... 1 ... IN THE HIGH COURT OF BOMBAY AT GOA Appeal Under Arbitration Act No.17 of 1996 State of Goa, Rep. By Executive Engineer, works Division VIII, T.I.P., Irrigation department, Sarvana, Bicholim-Goa. ... Appellant. Verses M/s Rani Constructions Pvt. Ltd., Khadpabandh, Ponda-Goa. ... Respondent. Mr. S. R. Rivonkar, Government Advocate for the appellant. Shri S. G. Dessai, Senior Advocate with Ms. Samiha Rodrigues Advocate for the respondent. CORAM: S.A. BOBDE & R.C. CHAVAN, JJ. Dated: 1st July, 2008 JUDGMENT : (Per R.C. Chavan, J.) This State takes exception to the judgment of Learned Civil Judge Senior Division, Bicholim in Civil Misc. Application No.101/94, whereby the ... 2 ... Ld. Judge rejected objections raised by the appellants to an award made on 17.5.94 and proceeded to make the award rule of the Court. 2. The appellant had issued notice inviting tenders for the work of construction of Left Bank Main Canal of Tillari Irrigation Project from Ch. 0.000 to 4.012 kms. in Bicholim Taluka. The respondent's tender was accepted by a work order dated 23.12.1987 for a value of Rs.1,22,06,757/-. The respondent was to commence work within 15 days. An agreement was signed between the parties on 23.12.1987 which contained an arbitration clause. A Schedule of the work to be carried out had been tendered by the respondent on 8.2.1988. According to it the earth work was to commence from January, 88 and the work of lining, including sleepers, was to commence from January, 1989. The work was to be concluded by January, 1990. However, in between, the parties exchanged notices on 6.3.1991 and the appellant terminated the contract stopping the work being executed by the respondent contractor. 3. On 9.4.1991, by a notice, the respondent claimed from the appellant a sum of Rs.68,73,993/- towards loss caused to them, to be paid within ... 3 ... 30 days of the notice failing which it was indicated that arbitration clause would be invoked. Since the appellant rejected the claim of the respondent, on 10.1.1992 the respondent invoked arbitration clause requesting the Chief Engineer of the appellant to appoint an Arbitrator. Arbitrator appointed earlier resigned on 13.9.92, whereafter Advocate Daniel Rodrigues was appointed arbitrator on 20.11.92 by the appellant's Chief Engineer. Respondent filed a Claim Statement before the Arbitrator claiming a sum of Rs.63,00,000/- towards extra expenditure, Rs.6,62,590/- towards revision of rates for the work done after expiry of the original contract, Rs.12,43,951/- on account of overheads and profits, Rs.10,00,000/- for illegal termination of contract, Rs.6,03,967.20 towards final bill and release of security deposit with interest at the rate of 18% per annum and pendente-lite and future interest at the rate of 21.75%, with cost of Arbitration Rs.50,000/-. 4. The appellant also filed a counter statement and made a counter claim of Rs.31,61,675/-. 5. With the help of the parties the Arbitrator identified as many as 18 ... 4 ... issues and after considering the material produced before him made an award. A summary of the award made by the Arbitrator is as under: Sr. No. In favour of Claimants Amount Claimed Amount Awarded 1. Extra cost of excavation due to restrictions imposed on the claimants Rs.63,00,000.00 Rs.23,55,613.00 2. Revision of rates Rs. 6,62,590.00 Disallowed 3. Loss of overheads and profit Rs.12,43,951.00 Rs.11,32,671.00 4. Damage on account of loss of reputation due to illegal termination of contract. Rs.10,00,000.00 Rejected 5. Final Bill Rs.6,03,967.20 Rs.3,31,800.0 6. Interest passed, pendente-lite from date of reference to date of award and future interest from the date of award to the date of decree or payment whichever is earlier. At 18% and at 21.75% 18% p.a. On the awarded sum against claim no.1, 3 & 5. 7. Cost of Arbitration Rs.50,000.00 Rs.5,000/- In favour of Respondents. 1. Counter claims of respondent Rs.31,61,675/- Rs.Nil 2. Income tax As per I.T. Rules. As per I.T. Rules. 3. Royalty - As per actuals. The Arbitrator also granted interest at the rate of 18% per annum. ... 5 ... 6. This award was challenged by the appellant by raising objections before the Civil Judge Senior Division, Bicholim. It was alleged that the Arbitrator accepted whatever was said by the claimant. Though he had framed issues, he did not render findings on each of these issues. The approach of the Arbitrator was to favour the claimant. The award was unjust and therefore was non-est in view of provisions of Section 30 of Arbitration Act, 1940 and was liable to be set aside on the ground of misconduct committed by the Arbitrator. 7. The Ld. Civil Judge Senior Divisions considered the reply filed on behalf of the claimants whereby the claimants had contended that an award could be set aside only on the grounds enumerated under Section 30 of Arbitration Act 1940, and since the grounds enumerated by the appellant did not fall within those enumerated in Section 30, they prayed for dismissal of the objections raised. After hearing the parties, the Learned Civil Judge, Senior Division held that the objections to the award could be considered only under Sections 15, 30 and 33 and since the grounds made out did not fall within the scope limited by these provisions , the objections were liable to be rejected. ... 6 ... 8. Aggrieved thereby the appellant is before us. We have heard the Ld. Government Advocate Shri S.R.Rivonkar for the appellant, and did not consider it necessary to hear Advocate Shri S. G. Dessai, Senior Counsel for the respondent. According to Advocate Rivonkar for the appellant the award was liable to be set aside on the ground of legal misconduct committed by the Arbitrator in not considering the material tendered on behalf of the appellant. For this purpose he placed reliance on a judgment of Supreme Court in K.P. Poulose V/s State of Kerala reported in (1975 Supreme Court 1259). It is not necessary to go through the facts of the said case. The Ld. Counsel for the appellant relies on the following observations of the Supreme Court: “It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision.” (emphasis supplied) The Ld. Counsel submitted that the Arbitrator has committed legal misconduct by arriving at a decision by ignoring very material documents which threw abundant light on the controversy to help a just and fair decision. ... 7 ... 9. The Ld. Counsel for appellants submitted that the Arbitrator has wrongly held that appellant had not supplied designs to the respondent, justifying the claim made by the respondent. This aspect has been dealt with the Arbitrator in page 13 of his award. The claimant had alleged that the appellant had not provided working drawings in respect of concrete sleepers, till one year after signing of the agreement. The appellant argued that the drawings appended to the tender document were construction drawings. The Arbitrator found that the drawings for concrete sleepers were not appended to the tender. He also found that whatever drawings were appended to tender did not bear the signature of the Engineer incharge or any other approving authority, though they were signed by both the parties at the time of entering into agreement. 10. In this connection the Ld. Counsel for the appellant submitted that in view of time table of the work supplied by the contractor himself, the work of laying sleepers was to commence in January, 89. He submitted that by letter dated 25.2.1989 the Executive Engineer had pointed out to the contractor that the drawings relevant for the work awarded had been given to the contractor and the drawings of the sleepers formed part of the agreement itself. This seems ... 8 ... to be after the contractor made a request by his letter dated 7.11.88 that he had not received approval for the drawings for sleepers. 11. It is not the case of the appellant that drawings for sleepers had been supplied as claimed by them. On the other hand the appellant seeks refuge in the time table tendered by the Contractor, claiming that drawings were not needed till January, 89, since work of laying sleepers was to begin thereafter. Appellant also fell back on the drawings which had been supplied at the time of entering into an agreement. The Arbitrator has observed that the drawings duly signed by the Engineer incharge had not been provided. This grievance of the Contractor was accepted by the Arbitrator because appellant could not show that the drawings duly signed by the Engineer incharge had indeed been provided. 12. While considering the question of misconduct of an Arbitrator under Section 30 of the Arbitration Act, 1940, it would not be permissible for us to go into correctness of the award made by the Arbitrator, or the conclusions drawn by him. For proving misconduct it would have to be shown by the appellant that the Arbitrator did not take into consideration material documents as held in the ... 9 ... case of Poulose, referred to above. Here it appears that the Arbitrator had duly considered the material placed before him. 13. The next grievance is about not handing over the entire site because of work regarding some CDs. A 'CD' is a sort of cross drainage built over or below canals, either for people to pass or for water courses to be conveyed. There is no dispute that the work of building CDs had been given to another contractor with whom the claimant was supposed to cooperate. In the letter dated 25.2.89 on which the Ld. Counsel for the appellant placed reliance, it has been mentioned that the entire site had been handed over to the Contractor immediately after issue of work order and that as per undertaking, the contractor was to cooperate with the agencies engaged in the execution of CD work and also to make independent approaches to canal site. There can be no doubt that the Contractor could not have avoided execution of work on account of CDs not being ready to enable him to approach the canal site. He was expected to have his own independent approaches. He was also expected to cooperate with the agencies engaged in execution of CD work. It however does not follow that the work of creating CDs had not caused any hindrance in the execution of canal ... 10 ... work allotted to the respondent contractor. Even this aspect has been duly considered by the Arbitrator on page 19 of his award. Whether the CD work had created a partial hindrance or a total hindrance is a matter of degree which had been considered by the Arbitrator. But it cannot be said that the Arbitrator had not taken into consideration this aspect of the matter, in order to contend that the Arbitrator misconducted himself. In fact, by letter dated 2.3.1990, the appellant had admitted that some CD work had been completed and the sites were available to the contractor for the execution of the work, while also stating that there was likely to be delay on account of land acquisition which would be a time consuming process. After so saying by letter dated 2.3.90, it is strange that the appellant wants to contend that the Arbitrator did not consider all aspects of the ground of delay due to not handing over the entire site. 14. It is not necessary to independently consider the question of legality of termination of contract since it depended on the above two grounds, which justified delay. 15. The Learned Government Advocate for the appellant submitted that ... 11 ... the Arbitrator had made an award in excess of the amount claimed. He submitted that a sum of Rs.11,32,671/- had been awarded towards item no.3 as loss of overheads and profits against claim of Rs.7,75,051.00 only made in the notice dated 9.4.1991. We are afraid that the Ld. Government Advocate is not correct in contending that only Rs.7,75,051.00 had been claimed in the said notice towards item no.3. Item no.3 in the award is titled as under: “Loss of overheads/profit.” This corresponds to item nos.3 and 4 in the Statement of Claims made by notice dated 9.4.1991. These two items in the annexure to the notice dated 9.4.91 reads as under: “Item No.3: Loss of over heads owing to fall in product on account of Department and restricted working conditions caused : Rs.7,75,051.00 Item No.4: Loss of profit due to fall in production on account of Department and restricted working conditions caused Rs.5,16,701.00” 16. It may thus be seen that the claim of overheads and profits is ... 12 ... Rs.12,91,752/- and the amount awarded is Rs.11,32,671/- only. It cannot be therefore said that the Arbitrator had misconducted by himself by awarding amounts in excess of those claimed. 17. It was lastly submitted that the Arbitrator could not have awarded interest at 18% per annum since the work allotted to the respondent/claimant pertained to an irrigation project executed from public funds and was not a commercial project. If such an arguments were to be accepted the State would be immune from paying interest on most of the works executed by the contractors for the State, since most of the projects are not profit making commercial ventures of the Government. This contention has to be rejected, since the object for which the work was undertaken is totally irrelevant for determining the nature of transaction. As far as the contractor is concerned it was purely commercial transaction of executing a work in response to a contract executed, for which he has to borrow funds from the market at such rates at which the funds may be available. 18. In this view of the matter we find that the Ld. Civil Judge Senior ... 13 ... Division rightly rejected the objections raised by the appellant. The order of the Ld. Civil Judge does not call for any interference by this Court. The appeal is therefore dismissed. S.A. BOBDE, J. R.C. CHAVAN, J. cg/-