such items exist in the tender for the main work or can be derived in accordance with the provisions of sub- clause (ii) of clause 12 and the Engineer-in-Charge may revise their rates. The Engineer-in-Charge shall, however, be at liberty to cancel his order to carry out such increased quantities of work by giving notice in writing to the contractor and arrange to carry it out in such manner as he may be considered advisable. But, under no circumstances the contractor shall suspend the work on the plea of non settlement of rates of items falling under the clause. All the provisions of the preceding paragraph shall equally apply to the decrease in the rates of items for quantities in excess of the deviation limit, notwithstanding the fact that the rtes for such items exist in the tender for the main work or can be 5 derived in accordance with the provisions of sub clause (ii) of the preceding clause 12 and the Engineer-in-Charge may revise such rates having regard to the prevailing market rates. The amount of the tender in the award letter has been mentioned Rs.53,08,647.31 P. and deviation limit is 20%. The prescribed deviation is Rs.10,61,729.46 P. Gross work done including additional, substitute and altered items as processed in the final bill of the respondent/Executive Engineer is Rs.52,61,730.07 P. The work was closed by the respondent/Executive Engineer under Clause -13 of the agreement vide his letter dt. 2.9.98:- CLAUSE 13:- “If at any time after the commencement of the work the Chairman HPWB shall for any reason what-so-ever not require the whole thereof as specified in the tender to be carried out the Engineer-in-Charge shall give notice in writing of the fact to the Contractor who shall have no claim to any payment of compensation what-so- ever on account of any profit or advantage which he might he derived from the execution of the work in full, but which he did not derive in consequence of the full amount of the work not have been carried out, neither shall he have any claim for compensation by reason of any alterations having been made in the original specifications, drawing, designs and instructions which shall involve any curtailment of the work as originally contemplated. Provided that the contractor shall be paid the charges on the cartage only of material actually and bonafidely brought to the site of the work by the contractor and rendered surplus as a result of the 6 abandonment or curtailment of the work of any portion thereof and then taken back by the contractor provided however that the Engineer-in- Charge shall have in all such cases the option of taking over all or any such materials at their purchase price or at local current rates which ever may be less. In the case of such stores, having been issued from Government stores, supervision charges and storage charges, shall be refunded in addition of the issue rate of material. After closing the work in between the claimant/contractor stated that he executed the agreemental items to the tune of Rs.37,64,446/- and thus deviation limit on these agreemental items with 20% prescribed deviation will be Rs.7,52,889/-. The gross work done including additional, substituted and altered items as per final bill is Rs.52,61,730.07 P. Thus deviation is for Rs.7,44,395/- which is more than the deviation limit. Agreement item No.1 cutting in earth work, agreement item No.4(d) from work beams cantilevers, agreement item No.5 C.C. 1:4:8, agreement item No.9(b) C.C. 1:2:4, in suspended floor, agreement item No.10 tor steel, agreement item No.4(b) steel work welded in trusses individually exceed the percentage set out in the tender documents which is 20% and beyond that quantity and clause 12-A shall be applicable. Accordingly, the Claimant/Contractor. Alongwith his deviation of rates of the above mentioned items have submitted analyses of rates but no relevant documents like vouchers etc. in support thereof have been submitted whereas the Respondent/Executive Engineer for item No.1,4(d),5,9(b), 10, 13 and 44(b) has paid on 7 agreemental rate whereas the same should be under clause 12-A. Moreover, the claimant/Contr. has not supplied the basic rate of material for the relevant time alongwith his analysis. This forum on the basis of whole sale price index issued by RBI from time to time for the respective year has worked out the rates for the above items.” Clause 12-A provides that if the quantity of the contracted or substituted items individually exceed more than the deviation limits provided for under Clause 12, then within 7 days the Contractor shall, from the receipt of the order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit. The Engineer-in-Charge has the discretion to either cancel his order or determine the rates in accordance with the provisions of Sub Clause (2) of Clause 12. It is an admitted position that extra items exceeded the deviation limit and the claims had to be adjudicated under clause 12-A. The dispute however, is as to whether the Contractor applied for revision of the rates ‘supported by proper analysis’ or not. The contradiction in the award which is sought to be drawn by Mr. Chander Narayan, learned Advocate is as under:- “According to the claimant/Contr. certain quantities of certain items have been executed beyond the prescribed deviation limit and are payable to him 8 under Clause 12A. Accordingly, he has submitted proper analyses of rates to the Respondent/Executive Engineer from time to time. The Respondent/ Executive Engineer stated that he has paid the claimant/Contractor in his final bill for all the quantities executed under various items under contractual provisions as contained in Clause 12 & 12A.” “Agreement item No.1 cutting in earth work, agreement item No.4(d) from work beams cantilevers, agreement item No.5 C.C. 1:4:8, agreement item No.9(b) C.C. 1:2:4, in suspended floor, agreement item No.10 tor steel, agreement item No.4(b) steel work welded in trusses individually exceed the percentage set out in the tender documents which is 20% and beyond that quantity and clause 12-A shall be applicable. Accordingly, the Claimant/Contractor. Alongwith his deviation of rates of the above mentioned items have submitted analyses of rates but no relevant documents like vouchers etc. in support thereof have been submitted whereas the Respondent/Executive Engineer for Items No.1, 4(d), 5, 9(b), 10, 13 and 44(b) has paid on agreemental rate whereas the same should be under clause 12-A. Moreover, the claimant/Contr. has not supplied the basic rate of material for the relevant time alongwith his analysis. This forum on the basis of whole sale price index issued by RBI from time to time for the respective year has worked out the rates for the above items.” (Emphasis supplied) On first brush, it appears that the Arbitrator has actually contradicted himself but however, careful reading of his 9 findings would reveal that the Contactor had in fact submitted proper analysis of rates to the Executive Engineer from time to time but the same was not supported by any vouchers. Clause 12-A only mandates the Contractor to supply proper analysis of the items for quantities which are in excess of the deviation limit. Therefore, in my considered view, it cannot be said that the findings of the Arbitrator qua claim No.1 are in any manner contradictory or that the Contractor failed to take steps in compliance of Clause 12-A of the agreement and did not fulfill his contractual obligations. Noticeably, the Arbitrator observed that the Contractor had not supplied the basic rate of material for the relevant items along with the analysis before him. Therefore, based on the whole sale price index issued by the RBI, the Arbitrator awarded the claim in favour of the Contractor amounting to Rs.1,13,257/- towards Claim 1(C). The conclusion arrived at is borne out from the record. It is sufficiently reasoned. Clause 42 of the agreement simply provides that it is the responsibility of the Contractor alone to get the required quantity of material issued. While deciding claim No.1(H), the Arbitrator has observed that the contractor would not be entitled for cartage charges for the material transferred to other works as Clause 42 of the agreement specifically provided that it was the responsibility of the Contractor alone to get the required quantity of material issued. The work had to be stopped under 10 Clause 13 but however, since the Contractor had actually executed and completed all cement and steel related work, therefore, for the excess material transported by him no cartage was payable to him. On Claim No. 1(H) which has been relied upon to contend that Claim No.1(F) also could not have been decided in favour of the Contractor. It is an undisputed position that requisite quantities of material of CGI/PGI sheets was brought by the Contractor at the site but, however, the same could not be used as the execution of the work was stopped by the authority. Therefore, the same had to be returned back to the authority by the Contractor. The Arbitrator has held that due to natural calamities the National Highway from Reckong Peo to Shimla via Rampur was closed and, therefore, the said material had to be transported by the Contractor via Manali and as such the Contractor had to cover an extra distance of 443 kms. for carrying the material issued from the stores of the authority. That the said issued material was returned back to the authority is not in dispute. Admittedly, this material was issued only for the purposes of executing the work. The quantity issued was not in excess from what was stipulated under the contract. The material could not be utilized as the work was stopped by the authority. In this view of the matter, Clause 42 of the agreement, in no manner can be pressed and it cannot be held 11 that the Contractor had brought CGI/PGI Sheets in excess, than what was required for the purpose of execution of the work. Clause 13 provides that the Contractor would be entitled to; (i) charges on the cartage only of material actually and bonafidely brought to the site of the work and (ii) rendered surplus as a result of the abandonment or curtailment of the work. Hence, in my considered view, the Arbitrator was right in awarding the claim 1(F). The concession made by Shri S. R. Sharma, Advocate is taken on record and the impugned award is modified to the extent that under this claim the Contractor shall be entitled to only a sum of Rs.25,836/. With regard to the interest, the Arbitrator has awarded simple interest @ 6% per annum. This is from the date of closure of the work till the date of award. For the post award period interest would be in accordance with Section 31(7) of the Act. In State of Manipur & Ors. (supra), the Apex Court was dealing with Clause 7 of the agreement specifically contemplated no payment of interest for a particular period. The same is not the position herein. The decision is therefore clearly distinguishable in the facts of the present case. 12 In the present case Clause 12(A) specifically provided for determination of the fresh rates for such of those items which were in deviation or in excess of the contracted limit. There is no dispute with regard to the extra item or the quantity. The Contractor was entitled to the immediate payment in accordance with the provisions of the contract but, however, the same was not done so. Clause 33 of the Central Conditions provides for as under:- “The Contractor shall not be entitled to any interest in case of non-payment of his bills/claims in any manner.” The Apex Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. {2003(5) SCC 705}, Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission {2003(8) SCC 593} as also in Executive Engineer Dhenkanal Minor Irrigation Division v. N. C. Budharaj {2001(2) SCC 721} has held that the Arbitrator has got no jurisdiction to pass an award which is contrary to the terms of the agreement. In fact in N. C. Budharaj (supra), the Court has specifically held that if the contract specifically barred payment of interest, the Arbitrator would have no jurisdiction to award the same. In the present case, the Arbitrator has awarded interest @ 6% w.e.f. 3.9.1998 up to the date of the award. This part of the award being contrary to the ratio of law laid down by the Apex Court in ONGC would be hit by the provisions of Section 34(2)(iv) and 5(b)(ii) of the Act. 13 The award is modified to the aforesaid extent. However, with regard to post award period, Contractor would be entitled to interest in terms of Section 31 (7) of the Act. Section 31 sub section (7) reads as under:- (7)(a) unless otherwise agreed by the parties, where and insofar 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. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.” The Arbitrator has not awarded any interest for the post award period. The mandate of the Act being that the Contractor shall be entitled to interest @ 18%. The objection petition is silent with regard to the same. The Apex Court in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy and another {2007(2) SCC 720} has held as under:- “After economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the arbitrator at 18% for the pre- 14 arbitration period, for the pendente lite period and future interest be reduced to 9%.” Keeping in view the ratio of law laid down by the Apex Court, in my considered view, the Contractor would be entitled to interest @ 9% from the date of award upto the date of payment. For the aforesaid reasons, the objection petition is partly allowed and the impugned award is modified to the aforesaid extent. ( Sanjay Karol ), Judge. March 18, 2009. (rana)