IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE J.B.KOSHY & THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH WEDNESDAY, THE 20TH AUGUST 2008 / 29TH SRAVANA 1930 Arb.A.No. 24 of 2006() ---------------------- OP(ARB).62/1997 of PRL.SUB COURT,TRIVANDRUM .................... APPELLANTS/RESPONDENTS IN OP (A) 62/1997: --------------------------------------------------------- 1. THE KERALA STATE HOUSING BOARD, REPRESENTED BY ITS SECRETARY, KSHB, THIRUVANANTHAPURAM. 2. THE CHIEF ENGINEER, KERALA STATE HOUSING BOARD, THIRUVANANTHAPURAM. 3. THE EXECUTIVE ENGINEER, DIVISION NO.4, (TO WHOM THE WORK HAS BEEN TRANSFERRED FROM DIVISION NO.III) OF K.S.H.B., THIRUVANANTHAPURAM. BY ADV. SRI.P.C.IYPE, SC, KSHB SRI.A.JAYASANKAR, SC KSHB, TVM SRI.B.GOPAKUMAR RESPONDENT/PETITIONER IN OP(A) 62/1997: ---------------------------------------- P.V.JAYARAJ, GOVT. CONTRACTOR, ASHA MANDIRAM, PAZHAKUTTY, NEDUMANGAD P.O., NOW RESIDING AT SREEVISWAM, THIRUMALA P.O., THIRUVANANTHAPURAM. BY ADV. SRI.BIJU BALAKRISHNAN,CAVEATOR. THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 20/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: J.B.KOSHY & THOMAS P. JOSEPH, JJ. ------------------------------- ARB.A.NO.24 OF 2006 () ----------------------------------- Dated this the 20th day of August, 2008 J U D G M E N T KOSHY,J. Appellant, Kerala State Housing Board entrusted a construction work to the respondent contractor and contending that work was not completed within the prescribed time, the contract was terminated on 16.10.1984. Contractor approached the Court for appointing an arbitrator. Admittedly, there was an arbitration clause in the contract and Sub court referred the matter of dispute to the Arbitrator (C.E. (Arb)), against which, appellant filed an appeal before this Court. This Court appointed a retired District Judge as the arbitrator as agreed by the parties. Twelve issues were raised before the arbitrator. Those issues are as follows: 1. Was there any delay in handing over site, delay in supplying departmental materials such as cement, shutters, steel and other materials so ARB.A.24/06 2 as to complete the work within the agreement period? 2. Is there any delay in sanctioning the mobilisation advance to the plaintiff and illegalities shown to the plaintiff in paying the said amount and what is the loss caused? 3. Whether there was delay in development works in the work area which contributed for the non completion of work? 4. Whether there was change of design and delay in finalisation of the same? 5. Was there any change of soil with respect to escalation of foundation of all buildings and the additional expenditure losses and damages caused to the plaintiff as a result of the changed costly design as detailed para 9 of the plaint? 6. Was there any prompt payment as per the provisions of MDSS and the provisions of the agreement and the losses on account of this? 7. Whether the plaintiff is entitled to get increased additional rates and amounts for the blocked up capital after a period of contract due to price escalation and other amounts stated in para 16, 17, 18 and 19 of the plaint? 8. Whether the plaintiff is entitled to get 36% interest from the date of claim till the date of recovery including security and retention? 9. Is the plaintiff entitled to recover the prevented gains final bill etc. as stated in the plaint? 10. Whether the plaintiff is entitled to get losses and damages due to the negligence of the ARB.A.24/06 3 defendants and their agents? 11. Whether 2nd termination order dated 16.10.1984 passed by the 2nd defendant is legal and binding against the plaintiff and the resultant losses and damages ? 12. Any further claims after perusal of the records in the sole possession of the defendants may be allowed to be adjudicated? Both sides participated in the arbitral proceedings and adduced evidence. The arbitrator passed the award, which is as follows: In the result the following award is passed: (1) Issues 1, 3 and 4 .. Rs.2,00,000/- (2) Issue 2. .. Rs.50,000/- (3) Issue 5. .. Rs.50,000/- (4) Issue 6. .. Nil. (5) Issues 7 and 8 .. Rs.3,96,604/- (including 25% revised rates amounting to Rs.2,68,904/- plus for the work not included in the final bill amounting to Rs.1,27,700/-). (6) Issues 9 and 10. i. Security amount .. Rs.36,270/- ARB.A.24/06 4 ii. Retention amount .. Rs.36,270/- iii.Refund of fine .. Rs.2,500/- (7) Issues 11 and 12 .. Rs.50,000/- Interest was awarded at the rate of 18% from the date of action till the recovery. Petition to set aside the arbitration award as well as the claim for passing the decree in terms of the award were considered by the civil court in the impugned order. The court set aside the award with regard to issues 1, 2, 3, 4 and 5 and issues 11 and 12. Under issue No.6, no amount was ordered. With regard to issues 7, 8, 9 and 10 award was upheld. With regard to interest, court found that claim for interest was 36%. But awarded interest only at 18% because in the final bill for the amount due from the contractor to the appellant, appellant also charged interest at 18%. With regard to the portion of the award that was set aside, a new arbitrator was appointed in a separate proceedings and we are not considering the same in this appeal. 2. Question is whether the award in respect of issues 7, ARB.A.24/06 5 8, 9 and 10 are liable to be set aside ? The learned counsel for the appellant argued that since the issues regarding 1, 2, 3, 4, 5, 11 and 12 are set aside as the arbitrator travelled beyond the terms of contract, issues 7, 8, 9 and 10 are also liable to be set aside for the same reason. We are unable to accept the above contention. Those issues which are considered by the arbitrator against the contractual provisions are set aside. But with regard to issues 7, 8, 9 and 10, the court correctly found that they are arising out of the contract, and with regard to those issues, it cannot be stated that arbitrator committed any legal misconduct and arbitrator gave very good reasoning also. The civil court also considered the objections with regard to those issues and found that the arbitrator was correct in awarding the same. With regard to issue No.6, no relief was granted by the arbitrator. With regard to issues 7 and 8, the entire claim was not awarded. The arbitrator negatived part of the claim due to lack of evidence and sufficient grounds. It is also noted that the contract was entered into on 18.6.1981 and date of completion was agreed as 17.12.1981. By the time, work was being carried out, after supply of materials revised rates were published by P.W.D in ARB.A.24/06 6 1982 and only 25% increase was given by the arbitrator of the enhanced rate in 1982. It is submitted that part of the work was carried out before the revised rates in 1982 came into force. But we note that only 25% of the enhanced rate is granted by the arbitrator, and therefore, it cannot be stated that a great injustice was caused. With regard to issues 9 and 10, after finding that claimant cannot be made solely responsible for the delay, ordered for security amount, retention amount and also reduced the fine. We are of the view that on the basis of the finding that there was delay in supply of materials like steel, cement, etc. on the part of the appellant, only the security retention amount or part of the fine amount was directed to be refunded. The civil court has considered each and every issues separately and found that no grounds are made out to set aside the arbitration. It is submitted that the security amount was deposited and that might have earned interest and if further interest has to be paid, it will amounts to payment of double interest. But the arbitrator only ordered the actual amount which was deposited as security amount and interest be paid only for that amount and there is no order that served out interest on ARB.A.24/06 7 interest. It is finally contended that the counter claims were not considered by the arbitrator even though a specific demand was made. Counter claim was made for Rs.1,86,954/-. It was not considered by the arbitrator or the court. Arbitrator considered the matter at paragraph 17 which is as follows: “17. Counter-claims have been urged by the respondents alleging that the contractor is liable to compensation the Board for the losses and damages towards more than 10 years interest at the rate of 18% for the liability outstanding against him as per the final bill pending in these series and interest on investment which the Board could have been avoided. Had the contractor finished the work within the original time of completion. Besides recovery of losses suffered due to the non- construction of 2 buildings covered by the agreement is also claimed. No such claim was preferred in the counter statement, nor is there proof to establish the same. To the very lengthy replication the replies filed as an argument note in which for the first time such a counter-claim is raised. It is not warranted by the evidence and circumstances in this case and hence disallowed.” The Sub court also considered the above at paragraph 42 which is as follows: ARB.A.24/06 8 “42. The Arbitrator found that the defendants did not raise a counter claim. But they filed written statement. It is seen that the respondents filed objection to the rejection of amount to the respondents. They raised a counter claim of Rs.1,86,954/-. But it is seen that in the written statement, there was no counter claim. In my view, this court cannot decree and counter claim in a reference like this when the Arbitrator decided to negative the same.” It is contented that in the original written statement, it was stated that huge loss was incurred (an amount of Rs.10 lakhs) due to the negligence of the contractor for completing the finishing work. But the specific amount as claimed was mentioned in the written statement. Apart from the above, how the delay occurred etc. were considered by the arbitrator while discussing issue No.10 as well as the general discussions. Sub court also considered the matter. With regard to interest, it was considered by the court. The respondent has sold his property to clear the liability of the bank, and, on the basis of that, 36% interest was claimed before the Sub court also. But that was also rejected because 18% interest only was charged by the appellant. Therefore, ARB.A.24/06 9 respondents claim was also rightly rejected by the Sub court but for the amount due, 18% interest was ordered. No grounds are made out to set aside the issues 7, 8, 9 and 10. Considering the totality of the circumstances, we see no ground to interfere in the impugned judgment, and hence, we dismiss the appeal and parties have to bear their costs. J.B.KOSHY, JUDGE THOMAS P. JOSEPH, JUDGE prp J.B.KOSHY & K.P.BALACHANDRAN, JJ. -------------------------------------------------------- M.F.A.NO. OF 2006 () --------------------------------------------------------- J U D G M E N T --------------------------------------------------------- 4th August, 2008