1 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arbitration case No. 4 of 2003. Reserved on : 14-8-2008. Date of Decision: 12 .09.2008. _______________________________________________________________ H.P. Housing Board. Objector. Versus K.K. Gupta. Respondent. Coram Hon’ble Mr. Justice Surinder Singh, J. Whether approved for reporting1? For the Objector. : Mr. C.N. Singh, Advocate. For the respondent Mr. R.N. Chaudhary, Advocate. ___________________________________________________________ SURINDER SINGH, J. The present objection petition under Section 34 of the Arbitration and Conciliation Act, 1996, ‘Act”, in short the ‘Act’ has been preferred by the H.P. Housing Board (H.P. Govt. Undertaking), Shimla through its Superintending Engineer (Headquarter), Nigam Vihar, Shimla, hereinafter to be called as the “Objector-Board”, against the award dated 30.10.2002 passed by Arbitrator-cum- Superintending Engineer (Arbitration), H.P.P.W.D. Solan. In short, the facts are that an agreement No. 24 of 1995- 96 was entered inter-se the parties to this petition for the construction of, SHC at Baddi C/O 20 Nos. HIG-I Houses in periphery area of Phase- I and II including installation of internal WS & SI. The work was allotted to the respondent-contractor vide letter dated 15.2.1996 at a Whether reporters of the Local papers are allowed to see the judgment? Yes. 2 contract cost of Rs. 41, 84, 658.11 paise. The said work was required to be completed within a period of one year. The time was duly extended and the work was completed on 28.2.1998 within the extended period. The respondent-contractor raised a dispute. The Superintending Engineer, H.P.PWD Solan was appointed as arbitrator by the C.E.O. H.P. Housing Urban Development Authority for adjudication of the dispute between the parties. In total, the respondent contractor raised fourteen claims, the arbitrator only allowed claims No. 7, 8, 11 and 13 as shown hereunder :- Sr.No. Description of claim Amount demanded Amount awarded CLAIMS 1. Amount due on account of providing and placing concrete 1:3:6 in pressed steel door frames Rs.21,369 NilL 2. Amount due on account of supply of sand for filling under the floors (not included in the relevant item of contract) Rs.27423/- Nil 3. Amount due on account of straightening of reinforcement steel bars not included in the relevant contract item Rs.8130/- Nil 4. Payment of difference on account of the correct item of 6 mm thick ceiling plaster paid as smooth finish Rs.6056/- Nil 5. Amount due on account of difference in the cost of MS plate for water storage tanks and pressed steel door frames Rs.92454/- Nil 6. Amount due on account of white cement for Terrazzo in Flooring & Dado Rs.57050/- Nil 7. Amount due on account of additional thickness of mud phuska Rs.10590/- Rs.10590/- 8. Amount due on account of application of correct rate to the item of vertical fins and sub-breakers Rs.15673/- Rs.15673/- 9. Provision of 4 mm plain glass not included in the item of window shutters Rs.40325/- Nil 10. Payment on ac count of the cost of bitumen used at site Rs.44196/- Nil 11. Amount due on ac count of infructuous overheads due to prolongation of contract Rs.3,50,004/- Rs.48818/- 3 time period 12. Amount due on account of denial of turnover Rs.3,10,789/- Nil 13. On account of interest @ 18% per annum @ 12% per annum simple interest on Rs.26263/- for 3 ½ (Three and half years) till date of award. 14. Arbitration cost Rs.25,000/- Nil Total Rs.75081/- + interest as awarded claim No.13. The objector-Board did not raise any counter claim. The learned arbitrator awarded the total amount of rupees 75081/- along with 18% simple interest @ 12% per annum on claim No. 7 and 8 from the retrospective date as indicated against column No.13 above. The Objector-Board assailed the award by filing the objection petition on the grounds, firstly, that the claim No. 7 awarded in favour of the respondent-contractor to the extent of 10590/- was not admissible because the respondent-contractor had laid 4” mud phuska for tile terracing as per the agreement and he was paid according to the rate fixed under the agreement itself, thus this claim could not have been allowed to him by the arbitrator as the contractor did not do extra work nor he was permitted/authorized to perform any extra work on this account. Secondly, the Arbitrator wrongly allowed claim No. 8 to the tune of rupees 15,673/- to the respondent contractor. Since full amount for the work stood paid to the respondent as per item No. 3 of the agreement in the third running bill. Thus he was not entitled for the said claim. Thirdly, the arbitrator had also wrongly allowed claim No.11 to the extent of 48818/- because the contractor did not deploy the requisite number of labour at the site of work and the progress was very slow. He was also served with the notices to speed up the work. When the work was completed by delay of one year, various defects were pointed out and the contractor was asked to remove the same which he finally 4 removed in the month of May, 2001. The petitioner objector-Board was not responsible for the delayed work and the amount under the aforesaid claim was wrongly awarded to the contractor. The petitioner also objected to the interest awarded by the arbitrator as aforesaid. Hence prayed to set-aside the award. The respondent-contractor resisted and contested the objection petition. It is averred that the respondent completed the work during the extended period but the Board was required to release the final bill within 6 months of its submission as per clause 7 of the agreement but it was released only on 22.5.2001, thus it caused big prejudice to the respondent as the submission, preparation and release of the bill was required to be done by the objector Board. It is further averred that the extra work was done by the respondent with respect to laying of phuska because 15 cm additional mud phuska was required to be laid by him for which he is entitled to be paid. Regarding claim No. 8, in reply to that, the respondent submitted that the rates allowed by the arbitrator are as per the H.P.P.W.D. Schedule of rates 1997 as contained in Chapter-8 which ought to have been included in the NIT of the agreement itself by the petitioner as they were aware of the specialized work/special skill at the time of advertising and opening of the tender. In reply to claim No.11, it is stated that the extension of time to complete the work was accorded to the respondent-contractor vide a sanction letter (No. HB-15- Contract case baddi/92-II) dated 15.12.2000 in response to his application which contained reasons of delay. Therefore, he was rightly awarded the amount and further submitted that the rate of interest was correctly and aptly, applied and awarded by the arbitrator against claim 5 no. 13 which was within his competence in the facts and circumstances of the case, therefore the award is based on facts and law which cannot be interfered with. In para 2 (6) of the objection petition, the objector-Board took the plea that the impugned award is against the Public Policy of India, but vide order dated 26.5.2003, it was ruled that there was no foundation of this objection in this petition, therefore, no issue would arise and this Court proceeded to frame the following issues:- 1. Whether the award of the arbitrator in respect of all the claims allowed by the arbitrator dehors the evidence? OP Objector. 2. Relief. I have heard the learned counsel for the parties and have carefully gone through the record. Legally, the award can be set-aside only on the grounds enumerated under Section 34 of the Act or if it is contrary to the substantive provisions of the Act or against the terms of contract which affects the rights of the parties, it would be patently illegal. Keeping this settled proposition in mind, I proceed to examine the matter. Issue No.1. In the instant case, against claim No.7, the respondent contractor claimed Rs.10, 590.00 because the tile surface of the roof was required to be even and true to slopes of 1 in 48 and leak-proof, as per the C.P.P.W.D. Manual vide clause 11 of the contract agreement and contractor was bound to do the additional work specified in the contract 6 for work. According to the contractor, there were many undulations in the building roofs, 100 MM maximum thickness of mud phuska was considered inadequate, therefore, it was conveyed that in view of the slop of 1:48, the average depth of mud phuska would become 15 CM. It would not have been possible to achieve the required slope of 1 :48 with 4” average thickness of mud-phuska, and was duly explained to the J.E & S.D.O. concerned, who appreciated the situation. The work was actually done keeping in view the above requirement and the Amount due on account of this additional depth was computed as under, vide Annexure-P7 filed before the arbitrator :- Extra depth of mud phuska Material cost/cum. : 15 CM Cost at site including loading, carriage, unloading Rs. 450.00 per truck load of 5 CM : 90.00 Extra labour for lifting to roof 4 Nos-w/s labour @ 50: 200/5cum. : 40.00 _______ 130.00 Cost of material for 20 sqm. 130.00 Material/sqm. 6.50 Add 10% contractor project: 0.65. Add 10% contractor OH. 0.65. _______ 7.80. Mud Phuska carried out: 1357.70 sqm. Additional cost: 10590.00 Rs. The contractor was able to achieve average of 4” mud phuska at site as required under item of contract agreement. The perusal of The Measurement Book Annexure-P3 with objection petition and letter dated 4-11-1997 sent by the respondent shows that in order to 7 acquire the requisite slope, he applied extra thickness of mud phuska, on the roof over an area of 1357.70 sqm as per the CPWD Manual and the calculations were made vide Annexure-P7 above which is the foundation of the claim appears reasonable and the learned Arbitrator being an expert on the subject rightly appreciated the above fact that extra-work was done which in fact, was the requirement as per the site conditions for maintaining the slope of roof etc. Thus the findings of the learned Arbitrator require no interference being based on law and facts. Secondly, the learned arbitrator has awarded the amount of rupees 15673/- against claim No.8 of the respondent on account of application of correct rate to the item of vertical fins and sun-breakers which was considered to be specialized job. According to the respondent, this work was incorrectly measured under the head of walls etc. He filed his calculations as per Annexure-8 before the learned arbitrator on the basis of item no. 8.1 (P) of HPSR 1987, instead of item No. 3.1 of the agreement. Whereas the objector Board justified the measurements and rates assessed by them against the proper item. According to them, the contractor never objected to it. As per the affidavits of Executive Engineer and Ajay Kumar, Junior Engineer filed in evidence, the amount stood paid in the third running bill. However, in 10th final bill and Annexure-P3 clause 3 (b), the item of vertical surface has been mentioned and the measurements of the same are recorded as per the M.B (Page-52) as area of work done = 5.5.5.19 sq meters whereas, in Annexure-P2, clause No.3 (b) the general abstract of the schedule of quantity to the agreement, as per the affidavits filed in the 8 evidence, the quantity of work has been calculated and recorded 276.80 sq meters as against 5.5.5.19 sq meters which essentially proves the extra work done by the contractor and this work was paid as an item included in the contract schedule, as vertical surfaces/walls since it involves the special skill job, therefore the learned Arbitrator is justified in awarding the claim to the respondent as a separate item for a particular specialized job work like vertical fins and sun-breakers holding that it ought to have been included in the contract agreement inspite of getting the work done against other items which did not require a special skill therefore, no fault can be found therein, in applying the rates mentioned against no. 8.1 (p) of HPSR 1987 as its rates were not provided in the contract agreement which otherwise should have been included. The special skill work of vertical fins and sun-breakers cannot be held to be similar to vertical surface/wall under item No. 3.1 of the contract agreement. Thirdly, with respect to claim No.11, the arbitrator had awarded the amount of rupees 48818/- on account of infructuous overheads due to prolongation of contract time period to the respondent contractor against his claim of rupees 3, 50,004/-. The respondent-claimant, contested the claim and urged that the time period was got extended due to the failure of the objector-Board to indict its committed contractual inputs, inadequate measures and a timely fashion and the Board was burdened with excessive onside and off-side overheads Annexure-P11 filed before the arbitrator by the respondent is reproduced below :- 9 i)Average progress plant/month: Rs. 3, 48, 721.00 Or say Rs. 3, 50,000.00 ii) Provisions for overhead extension at the rate of 10% of the prime cost:Rs. 3,5000.00 x 100 x 10 120 x100 = 29, 167.00 iii) Provision for overhead expenditure for the contract: 3,50,004.00 iv) Overhead expenditure actually incurred : 7,00,008.00 v) Uncovered difference: 3,50,004.00 The objector Board contested this claim on the ground that the prolongation of the contract time period was not the fault of the Department but it was the failure of the respondent contractor to complete the work within the stipulated period due to non-deployment of sufficient labour at the site of work. According to them, number of notices were issued to the respondent to accelerate the work which turned deaf ears and the hearing as per clause 2 of the agreement was given to the respondent on 6.8.1997 before the Superintending Engineer, H.P. Housing Board and the respondent agreed to complete the work by 31.12.1997. Even thereafter some defects were pointed out which were removed by the respondent very slowly and completely in the month of January, 2000 and accordingly, he applied for extension which was received in the office on 20.11.2000 thus allowed till January 2001 and the final bill of the contractor was paid in May, 2001 which was accepted by him. Clause-5 of the contract agreement Annexure-P2 prescribes the procedure for extension of time for completion of the work and the respondent contractor applied for extension of time on the prescribed 10 proforma. This fact was considered by the arbitrator and he did not agree with the respondent contractor in toto but scrutinized the reasons mentioned in the application for extension of time and found the delay of only 105 days/3.5 months as against 314 days as claimed, attributable on the part of the Executive Engineer in his award and found the respondent entitled for compensation on account of over- head charges due to prolongation of the contract. The arbitrator also held 4% overhead charges as admissible for the entire amount of the respondent and determined the over-head on the tendered amount for stipulated period of twelve months at the rate of 4% which came to rupees 1, 67, 386/- and accordingly, the respondent was found entitled for the amount of rupees 13948/- per month and multiplying it for the period of 3.5 months it came to rupees 48,818/- which was awarded relying upon the judgment of this Court in Dr. Y.S. Parmar University and others –v- Pawan Kumar in OMP (M) No. 29 of 2000 decided on 4.4.2002. The aforesaid calculations made by the arbitrator is quite rational and the objector board failed to convince that the findings of the arbitrator on this score dehors the evidence. Fourthly, the contest has been made by the objector board with respect to the interest awarded by the arbitrator. The arbitrator has awarded simple interest on the amount aforesaid a (Cl. No. 7 &8) at the rate of 12% per annum for 3.5 years till the date of award, for unreasonably with-holding the genuine payment of the respondent which comes to rupees26,263/-. 11 Legally, the arbitrator is entitled to award interest pendent-lite and future interest at the rate not exceeding the current rate of interest which has been defined in clause (b) of Section 2 of the Interest Act. There is no clause in the agreement prohibiting the award of interest. The arbitrator can award interest for all the four stages: namely, i) from the stage of accrual of cause of action of action till the filing of the arbitration proceedings; ii) during the pendency of the proceedings before the arbitrator; iii) future interest arising between the date of award and date of decree; iv) interest arising from the date of decree till realization of the award There is nothing on record to show that the interest awarded by the arbitrator at the rate of 12%, per annum, was contrary to law. Thus while examining and appreciating the objections taken in the objection petition by the objector board, I do not find from the record that the award passed by the learned arbitrator in respect of all the claims allowed by him dehors the evidence or that either the ground enumerated under Section 34 of the Arbitration and Conciliation Act exists or the award is contrary either to the substantive provisions of the Act or against the terms of the Act which affects the rights of the parties. Issue No.1 is accordingly decided against the objector-Board. 12 Relief. For the foregoing reasons, I do not find any substance in the objections filed by the objector Board. Accordingly, the objection petition is dismissed. (Surinder Singh) Judge. September 12, 2008. (bm)