IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE A.K.BASHEER & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI TUESDAY, THE 2ND MARCH 2010 / 11TH PHALGUNA 1931 Arb.A.No. 12 of 2004() ---------------------- ARBOP.249/2003 of I ADDL.DISTRICT COURT, ERNAKULAM .................... APPELLANTS/PETITIONERS ------------------------------------------ 1. SOUTHERN RAILWAY, REPRESENTED BY ITS GENERAL MANAGER, HEADQUARTERS OFFICE, PARK TOWN, CHENNAI 600 003. 2. CHIEF PROJECT MANAGER, RAILWAY ELECTRIFICATION EGMORE, CHENNAI 600 008. 3. EXECUTIVE ENGINEER, RAILWAY ELECTRIFICATION, EGMORE, CHENNAI 600 008. BY ADV. SRI.K.P.DANDAPANI, SENIOR ADVOCATE RESPONDENT(S): RESPONDENT ------------------------- SHRI.P.M.ABDU HAJI, AGED 57 YEARS, S/O. LATE MAKKAR HAJI, SHALIMAR VILLA, P.O.KOORKANCHERRY, THRISSUR 600 003. ADV. SRI.K.S.BABU SMT.N.SUDHA THIS ARBITRATION APPEALS HAVING COME UP FOR ADMISSION ON 02/03/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: A.K.BASHEER & P.Q.BARKATH ALI, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Arb. Appeal No.12 OF 2004 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 2nd day of March 2010 JUDGMENT Basheer, J. This appeal, which is at the instance of the Southern Railway administration and its officials, is directed against the order passed by the District Court, Ernakulam in Arbitration O.P.No.249/2003. By the impugned order, the District Court held that there was no scope for interference with the award passed by the Arbitrator. Hence this appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996. 2. Essential facts which are necessary for disposal of the appeal may be briefly noticed. 3. Appellant had awarded certain works to the respondent on the strength of a written agreement executed between the parties on March 10, 2000 at a total cost of Rs.6,54,000/-. The contract related to “the proposed Track work in connection with stabling lines for AC LOCO turn round facilities at Ernakulam Town”. 4. It appears that certain disputes arose between the parties in Arb.Appeal No.12/04 2 connection with the above contract. The dispute was referred to arbitration. Project Manager, Railway Electrification, Visakhapatnam was appointed as the sole arbitrator by the General Manager, Southern Railway as directed by this court in Arbitration Request No.20/01. 5. The terms of reference for arbitration, as extracted in the memorandum of appeal read thus: “i) Whether the claimant/contractor is entitled to get an amount of Rs. 75,000/- towards the extra expenditure incurred by him for shifting of the track for 1 metre to dismantle the built-up track and to re-set the same again at a distance of 2 metres. ii) Whether the claimant/contractor is entitled to get the refund of Rs. 72,963/- which was deducted illegally from the final bill on account of the engagement of departmental labourers during the currency of the Agreement for the execution of the work, even though the work was going on without any delay and there was no default on the part of the claimant. iii) Whether the claimant/contractor is entitled to get and the Railway Administration is liable to pay an amount of Rs. 55,000/- towards the extra expenditure incurred by the claimant towards the transporting, loading and unloading of rails and sleepers to the work site from the locations where the sleepers were stored about at a distance of 2 kms. away from the Arb.Appeal No.12/04 3 site. iv) Whether the claimant /contractor is entitled to get and Railway Administration is liable to pay an amount of Rs. 10,000/- towards ground rent, the extra expenditure incurred by the claimant towards the storing the required ballast in a private land. v) Whether the claimant/contractor is entitled the refund of Rs. 18,000/- which was being deducted from the final bill towards the supply of Gauge tie plate. vi) Whether the claimant/contractor is entitled to get 12% contractor's profit and interest at the rate of 18% per annum on the above amounts and the balance amount due under the final bill due to the claimant from the date of due. vii) Whether the claimant/contractor is entitled to get the security deposit of Rs. 40,225/- and Earnest Money Deposit of Rs. 11,480/- with interest @ 18% per annum from the date of due till the date of realisation. viii) Whether the claimant/contractor is entitled to get the entire costs of the proceedings from the respondents.” 6. The Arbitrator after hearing the parties answered the reference and passed an award allowing claims under (i), (ii), (v) and (vi) of the terms of reference referred to above. As regards Clause (vii), the Arbitrator held that respondent/claimant would be eligible to Arb.Appeal No.12/04 4 get refund of security and earnest money deposits after the expiry of the due date. The Arbitrator further held that respondent/claimant would be entitled to get 18% interest on the amounts awarded to him from January 10, 2003, the date of entering the reference, till the date of payment. 7. The above award was challenged by the appellants before the District Court as provided under Section 34 of the Act. As mentioned earlier, the District Court found that the challenge made by the appellants was without any merit or substance. 8. Ms.Sumathy Dandapani, learned senior counsel who appears for the appellants, has mainly confined her arguments on Clauses (i) and (ii) of the terms of reference and also on the legality and propriety of the rate of interest awarded to the respondent/claimant. 9. It is contended by the learned senior counsel that the court below has committed serious illegality in refusing to advert to the question whether the sole Arbitrator had exceeded his jurisdiction while answering the terms of reference. The specific case of the appellants that the relevant clauses in the General and Special Arb.Appeal No.12/04 5 Conditions of the contract were not properly appreciated or interpreted by the sole Arbitrator was also not considered. The court below glossed over those contentions in a perfunctory manner. Learned senior counsel contends that the impugned award is liable to be set aside for reasons more than one. 10. Per contra, it is contended by Sri.K.S.Babu, learned counsel for the respondent that the grievance now sought to be redressed by the claimants is totally imaginary and wholly untenable. The Arbitrator had dealt with the terms of reference in a meticulous and fair manner. The Arbitrator had passed the award after affording sufficient opportunity to both sides . The parties were given opportunity to answer the interrogatories as well. The Arbitrator, being a technically qualified officer of the Railway Administration was understandably well versed with the technical aspects, which enabled him to address the issues in their proper perspective, it is contended. 11. The short question which arises for consideration is whether any interference is warranted with the order passed by the court below. Arb.Appeal No.12/04 6 12. Clause (i) of the terms of reference pertains to the claim made by the respondent/claimant for award of extra expenses incurred by him for shifting the track to a distance of 3 metres from the original alignment fixed by the Railway authorities. In this context, it may be relevant to notice that the case of the respondent/claimant was that while work was in progress on Track No.4, the Officer- in- charge of the site instructed him to shift the track, which was already laid to a total length of 60 metres. The officer directed the respondent that the track be removed and shifted 1 metre towards west in variance to the original alignment. This instruction was carried out by the respondent after removing the entire track which was laid already as per the alignment. However, the very same officer came with a further direction. The track was relaid as instructed by the Officer- in-charge. But surprisingly, the very same officer came up with yet another suggestion that the track be again slewed toward west by a further 2 metres. The respondent was constrained to carry out this instruction also. Resultantly, he incurred an additional expense of Rs. 75,000/-, which was claimed by him from the Railways. In response to the Arb.Appeal No.12/04 7 above claim, it was contended by the appellants that the respondent/contractor was bound to carry out the instructions, if any, that may be given from time to time by the Engineer in charge. In this connection, the appellants took shelter under Clause 19 of the Special conditions which reads thus : “19. The Contractor shall maintain correct alignment of rails, square of the sleepers, correct gauge to levels,longitudinal levels etc., till the completion and any rectification required shall be done by the contractor at his cost as directed by the Inspector-in-charge.” 13. It is significant to notice that the appellants did not have a case that the original alignment had been slewed or shifted by 3 metres towards west as instructed by the Engineer in charge. In other words, the appellants had admittedly asked the contractor to shift the alignment twice at his own cost. The contention of the appellants is that going by Clause 19 of the Special conditions, the contractor is bound to meet such additional expenses . The Arbitrator repelled the above contention and held that the claimant was entitled to get the additional amounts spent by him for slewing the tract twice. Arb.Appeal No.12/04 8 14. Having perused the materials available on record particularly Clause 19 referred to above, we do not find any irrationality or illegality in the view taken by the Arbitrator. Therefore, the challenge raised by the appellants to the above claim is wholly unsustainable. 15. The other contention raised by the appellants is with regard to claim No.(ii), which is with reference to the recovery of a sum of Rs. 72,963/- from the final bill submitted by him. The appellants deducted the above sum on the ground that they had engaged their own labourers to complete the work awarded to the respondent during the currency of the contract. The case of the respondent before the Arbitrator was that the action of the appellants in engaging some of their workers is totally unwarranted in as much as the currency of the contract was up to June 9, 2000. The work was progressing quite well and the labourers under the respondent were well on schedule to complete the work before the deadline. However, for some inexplicable reason, the Railway Administration engaged some of their own labourers. Respondent contended that because of the deployment Arb.Appeal No.12/04 9 of labourers by the Railway Administration, his own employees were left idle and they had to be paid their wages too. But when the final bills were presented, the appellants took the stand that respondent would not be entitled to claim the amounts spent by him for engaging his workers. The Arbitrator accepted the case of the respondent/ contractor and held that the appellants were not entitled to deduct the sum of Rs. 72,963/- from the final bills submitted by the respondent. 16. Learned senior counsel for the appellants invites our attention to Clause 26 of the General Conditions in this context and submits that the Administration had to deploy its own labourers since the contractor refused to speed up the work. It is the case of the appellants that the contractor was put on notice in this connection and he was asked to deploy more work force. Though it was contended by the appellants before the Arbitrator that notice was duly served on the contractor in this regard, the Arbitrator found that no such notice as envisaged under Clause 26 was served on him. More importantly, the Arbitrator found that prior approval from the competent authority was never obtained for issuing such a notice. It appears that the Arb.Appeal No.12/04 10 Administration wanted to advance the commissioning of the track. In other words, the proposed track was a new line and it was a linking work. The Arbitrator found that there was clear violation of Clause 26 and therefore, the contractor cannot be put to blame. It is true that Clause 26 stipulates that contractor shall give necessary directions to his workmen to see that they execute their work in sound and proper manner. The contractor shall forthwith on receiving intimation from the Engineer in charge take on additional number of staff and labourers specified by the Engineer within seven days of being so required. The Arbitrator noticed that on failure of the contractor to comply with the directions issued by the Engineer, the contractor has to be given seven days notice for carrying out the instructions and if he fails to do so, a further notice of 48 hour's has to be given to the contractor. If still the contractor fails to obey the instructions, even after service of 48 hour notice, the Administration will be at liberty to rescind /terminate the contract and take further steps to entrust the work to another contractor at the risk and cost of the former. 17. The Arbitrator had, after verification of the entire materials Arb.Appeal No.12/04 11 available on record and after hearing the parties, found that the Administration had deployed its own work force without serving notice on the contractor as contemplated under the General conditions and that too without getting prior approval from the competent authority. 18. Though learned senior counsel has made a vain attempt to contend for the position that 48 hour's notice referred to in Sub Clause 13 of Clause 26 of the General conditions is only directory and not mandatory, we are not impressed with the above contention. Having perused the materials available on record , we do not find any reason to interfere with the conclusion arrived at by the Arbitrator in this regard. 19. In this context, learned counsel for the respondent has invited out attention to two decisions of the Apex Court in Madhya Pradesh Housing Board v. Progressive Writers and Publishers ( 2009 (5) Supreme Court Cases 678) and also in Kwality Manufacturing Corporation v. Central Warehousing Corporation ( 2009(5) Supreme Court Cases 142). Their Lordships in these two decisions have reiterated the well settled proposition of law that scope of interference in regard to arbitral award by courts is limited. Arbitral Arb.Appeal No.12/04 12 award passed by an Arbitrator is ordinarily final and it cannot be interfered with unless the reasons/findings contained therein are totally perverse or the award is based on wrong proposition of law . In our view, the dictum laid down in the above two decisions is squarely applicable in the facts and circumstances of this case and the challenge against the award is bound to fail. 20. Lastly, it is contended by the learned senior counsel that the interest awarded by the Arbitrator is highly exorbitant and unreasonable. There is some force in the above contention. The Arbitrator has awarded 18% interest from January 10, 2003 till the date of payment. Having regard to the prime lending rate that was in vogue at the relevant point of time, we are of the view that interests of justice will be met, if the rate of interest is reduced to 9%. We do so. 21. The other claims in the impugned award being apparently negligible, the learned senior counsel has not taken much pains to address us. Having perused those claims under challenge, we are also not persuaded to interfere with the conclusions arrived at by the Arbitrator. No other point has been raised by the learned senior Arb.Appeal No.12/04 13 counsel before us. 22. Resultantly, the award of the Arbitrator under challenge is modified to the extent of reducing the rate of interest from 18% to 9%. In all other respects, the award under challenge is sustained. The Appeal is disposed of in the above terms. A.K.BASHEER, JUDGE P.Q.BARKATH ALI, JUDGE sv. Arb.Appeal No.12/04 14