THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE RAJA ELANGO C.M.A.No.814 & C.R.P.No.4892 of 2004 Date of Judgment: -07-2010 CT in CMA No.814 of 2004 Between: The Superintending Engineer, Godavari Valley Circle No.1, I & CAD Department, Sriram Sagar Project, Pochampad, Nizambad District. ..Appellant and 1.P.Ramachandra Rao and another ..Respondents The Court made the following Judgment: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE RAJA ELANGO C.M.A.No.814 & C.R.P.No.4892 of 2004 Common Judgment: (Per Honourable Sri Justice A.Gopal Reddy ) 1. This Civil Miscellaneous Appeal and Civil Revision Petition are directed against the common judgment/order dated 13-02-2002 of the V Senior Civil Judge, City Civil Court, Hyderabad allowing O.P.No.136 of 1995 filed by the respondent/contractor under Sections 16 and 17 of the Arbitration Act, 1940 (for short “the Act”) making the award of the arbitrator dated 02-08-1995 as rule of Court in respect of Claim Nos. IV-A & B; VII-A and IX-A & B and dismissing O.P.No.154 of 1995 filed by the petitioner/Department under Section 30 of the Act seeking to set aside the award of the arbitrator, were heard together and disposed of by this common judgment. 2. Brief facts, which give rise to filing this appeal and revision, are as under: The 1st respondent/contractor was entrusted with the work relating to earth work excavation and forming embankment of Saraswati Canal from KM 33.00 to 34.00 under Agreement No.67/SE/GVC-I dated 24-02-1982. The value of the work was at Rs.4,11,583/-, which has to be completed within four months of the handovering of the site. The site as such was handed over on 12-06-1982, but the contractor failed to complete the work within the stipulated time, the contract was terminated as per clause 61 of Preliminary Specification to A.P. Detailed Standard Specifications on 05- 04-1984. The contractor made certain claims through claim petition dated 19-08-1988 to the arbitrator under the agreement. As he failed to get the matter resolved before the arbitrator named under the agreement, he filed O.P.No.440 of 1988 for appointment of sole arbitrator before the V Additional Judge, City Civil Court, Hyderabad. On Court appointing sole arbitrator—Sri B.Rosaiah, Chief Engineer, Irrigation and Command Area Development Department, Erramanzil, Hyderabad—2nd respondent the contractor filed claim statement claiming total amount of Rs.13,36,710/- under 10 claims and interest on the said sum at the rate of 24% per annum. On department filing rebuttal statement/counter to the same, rejoinder has been filed restricting the claim to Rs.7,43,274.70 ps. with pendenti lite and also future interest. 3. The learned arbitrator by the impugned award dated 02-08-1995 under Claim No.IV A, towards the difference in cost of conveyance of soils with more than1/4 km lead awarded a sum of Rs.38,836/- and interest on the said sum at 10% per annum; Claim No.VII A, towards compensation for delayed payments, he awarded a sum of Rs.15,785/-; under claim No.IX, refund of unauthorised recovery, he awarded Rs.42,552.76 ps. and also interest at 10% per annum from 16-08- 1986 to 18-08-1988. Further pendenti lite interest at 12% on the amounts due under Claim Nos. IV A and IX A from 19-08-1988 to 02-08-1995 and rejected to award interest on the awarded amounts from the date of award till the date of payment. 4. On passing the above award the, contractor filed O.P.No.136 of 1995 under Sections 16 and 17 of the Arbitration Act to make the award as rule of Court insofar as claims awarded by the arbitrator with future interest at 18% per annum and to remit the award insofar as the claims which were disallowed by the arbitrator; whereas the Department filed O.P.No.154 of 1995 under Section 30 of the Act for setting aside the award of the sole arbitrator. 5. The learned V Senior Civil Judge, City Civil Court, Hyderabad by the impugned order partly allowed the O.P.No.136 of 1995 filed by the contractor making the award as rule of Court and for rest of the claims remitting the award to the arbitrator for reconsideration has been dismissed and the O.P.No.154 of 1995 filed by the Department for setting aside the award of the arbitrator was dismissed. Aggrieved by the dismissal of O.P.No.154 of 1995 the Department filed C.M.A.No.814 of 2004 and questioning the order making the award as rule of Court C.R.P.No.4892 of 2004 is filed. 6. The learned Government Pleader for Arbitration contends that claimant having not put forward any claim as per para-7 of the additional conditions accompanying the tender notice in writing, awarding the amount by the arbitrator under Claim No.IV, towards the difference in cost of conveyance of soils with more than 1/4th km lead, is erroneous. Under Claim No.IX, when the contractor failed to complete the contract work within the stipulated period, contract was terminated under clause 61 of Preliminary Specification to A.P. Detailed Standard Specifications then the department is entitled to recover the excess cost in execution of the balance work. Therefore, the same cannot be refunded. In Claim No.VII, the contractor claimed compensation for the delayed payment. Clause 59 of Preliminary Specification to A.P. Detailed Standard Specifications prohibits compensation, whatsoever, therefore, the award of the amount by the arbitrator under the above head is liable to be set aside. He also contends that interest awarded by the arbitrator at 18% on the awarded amount is liable to be scale down in view of the prevailing bank interest. 7. Sri G.Krishna Murthy, learned counsel for the respondent/contractor contends that once the arbitrator considered the rival claims and gave reasons for awarding the amount the same cannot be interfered. The civil court rightly made the award as rule of Court. He further contends that in Claim No.4 when the contractor claimed difference in cost of conveyance of soil with more than ½ km lead he is entitled to put forth his claim. The very fact that balance work was executed by the other agencies subsequent to the claimant as enclosed to R6, the soil was conveyed with ½ km lead and the same was paid to the other agencies subsequent to the claimant; on the same analogy the claimant is also entitled the difference in cost of conveyance of soil which was rightly awarded by the arbitrator. Under Claim No.VII, as per the terms and conditions of the agreement, final bill is to be paid within two months after the termination of contract. Admittedly, the contract was terminated in June, 1984 and the bill was paid with a delay of 2 years two months. Therefore, the compensation awarded under Claim No.VII cannot be interfered. Under Claim No.IX, in the absence of any notice to the contractor that the balance of work will be executed at the risk and cost of the contractor, the Department is not entitled to recover extra expenditure incurred by it for completion of balance work through other agencies. Therefore, the arbitrator rightly ordered for the refund of the amount so recovered and made the award as rule of Court, which needs no interference. 8. In view of the above submissions, the point that arises for consideration in this appeal is: “Whether the award passed by the arbitrator and made it as rule of court by the civil court suffers from any manifest illegality warranting interference.” 9. The contractor agreed to execute the work subject to the conditions set forth in the Preliminary Specification of the A.P. Detailed Standard Specifications and such other conditions as are contained in all the Specifications forming part of the contract. The works shown upon the drawing and described in the said Specifications and set forth in Schedule ‘A’ as the “probable quantities” and comply with the rate of progress noted at the end of the Articles of Agreement for a sum of Rs.4,11,583/- or such other sum as may be arrived at under the clause of the Standard Preliminary Specification relating to “payment on lump sum basis or final measurement at unit prices”. The contractor has also signed copy of the A.P. Standard Specifications and Addenda volume thereto maintained in the Godavari Valley Circle No.1 office in acknowledgement of being bound by all the conditions of the clauses of the Standard Preliminary Specification and all the Standard Specifications for items of works described by a Standard Specification number in Schedule-‘A’. The supplemental slip for the additional items of the work for the formation of embankment from KM 33.00 to 34.00 was signed on 08-08-1986. 10. Clause 7 of the additional conditions accompanying the tender notice clearly envisages any claims or disputes arising out of the contract should be promptly submitted in writing to the Executive Engineer within 15 days from the date of cause of action, so that the points in issue could be immediately verified at site by the Field Officers, facts ascertained and a prompt decision given. Claim raised well beyond the above time limit and raised subsequently at such a distance of time as to make it impossible to verify the facts are liable to be rejected. According to the claimant, he conveyed the soil with ½ km lead during actual execution and sought for a rate of Rs.17/cu.m but he was paid at part rate and finally at Rs.10.50/cu.m., whereas for the small quantifies also the other agencies were paid at Rs16.95/cu.m. Therefore, he is also entitled to the same. 11. Admittedly, the contractor has not put forward any claim during the execution of the work and the quantity of the soil, which was conveyed from more than ½ km prescribed under the agreement. When the contract as such is a lumpsum basis or by final measurement at unit prices, and the contractor verified the tender conditions is supposed to verify the work place and availability of the soil as specified in the tender notification or embankment to verify the contract area along with availability of the soil before tendering for the work. According to the claimant/contractor, sufficient earth was not available in the borrow areas provided with a lead in ¼ km. Since no notice as such was given as per para-7 of the additional conditions of the tender notice, it is difficult for the department to measure the quantity of the earth, excavation and forming embankment, which was available within the borrow area and quantity of earth transported beyond the borrow area. 12. In the absence of any evidence adduced by the claimant to the said effect, the arbitrator simply taken into consideration that the department paid to other agencies who executed the balance work under the said item under R-6 with ½ km cannot be uniformly apply to the claimant for the entire quantity of the earth which was conveyed by the claimant for embankment, as per SSR 1981-82, which were adopted in the estimate sanctioned for the work, conveyance of soil for is ½ km lead. Therefore, the finding of the arbitrator as per SSR 1981-82, which was adopted in the estimate sanctioned for the work, the rate for EWE and conveyance of soil works out to Rs.16.84/cu.m. for a quantity of 5847 cu.m. arriving at 36,836/- is erroneous. 13. In view of the same, award passed by the arbitrator is without any evidence adduced by the claimant about the quantity of the earth, which was transported beyond ¼ km. In view of the same, arbitrator as well as civil court misdirected themselves in accepting the claim. 14. From para-7 of the agreement as agreed by the parties we have to see sufficient evidence with regard to measurement accepted by the parties should be available to substantiate claim of the contractor. When the contractor has not given measurements during the execution of the work, accepting the claim of the claimant for the total quantity by the arbitrator as confirmed by the Civil Court is without any evidence. Therefore, the arbitrator has committed misconduct in awarding the amount without there being any evidence in that regard. Therefore, the above claim is liable to be set aside. 15. The learned Government Pleader strongly contended that Claim No.VII is only for delayed payments and Clause 59 of Preliminary Specification to Andhra Pradesh Detailed Standard Specifications prohibits such claim. When the arbitrator awards compensation or damages, whatsoever, in spite prohibiting the same, arbitrator committed misconduct and the same is liable to be set aside as held by the Supreme Court in RAMNATH INTERNATIONAL CONSTRUCTION PVT. LTD. v. UNION OF INDIA[1] and CH.RAMALINGA REDDY v. SUPERINTENDING ENGINEER[2]. 16. The arbitrator has not awarded any compensation for the delay in execution of work but awarded only delay in payment of amounts due under the final bill prepared and paid two years two months after termination of the contract. Interest on the said amount for the said period was quantified at Rs.15,785/-. Clause 68 of Preliminary Specification to Andhra Pradesh Detailed Standard Specifications provides payment of final bill after six months of completion of work. When the claimant executed the work by 30-07-1983 itself and he did not do any work subsequent to the said date, the Department is under obligation to finalise the final bill within a period of six months. As the contract work was terminated on 05-04-1984, the arbitrator awarded the above sum i.e. Rs.15,785/- by way of interest from 01-09-1984 to 15-08-1986 on Rs.77,314/- due towards final bill. Therefore, the judgments cited by the learned Government Pleader in RAMNATH INTERNATIONAL CONSTRUCTION PVT. LTD. and CH.RAMALINGA REDDY (1 & 2 supra) are misplaced to the facts of the present case. 17. The agreed terms and conditions provide that the final bill should have been paid within two months after termination. Under Clause 68 of Preliminary Specification to A.P. Detailed Standard Specifications, final bill has to be paid after six months of completion of work, but there was delay of 2 years 2 months. In view of the same, awarding Rs.15,785/- by the arbitrator is reasonable. 18. The judgment cited by the learned Government Pleader in SUPERINTENDING ENGINEER v. KEHAR SINGH[3] is also misplaced to the facts of the present case, wherein this Court found the amount awarded by the arbitrator is admittedly not in the nature of interest, which has already been awarded, but is in addition to it and is too remote a claim to be allowed under Section 73 of the Indian Contract Act. That is not the case on hand. Therefore, we do not see any substance or merit in the contention of the learned Government Pleader that the arbitrator could not have awarded the above amount. 19. Under Claim No.IX-A, the Department recovered an amount of Rs.42,552/- towards the execution of balance work from the claimant. As rightly held by the arbitrator the termination/determination order do not mention that balance of work would be get done through the other agencies at his cost except stating in its letter dated 05-04-1984 that in spite of notices issued to your end, as per Deputy Executive Engineer’s report, you have not resumed the work till today. Hence, your contract is hereby determined under clause 61 of Preliminary Specification to Andhra Pradesh Detailed Standard Specifications and calling upon the contractor to attend the site on 09-04-1984 to witness the closing measurements. 20. The arbitrator after verifying the records found the balance works not tackled by the claimant is only 9%, which was executed through other agencies, which was completed in two years. Where no time for completion of work is specified, a term for completion within a reasonable time implied and the work should be completed within the reasonable time. The learned arbitrator after issuing various letters to the contractor in the form of notices dated 04-11-1982, 24-01-1983, 16-04-1983, 25-11-1983, 30-11-1983, 07-03- 1984 and 05-04-1984 found recovery of excess amount towards the execution of balance work from the claimant is unreasonable and ordered for refund of the same with interest. In the absence of notifying to the claimant that the balance work would be get done through other agencies at his risk and cost, issuing notice for recovery of the amount two years after termination is unjustified. Further, we are also of the view the other agency took 2 years to complete the balance work of 9% is also a mitigating circumstance, for which the contractor should not be held responsible. In view of the same, we do not see any merit in the contention of the learned Government Pleader that the recoveries are justified and the arbitrator ought not to have ordered for refund. 21. In the result, appeal and revision are partly allowed, as indicated above. ________________ A.GOPAL REDDY, J. ______________ RAJA ELANGO,J. -07-2010 Murthy [1] AIR 2007 SC 509 [2] (1999) 9 SCC 610 [3] 1994 (1) ALT 293 (DB)