1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINRY ORIGINAL CIVIL JURISDICTION APPEAL NO. 250 OF 2005 IN ARB.PETITION NO. 575 OF 2004 J.K. Transport Corporation ..... Appellant Vs. [Orig. respondents.] Union of India ..... Respondents. [Orig. petitioners.] Mr. S.C.Gupte alongwith Mahendra Badhani i/by Mr. Sudheer Phadke for the Appellants. Mr. Sureshkumar for the Respondents. CORAM : S.B.MHASE & A.A. SAYED, JJ. DATE : JULY 18, 2009. P.C. 1. Heard. 2. By this appeal, the appellants are challenging the judgment and order passed by the learned Single Judge of this Court in Arbitration Petition No 575 of 2004, dated 17th January, 2005. 3. We need not go into the dispute between the parties, even though there is a reference by this Court to decide all the disputes between the parties. It appears that before the learned Single Judge of this Court, the claim in respect of Claim No. 3 in Arbitration Award was agitated and which 2 has been considered by the learned Single Judge of this Court. The said claim refers to the increase in the price of diesel. The contract alleged to have been performed by the Appellant was for transportation and for transportation diesel is required. It appears that after the necessary documents were signed, the Work Order was issued, however, prior to the commencement of the transportation work, the price of the diesel was increased. It is to be noted that the actual work of transportation started on 28.10.1999 and the date of hike in the prices of diesel is 6.10.1999. The rate of diesel per litre prior to 6.10.1999 was Rs. 12.80 ps. and after the said date it became 17.1 ps. per litre and therefore, there was hike in price of Rs. 4.21 ps. In view of this hike in price, the appellant-contractor made representation to the respondents that the price of diesel has increased and the same may be offered to him. There appears to be the correspondence with the subordinate officers to the superior officers in that regard. However, there is no concluded contract between the appellant and the respondents and no Superior Authority who is competent to consider the grievance of the Appellant has passed any order in favour of the Appellant- Contractor. Therefore, the fact remains that the grievance of the appellant was only at the negotiating stage and meanwhile the contract was performed and completed by the appellant and thereafter the dispute has been raised before the arbitrator and both the parties have made their claims and 3 counterclaim before the arbitrator and the award has been passed. 4. In the claim, the appellant had made claim of Rs. 61,66,830/-. As against that the arbitrator has awarded Rs. 23,80,948/-. It appears that the appellant was satisfied with this award, however, the Union of India being aggrieved by this award, filed Arbitration Petition No. 575 of 2004 in this Court. 5. After having considered all the aspects of the matter, the learned Single Judge of this Court has found that the clause 22 of the agreement between the parties is relevant. The said clause No. 22 reads thus :- "22. Rates :- Tenderer should note that rates quoted shall embrace all operations necessary for the satisfactory completion of the work and shall include all charges for handling, transport, lead, lift, labour, housing, sanitation, water supply, materials, fuel, tools and plants, electric power, workshop facilities, machinery, security, lighting etc. and any other expenses of very kind. 6. After having perused this clause, the learned Single Judge found that there is no concluded contract between the appellants and respondents in respect of the increase in the price of the diesel. The learned Single Judge has examined as to whether in view of the ingredients in the said clause the 4 claim of the appellants can be considered. After having gone through the said clause, the Court found that the increase in the fuel cannot be considered in clause No. 22, though the arbitrator had considered the same and passed the award. In the award it is nowhere stated by the arbitrator that he has granted this amount of compensation relying upon such clause of the concluded contract between the parties. The question of sudden rise in the price has been considered by the arbitrator and the arbitrator has after having considered the correspondence which was made by the subordinate officers has granted amount of Rs. 23,80,948/- 7. What is to be noted is that while granting this amount, no reference to the terms of the contract was made by the arbitrator and moreover when there is no term in the contract that if there is price hike which was adverse to the contractor, the contractor is entitled to claim the said amount. However by granting such a compensation in favour of the appellant the arbitrator has brought into existence a term, which was not in existence between the parties. Thus, the arbitrator has granted compensation by bringing into existence clause which was not in existence in the contract between the parties. 5 8. It is important to be noted is that it is not the case of the appellant- contractor that he has suffered the outright loss in the performance of the contract and has not earned a single pai and, therefore, the performance of the contract resulted in hardship. What we find is that it is the case of loss in profit and, therefore, this was not even the case of the contractor- appellant. He is only interested in recovering Rs.4/- per litre towards the hike in the price of diesel, which was one of the issue which is assumed to have taken into consideration by the contractor when he submitted the tender. Therefore not only the proposed rise but also the sudden rise in the prices has been considered by the contractor and accordingly the estimates have been submitted, when the tender was submitted. Unless there is a specific clause in the contract permitting the recovery of such amount towards sudden hike in the price, it cannot be said that the arbitrator acted within the limit. If the appellant-contractor was adversely affected by hike in the price of diesel, in that circumstance, he should not have commenced the work unless the issue has been resolved between the parties. In fact, he was expected to get the issue resolved or settled before commencement of the contract work. 9. The learned Counsel for the appellant has relied upon the decision of the Apex Court in case of STEEL AUTHORITY OF INDIA LTD. VS. 6 J.C.BUDHARAJA, GOVERNMENT AND MINING CONTRACTOR, reported in (1999) 8 SCC 122 and in case of SHYAMA CHARAN AGRAWALA & SONS VS. UNION OF INDIA reported in (2002) 6 SCC 201. These rulings do not support the claim of the appellants, on the contrary they support the view taken by the learned Single Judge of this Court and thus the rulings are not in any way helpful to the appellant. The third authority which has been relied upon by the learned Counsel for the appellant is in case of TARAPORE AND COMPANY VS. COCHIN SHIPYARD LTD. COCHIN AND ANOTHER, reported in (1984) 2 SCC 680, and in particular, he has drew our attention to the head note "C", which reads thus :- "C: _ Contract Act, 1872 - Section 56 - If the agreed fact situation, on the basis of which agreement entered into, ceases to exist, the agreement to that extent would become otiose - If rate initially quoted by contractor becomes irrelevant due to subsequent price escalation, held, contractor's claim for compensation for the excess expenditure incurred due to the price rise cannot be turned down on ground of absence of price escalation clause in that regard in the contract - Agreement as a whole must be seen" . However, in the present mater it has to be noted that the price escalation was not during the performance of the contract but it was before 7 the commencement of the work, and, therefore, the facts and circumstances of the case in the ruling are not applicable to the facts and circumstances of the present case. Here there was an opportunity to the contractor to get the issue about price escalation resolved or decided and thereafter to proceed with the work. Having not done that he proceeded with the work and continued and completed the work and fully aware of the fact that there is price rise and thereafter he had made grievance about the rise in the price. Therefore, he has taken a risk to continue the work and now at a subsequent stage it cannot be said that he is entitled to get an amount towards increase in price of the diesel. 10. Taking overall view of the matter, what we find is that the learned Single Judge has rightly consider the matter and set aside the claim No. 3 and 8 and allowed the petition of Union of India being Arbitration Petition No. 575 of 2004. There is no merit in the appeal. The appeal is hereby dismissed. No order as to costs. [A.A.Sayed, J.] [S.B.Mhase, J.] 8