THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE G.CHANDRAIAH C.M.A.NO.2559 OF 2003 JUDGMENT (Per the Hon’ble Sri Justice G.Chandraiah) Heard both the counsel. 2. Aggrieved by the order and decree dated 31.10.2002 passed by the I Additional Senior Civil Judge at Visakhapatnam in O.P.No.43/1996, in rejecting certain claims, which were allowed by the arbitrators in the award dated 14.8.1996, the contractor – M/s Geotech Construction, represented by its managing partner, filed the present appeal. 3. The appellant is M/s Geotech Construction, which is a partnership firm involved in construction activity. The respondent – M/s Dredging Corporation of India Ltd., is the main contractor, which was awarded the contract of construction of bunds with laterite gravel for reclamation and development of land at the south end of Willington island Cochi on 21.4.1992 by the Cochin Port Trust. The respondent – Corporation, awarded part of the said work of construction to the appellant – contractor by letter of intent dated 3.2.1992 and the work was to be completed by 3.5.1992 i.e., within a period of three months. As the work could not be completed within three months, extension was given unconditionally till 30.4.1993. However, the work could be completed by 3.12.1993. Disputes arose between the appellant/contractor – claimant and the respondent – Corporation and as per the agreement of contract dated 21.4.1992, the disputes were referred for arbitration. The respondent – Corporation also raised counter claim. The disputed claims of the contractor and the counter claim are as follows: I. Release of security deposit of Rs.11,92,366/-. II. (i) Release of amount withheld towards labour records. (ii) Delay in payment of interim bills. (iii) Release of Rs.11,632/- withheld towards sales tax and (iv) Release of Bank Guarantee for Rs.4,92,961/- towards sales tax. III. (i) Payments due and claimed against extra filling actually done beyond the contract period at increased cost. (ii) cost of extra fillings done for replacing the liquid silt layers below the side slopes of main bund. (iii) Cost of filling done for the connecting bund (iv) Peripheral bund filling IV. Interest on delayed (withheld or denied) payments V. Compensation towards idling charges of work moving machinery during 16.5.1992 to 15.12.1992. VI. Service charges towards bank guarantee of Rs.4,92,961/- VII. Cost of arbitration Counter claim by the respondent – Corporation of Rs.149.84 lakhs due to prolonged idling of their dredger and the deployment of other dredgers due to delay in completion of bunds by the claimant – contractor. 4. By award dated14.8.1996, the Arbitrators allowed the claims I, II (iii) and (iv) and III (i) (ii) and (iv) and IV and rejected the claims III(iii), V, VI and VII. Counter claim of the respondent – Corporation was rejected. Claiming future interest and for making the award as rule of the court, the contractor filed O.P.No.43/1996. Seeking to set aside the award, the respondent – Corporation filed O.P.No.56/1996. 5. By common judgment and decree dated 31.10.2002, the court below, set aside the claims, which were allowed by the Arbitrators in claims I, II(iii) and (iv) and III(i) (ii) and (iv) and made rest of the award in respect of claims III(iii) IV, V, VI and VII, as rule of the court. The court below granted total interest of Rs.2,96,492/- under claim IV for the delayed, withheld or denied payments to the appellant – contractor, at the rate of 12 per cent per annum from due date to 6.6.1994 i.e., date of reference to arbitration and at the rate of 18 per cent from 6.6.1994 till the date of the award i.e., 14.8.1996, excepting interest on sales tax amount. The court below in the impugned judgment confirmed the total amount of Rs.2,96,492/- granted towards interest and further granted interest on the said amount at the rate of 6 per cent per annum from the date of decree till realization. 6. Thus aggrieved by the order and decree of the court below in O.P.No.43/1996 in setting aside the award in respect of the claims, which were allowed by the Arbitrators, the contractor filed the present appeal. In this appeal, the rival contentions of both the parties pertaining only to the disputes claims, which were allowed by the Arbitrators, are being referred to and the rest of the claims, which are rejected by the Arbitrators, are not being referred to, since the claimant is not aggrieved by the rejection of the said claims and is seeking to make the award of the Arbitrators as rule of the court. 7. The learned counsel appearing for the appellant – contractor contended that the court below did not appreciate the material evidence on record and erroneously set aside the claims allowed by the Arbitrators and the same is liable to be set aside. With regard to the first claim – release of security deposit of Rs.11,92,366/- withheld by the respondent – Corporation, he contended that there was delay in handing over the site, in payment of bills, early onset of monsoon, increase in the quantity of filling and change of alignment of bunds after award of work. He submitted that due to intermittent rains, practically no work could be done during the month of October, 1993 and in spite of further rains off and on, the work as per the requirement, was finally completed by 3.12.1993. Therefore as per clause 33 of the General Description and Special Conditions of Contract, the bank guarantee and security deposit are liable to be refunded by 2.3.1994 itself. He stated that the respondent – Corporation has released the Bank guarantee of Rs.7,83,804/-, which was furnished towards performance guarantee under their letter dated 6.4.1994, but the security deposit, which was collected at the rate of 10 per cent from interim bills 1 to 7, were not released and, therefore, he contended that non-release of security deposit is in violation of the terms and conditions of the contract. For denial of claims II (iii) and (iv), which were granted by the Arbitrators, and set aside by the court below, i.e., release of Rs.11,632/- withheld towards sales tax and bank guarantee for Rs.4,92,961/-, he contended that release of 4.2 per cent withheld towards sales tax from interim bill no.7 dated 10.12.1993 of Rs.11,632/- ought to have released on 25.12.1993, when 75 percent payment against the bill has been released. He stated that necessary clarification in this regard, including the amendment made to Kerala General Sales Tax Rules, pointing out that earth work contracts are not exigible to sales tax, were brought to the notice of the court below, but the same was not considered and that even in case if the appellant is liable to pay, since it being the sub-contractor, there is no liability on its part as the same is spelt out in the agreement. He stated that finally, the respondent – Corporation released Rs.4,92,961/- withheld towards sales tax from claimant’s bill nos.1 to 6 against bank guarantee on 30.11.1996. Hence, the amount withheld from interim bill no.7, requires to be released. With regard to denial of amounts by the court below, which were granted by the Arbitrators in claims III (i) (ii) and (iv) i.e, payment due and claimed against extra fillings actually done beyond the contract period at increased cost and for cost of extra fillings done for replacing the liquid silt layers below the side slopes of main bund and for peripheral bund fillings, the learned counsel submitted that as the contractor executed +25% over the contract value by middle of April, 1993 itself, the contractor is entitled to claim enhanced rates for the quantities of work done beyond the contract period mainly for the following reasons that (a) the work was delayed beyond original contract period and extension was granted up to 30.4.1993 without levy of penalty, (b) the rates of labour and spare parts have gone up and consumables for earth moving machinery have gone up due to high inflation, budgetary influences etc., with reference to the rates prevailing in February, 1992 at the time of negotiating the tender and (c) machinery and workers remained idle for months together, due to prolonged execution of the work. Therefore, he contended that for the quantity done in excess of contractual obligation i.e., 1,02,164.072-85,943.40) M3 at (160.00-140-00)M3 = 7,46,150, a reasonable rate of Rs.160/M3 is to be paid to mitigate the increased cost of labour, machinery, spare parts and consumables etc. He contended that the Arbitrators with technical know-how has awarded the claims sought by the appellant – contractor and the court below, in the impugned judgment, without considering the same and without there being any scientific analysis and without considering the terms and conditions of the contract, denied the genuine claims of the contractor and the same is liable to be set aside and the award of the Arbitrators shall be made as rule of the court. 8. On the other hand, the learned counsel appearing for the respondent – Corporation submitted that the Arbitrators did not consider the material evidence on record while awarding the excess amounts sought for by the claimant - contractor. Relying on the judgment of the Apex court in DANDASI SAHU v. STATE OF ORISSA[1], he contended that the Arbitrator shall mention in the award that he considered all the documents. But in the present award, he did not do so. He submitted that as the award of the Arbitrators is bereft of reasons and without considering the material evidence on record and in ignorance of the terms and conditions of the contract and the rules governing the contract and as there is no evidence to show that the contractor had done in excess of the contractual obligation, the trial court by rightly following the judgment of the Division Bench of this court in STATE BANK OF INDIA vs. RAMDAS AND OTHERS[2], set aside the part of the award of the Arbitrators and the impugned judgment does not warrant any interference and that the appeal may be dismissed. 9. In view of the above rival contentions, the point that arises for our consideration is whether the impugned judgments warrant any interference? 10. In order to consider the above rival contentions, at the cost of repetition, it is once again necessary to note few admitted facts of the case. The appellant – contractor entered into an agreement with the respondent – corporation on 3.2.1992 by means of letter of intent for construction of bund with laterite gravel. The letter of acceptance of tender was confirmed on 7.2.1992 stipulating that the work shall be completed by three months. However, the contract work could be completed by 3.12.1993 and as there were disputes with regard to certain claims, the matter was referred to Arbitrators and they passed award on 14.8.1992, allowing certain claims and rejecting rest of the claims. 11. The first claim which was allowed by the Arbitrators, was release of security deposit of Rs.11,92,366/-. As per the agreement of contract, the work shall be completed within three months from the date of acceptance of tender dated 7.2.1992. But it was completed by 3.12.1993 The grievance of the contractor is that the work could not be completed within the stipulated period, because of delay in payment of bills, early onset of moons, increase in the quantity of filling and change of alignment of bunds after award of work. The contention of the counsel is that when final completion is taken as 3.12.1993, the performance and bank guarantee and security deposit are liable to be refunded by 2.3.1994 as per Clause 33 of the General Description and Special Conditions of contract and that a part of the bank guarantee of Rs.7,83,804/- was already released. On the other hand, the case of the Corporation, while denying the delay on its part in payment of bills and also increase in the quantity of filling and change of alignment of bunds after award of work, is that the extension was granted only upto 30.4.1993 and thereafter there was no extension and hence as per condition no.22 of IV – General Conditions, as the contractor failed to complete the work as per the accepted programme, the Corporation has right to recover the said amount from any of the amounts due to the contractor from the Corporation, including security deposit as debt due and further the time is the essence of the contract and under unavoidable circumstances, the DGM (P) has the jurisdiction to extend time for completion of work. 12. In this regard it is to be noticed that the case of the claimant for delay in completion of work is due to delay in payment of bills, early onset of monsoons, increase in the quantity of filling and change of alignment of bunds after award of work. In order to show that there was no delay on its part, the Corporation sought to rely on Exs.R-44 to R-57 and Excs.C-11, R-21, C-22, C-43 and C-44. And as per these documents, the case of the Corporation is that work was stopped not on account of non-payment of the bills, but only due to the rains. Therefore, even as per the admitted case of the Corporation, the work was stopped because of rains. As per condition no. 22 of IV – General Conditions of Contract, under unavoidable circumstances, the DGM (P), has the jurisdiction to extend time for completion of work. In the present case the time was extended up to 30.04.1993. The case of the claimant, apart from other grounds, is that there were unprecedented rains till the end of 1992 and that the work could be resumed only during January, 1993 and again due to heavy monsoon, all the work of the bunds, had to be suspended from the end of May, 1993 to the middle of September, 1993 and that due to intermittent rains, practically no work could be done during the month of October, 1993 and it could be completed by 3.12.1993. It is to be noticed that admittedly the time for completion was extended up to 30.4.1993 and thereafter the admitted case of the Corporation is that the work was delayed due to early on set of monsoons. Therefore, in our considered view, when there are rains, which hampered the claimant – contractor from completing the work, the delay cannot be taken to deny the release of security deposit. 13. The other ground raised by the claimant is with regard to increase in quantity of work. Though the Corporation denied that there was increase in the quantity of filling of work, no documents were placed in support of this contention. As already noted above, the admitted case of both the parties for delay in completion of work, is due to early on set of monsoons and the arbitrators with technical know-how considering the method of measurement have found that quantity of filling in the bund also increased beyond the deviation limit of 25 per cent and that the work has been carried out satisfactorily. The court below has not considered this factor while denying the release of the security deposit and only held that the measurement book has not been referred to. Non-referring to of measurement can be treated as technical defect, but it cannot solely be taken to hold that there is no deviation of work. With regard to deviation, the evidence will be considered in the course of judgment, while considering the other claims. 14. As per the submission of the counsel for the claimant, the Corporation had already released the Bank Guarantee of Rs.7,83,804/- which was furnished towards performance guarantee under their letter dated 6.4.1994 vide Ex.C-19 and the security deposit amount of Rs.11,92,336/- which was collected at the rate of 10% from interim bills 1 to 7 was not released. 15. In view of the above circumstances, we are of the view that the finding of the court below for refusing to release the security deposit cannot be sustained and the same is set aside and we hold that claimant is entitled for release of the security deposit. 16. The next aspect is with regard to release of bank guarantee for Rs.4,92,961/- and Rs.11,632/- towards sales tax. The case of the appellant – claimant is that it is the sub-contractor and only the principal contractor is liable to pay sales tax and even otherwise, earth work contracts are not exigible to sales tax. It is also stated that the respondent – Corporation has released Rs.4,92,961/- withheld towards sales tax from claimant’s bill nos.1 to 6 against bank guarantee on 30.11.1993 and the amount withheld from interim bill no.7 is to be released. So the present dispute is only with regard to an amount of Rs.11,632/- withheld towards sales tax. On the other hand, the contention of the respondent – corporation is that sales tax is to be paid for earth work contract also and further the Arbitrators cannot take on themselves the function to be exercised by the authorities of the sales tax to say whether the work is purely of earth work and is exempt from sales tax. 17. As per condition 15 of II General Description and Special Conditions of Contract, the contractor shall be responsible for payment of sales tax. But in the present case the dispute is whether the earth work is exigible for tax or not. In this regard it is to be noticed that even as per the case of the respondents whether earth work is exigible or not, is the duty of the authorities concerned under the Kerala General Sales Tax Rules governing both the parties. In these circumstances, the approach of the court below in recording a finding that the earth work is exigible, cannot be sustained and is excess exercise of jurisdiction. In our considered view, the Arbitrators in order to resolve the issue have rightly ordered release of Rs.11,632/- and also the bank guarantee of Rs.4,92,961/- by the respondents to the claimant, subject to the condition of furnishing an indemnity bond, indemnifying the respondents towards any claim of the State Government at a future date towards payment of sales tax for this work and the same does not warrant any interference. 18. The other claim allowed by the arbitrator is claim no.III (i), (ii) (iv) i.e., payments due and claimed against extra fillings actually done beyond the contract period at increased cost; cost of extra filling done for replacing the liquid silt layers below the side slopes of main bund; and peripheral bund filling. Under these heads, the Arbitrators awarded amounts of Rs.3,69,831/-, Rs.12,93,509/- and Rs.90,337.50 respectively. 19. The claim of the contractor - firm is that it has done extra filling beyond the contract period at increased cost and in fact the earthen bund etc., to be carried out by the claimants without seeking any alternation in rates works out to 85,943.42 cum, but it has carried out work to an extent of 1,02,164.072 cum. and hence as there was increase in rates, they are entitled for increased rate at Rs.160/- M3 and however, the Arbitrators awarded an amount of Rs.136.80 per cum. It is also stated that they have made extra fillings for replacing the liquid silt layers below the side slops of main bund, than what is agreed in the contract and further they made peripheral bund. On the other hand, the respondent – Corporation denied that the appellant – contractor carried out extra work, and relying on Clause 13 of II- General Description and Special Conditions of Contract, contended that “The rates quoted/accepted by the contractor shall remain firm throughout the period of contract including extended period, if any.” 20. In this regard it is to be noticed that as per the contract agreement, the total quantity of providing earthen bund to be carried out by the claimant without seeking any alteration of rates is 85,943.42 cum. But as per the joint measurements, the quantity of earthen work carried out was found at 102164.072 cum. Therefore, the claimant has claimed increased rate of Rs.160/- per cum for the excess done, which comes to 16,220 cum. They have intimated this fact to the respondent by way of fax letters dated 26.3.1993 and 24.7.1993 and even earlier also, they sought for enhancement of rate at Rs.140/- per cum vide letter dated 6.8.1992, due to delay in handing over the site and for unprecedented rains. Further, by letter dated 24.11.1992, they sought for higher rate because of increase in the price of diesel by 16 per cent. 21. It is to be noticed that the Arbitrators noted that the claimant has done work in excess of the contractual obligation of 16,220.65 cum. This figure was arrived at by way of joint measurements, which is 25 per cent excess beyond the contractual obligation. The aspect of joint measurements was not specifically denied by the respondent – Corporation and in the counter they only stated that the Arbitrators have clearly erred in awarding escalated rate, when it is not provided in the contract and that the Arbitrators erred in taking the average depths of the level without considering the measurement book, wherein the measurements are made with regard to the extra filling. As noted above, in the counter, the joint measurements are not denied and in the counter it is only stated that extra filling is mentioned in the measurement book. Their further case is that as per the clause 13, excess rate cannot be granted. 22. The reasons for seeking enhanced rate are due to increase in diesel price and the cost of labour, material etc. As already noted above, one of the main factors for delay, which is admitted by both the parties, is rain. As noted above, by fax letters the claimants sought for enhancement of the rates for the excess work and the Corporation replied by fax dated 8.4.1993 that the matter concerning the cost of work beyond deviation limit, can be settled through arbitration, after completion of work and certification of final quantities. The Arbitrators found that the work was completed satisfactorily. Therefore, in view of the fax reply dated 8.4.1993 and as there is 25 per cent extra work than the contractual obligation, we are of the considered view that the corporation is estopped from invoking clause 13 and the court below failed to consider this material evidence available on record, before reversing the claim allowed by the Arbitrators. This is a total perverse appreciation and cannot be sustained. The amount of Rs.3,69,831/- awarded by the Arbitrators for the excess work of 16,220-65 cum. done by the claimants at the rate of Rs.136-80 i.e., an increase of 20 percent of the claimants quoted rate of Rs.114/- per cum, for the reasons stated therein, cannot be interfered with. 23. The next claim no.III(ii) is with regard to claim for cost of extra fillings done for replacing the liquid silt layers below the side slopes of the main bund. The case of the contractor is that as per the layout drawings, the initial soundings/levels along with central line of the proposed bunds only had been taken and recorded. All initial soundings / levels show the top level of silt only. Again the depth of the silt varies from 0.20 to 1.50 meters. Hence, average initial bed levels at the toe of the bunds, which are necessary for ascertaining the bottom profile of the bunds, can only be derived/assessed from the above mentioned jointly accepted initial sounds / levels along with centre line. Hence, it is clear that the average depth of silt is: 0.20 + 150/2 = 0.85 meters. Therefore, the average bed level of toe, on either side of the bund has to be 0.85 meters below the sounds / levels recorded along centre line on layout drawings. As per the details of joint measurements admitted against interim bill no. 5 dated 1.10.1993 and bill no.6 dated 9.11.1993, duly corrected, the fillings required for replacing an average depth of 0.85 meters of liquid silt layers below the side slopes of main bund comes to 9,455.476M3. Hence, the