IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 15.12.2008 CORAM THE HONOURABLE MR.JUSTICE S. RAJESWARAN O.P. No.95 & 96 of 2003 1. The Chief Engineer (Construction II), (Guage Conversion), Southern Railway, Egmore, Chennai 600 0-08. .. Petitioner in both O.Ps. Vs. 1. M/s.Nilakantan & Sons Pvt. Ltd., Engineers & Builders, 47-A, Luz Avenue, Mylapore, Chennai 600 004. 2. Hon'ble Mr.Justice K.M.Natarajan, Sole Arbitrator, No.136, Lattice Bridge Road, Kamaraj Nagar, Thiruvanmiyur, Chennai 600 041. .. Respondents in both O.Ps. The above Original Petitions are filed under Section 34 of Arbitration and Conciliation Act 1996 to set aside the award dated 21.09.2001 passed by the second respondent pertaining to the disputes in relation to the agreement Nos.152/CN/95 dated 1.12.1995 and 206/CN/95 dated 1.12.1995 respectively. For Petitioner in both O.Ps. : Mr.V.G.Suresh Kumar For Respondents in both O.Ps. : M/s.R.Murari & R.Thirunavukarasu for R1 **** COMMON ORDER Both the Original Petitions are filed to set aside the award dated 21.09.2001 passed by the second respondent pertaining to the disputes in relation to the agreement Nos.152/CN/95 dated 1.12.1995 and 206/CN/95 dated 1.12.1995 respectively. 2. As the parties and the dispute involved in both the Original petitions are one and the same, a common order is being passed to dispose of both the petitions. 3. O.P.No.95 of 2003 has been filed by the petitioner to set aside the Award dt.21.09.2001 and the further orders of the second respondent/Arbitrator dated 5.11.2001. The contract involved in O.P.No.95 of 2003 is the work of guage conversion from Madras Beach - Tiruchirapalli - Villupuram - Tiruchirapalli section - construction of a bridge with 10 x 18 metres PSC Girders, opposite to the existing MG Bridge No.129, across the river Manimuthar and construction of bridge with 2 x 18 meter PSC Girders opposite to the existing MG Bridge No.128, across Mari odai between VRI and VRT stations under agreement No.152/CN/95 dt.16.10.1995. 4. The contract involved in O.P.No.96 of 2003 is the work of guage conversion from Madras Beach - Tiruchirapalli - Villupuram - Tiruchirapalli section - construction of a Bridge with 21 x 18 metres PSC Girder, opposite to the existing Bridge No.181, across the Vellar river under agreement No.206/CN/95 dt.01.12.1995. 5. Certain disputes arose in respect of both the agreements and the first respondent filed O.P.No.271 of 1998 in respect of the agreement dt.16.10.1993 and O.P.No.252 of 1998 with regard to the agreement dated 1.12.1995. By an order dt.25.02.1999, this court appointed the second respondent as an Arbitrator to go into both the disputes. In both the matters separate awards were made by the second respondent/Arbitrator on 21.9.2001. The petitioner herein filed applications for clarification of both the awards and separate orders were passed by the second respondent/Arbitrator in those applications on 5.11.2001. Aggrieved by the award and the orders passed in the clarification applications, the above petitions have been filed under Sec.34 of the Arbitration and Conciliation Act, 1996. 6. Heard the learned counsel for the petitioner and the learned counsel for the first respondent. I have also gone through the documents and judgments referred to by them in support of their submissions. 7. The learned counsel for the petitioner contends that the second respondent/Arbitrator has not evaluated the evidence properly and the award passed by him is contrary to the express provisions contained in the contract and therefore, the same is liable to be set aside. 8. Per contra, the learned counsel for the first respondent submits that no ground as contemplated under Sec.34 of the Act were made out and it is not for this court to re-evaluate the evidence to come to a different conclusion. In support of his submission, he relied on the judgment of the Hon'ble Supreme Court reported in (2006)11 SCC 181 (McDermott International Inc. Vs Burn Standard Co. Ltd. and others) and an unreported judgment of this court made in O.P.No.547 of 2006 dated 15.12.2006 (Union of India owning Southern Railway rep. by its Chief Engineer/Construction, Chennai 8 Vs TECCO Trichy Engineers & Contractors and 3 others) 9. I have considered the rival submissions carefully with regard to facts and citations. 10. For the sake of convenience, I am referring to the award assailed under O.P.No.95 of 2003 and it is admitted by both the parties that the decision to be taken in O.P.No.95 of 2003 will cover the award challenged under O.P.No.96 of 2003 also. 11. The dispute involved in O.P.No.95 of 2003 is relating to the agreement No.152/CN/95 dt.16.10.1995 for the construction of superstructure across the Manimutharu river. In response to the invitation of tenders for the above work, the first respondent submitted their offer on 6.7.1995 and after negotiation, the petitioner herein accepted the tender and issued the work order on 14.8.1995. The agreement was signed on 16.10.1995. The cost of the work is valued at Rs.69 lakhs and the period of work is nine months, i.e., by 13.5.1996. The first respondent submitted designs and drawings on 11.9.1995 and the designs were finally approved on 23.02.1996. The foundation and substructure contract works were awarded to another agency and the contract for earth filling of the embankment of approaches was given to yet another agency. According to the first respondent, by the failure of the petitioner herein in handing over the site in the required manner, the petitioner committed breach of contract. The short supply of cribs seriously handicapped the launching programme of the girders on the bed level. The first respondent was forced to adopt different pattern of casting and launching by the officials of the petitioner, which resulted extra cost and time. In the year 1996, there was heavy rain and flooding of all the rivers causing severe disruption of casting and launching of the work on the river-bed inspite of the first respondent incurring heavy expenditure on account of protective works. Because of the rains, the first respondent's office, stores, labour shed etc. were totally submerged and the materials were washed away. It took nearly a month for the floods to recede and the first respondent thereafter assessed the extent of damages and made a claim for Rs.19,06,067.50. Initially, the officers of the petitioner were very sympathetic and assured the first respondent, the payment of compensation for the floods and also for non- recovery of losses of materials. The first respondent was directed to get on with the work and it was decided to form a committee to assess the damages and to recommend compensation. The petitioner granted acceleration advance of 5% of the contract value. The petitioner invoking clause 17(2) of GCC extended the time and in a meeting held on 15.9.1997, expressed sympathy and advised the first respondent to seek through arbitration a larger compensation. But this was not adhered to and the first respondent was forced to approach this court for appointment of Arbitrator. There was no payment for the first respondent's bills for nearly eight months after the floods. Thereafter, differences arose between the parties and the petitioner stopped completely the payment. However, on a representation made by the first respondent to the petitioner, the first respondent was allowed to carry on with the offloaded portion of the work and accordingly the first respondent went ahead with the work. However, the department stopped the work again stating that this work would be handed over to a competitor for completion. According to the first respondent, all the works were stopped to favour M/s.K.S. & Co. Thereafter, the petitioner called for re-tendering as per tender notice dated 10.02.1998 for the portion of work and the tender of M/s.K.S. & Co. was accepted. Despite all these provocations, it was claimed by the first respondent that they went ahead and completed whatever work was allotted to them. In the above factual background, the respondent filed a claim petition before the second respondent/ Arbitrator. 12. The claim petition was resisted by the petitioner herein by filing a counter. According to the petitioner, the designs and drawings were submitted by the Contractor only on 11.11.1995 and not on 11.9.1995 as alleged by the first respondent. The first respondent had been receiving the payment from October, 1995 towards the mobilisation advance and submission of approved drawings. The contractor could not launch the girder due to the failure of their machineries. The first respondent completed the concrete work only on 11.5.1996. Since the first respondent has not taken any step to complete the work, the stressing and launching the girders 1 to 5 were not launched prior to flood and hence the Railway is not responsible for the first respondent's failure. Though the first respondent had to cast all the girders by 30.6.1997, they cast only 3 girders within the period. The first respondent was lethargic in carrying out the instruction of the Railway officers. The petitioner contended that as the first respondent had not taken any serious step in the execution of the work, as per para 29.2 of the agreement, the Railway has got every right to terminate or offload the contract. Therefore, the agreement was terminated on 27.01.1998 and it is upto the Railways to award the work to any other Contractor. The petitioner denied the liability to various claims made by the first respondent and instead made counter claims on the grounds of damage of girders, the cost of steel cribs, wooden sleepers etc. due from the first respondent and also towards risk and cost. 13. To the counter statement filed by the petitioner before the Arbitrator, the first respondent filed a rejoinder sticking to their earlier stand. 14. On the pleadings of the parties, the second respondent Arbitrator framed the following issues. 1. Whether the respondent has committed breach of contract as alleged ? 2. Whether the termination of the agreement, is legal and valid ? 3. Whether the claimant/petitioner is entitled to compensation for loss suffered due to flood in December  1996 ? 4. Whether the claimant/petitioner is entitled to compensation for loss due to infrutous over-heads and profits due to breaches committed by the respondents ? 5. Whether the claimant/petitioner is entitled to compensation or loss due to reduced productivity from idle of labour, machinery, equipments etc. ? 6. Whether the claimant / petitioner is entitled to compensation for the loss incurred due to off- loading of work and profit ? 7. Whether the claimant/petitioner is entitled to claim increased cost in carrying out the works due to breaches of contract and delay by the respondent ? 8. Whether the claimant/petitioner is entitled to release of the bank guarantee given towards mobilisation and acceleration advance and security deposit ? 9. Whether the claimant/ petitioner is liable for the extra cost incurred in carrying out certain portions of the contract work through other agency ? 10. Whether the claimant/ petitioner is entitled to any interest, if so, at what rate ? 11. Whether the claimant/petitioner is entitled to the cost of this arbitration proceedings ? 12. Whether the respondent is entitled to counter-claim for the loss due to damages of girders ? 13. Whether the respondent is entitled to counter  claim towards the cost of steel cribs due from the contractor/ petitioner ? 14. Whether the respondent is entitled to counter-claim for cost of wooden sleepers from the claimant/petitioner? 15. Whether the respondent is entitled to counter-claim under the heads of Risk and cost ? 16. To what relief, parties are entitled to ? 15. Issue No.1 relates to the breach of contract by the petitioner as alleged by the first respondent. This issue was further sub-divided into the following breaches: a. Delay in providing the approved drawings; b. Delaying in handing over the site; c. Not provided adequate steel cribs in time; d. make claimant to adopt enormous methods of launching; e. Delay in withholding the payments f. Non-payment of compensation for the flood damages; and g. Illegal termination of contract and favouring another agency by awarding the balance of work at the cost of the claimant. 16. While considering the above said breaches, the second respondent/Arbitrator found that the first respondent clearly established that there is a delay of more than seven months from the date of submission of preliminary drawings and designs and six months from the date of submission of detailed design and drawings by approving them by the petitioner. The second respondent/ Arbitrator also found that there is enourmous delay in handing over the site to the first respondent. It was also found by the Arbitrator that the number of steel cribs required for launching one girder is 300 and number of steel cribs provided by the petitioner are not adequate and also not in time. Hence, the second respondent/Arbitrator accepted the contentions of the first respondent that the supply of materials were not adequate and besides there was a delay in supplying the same. The Arbitrator has also rejected the contentions of the first respondent that they were forced to adopt numerous launching methods requiring different types of arrangements, infrastructure, tools, etc. by relying on clause 20 & 21 of GCC. It is the finding of the Arbitrator that there are no regular payments for the work done after the floods and withholding of the payments by the petitioner for the work done by the first respondent. No amount is paid towards flood damages despite many demands by the first respondent. The second respondent/ Arbitrator further found that the contract was illegally terminated and the award of the contract by M/s.K.S. & Co. is irregular. Thus, the second respondent/ Arbitrator found that it is the petitioner who has committed the breaches of the contract and answered the issue No.1 in favour of the first respondent. To arrive at the above said findings, the second respondent/ Arbitrator has elaborately evaluated the evidence adduced before him and this court sitting under Sec.34 of the Act 1996, cannot re-evaluate the same to find out the correctness of those findings. The above said conclusion was arrived at by the second respondent/ Arbitrator purely on the basis of the evidence adduced and also by interpreting the relevant clauses contained in the agreement and I hardly find any grounds to interfere with the same. 17. For Issue No.2, after adverting to the fact that the petitioner had always granted extension of time without disputing the reasons given by the first respondent and after going through clause 17(2) of GCC, the second respondent/ Arbitrator found that the termination of the contract is illegal. The Second respondent/Arbitrator has pointed out the fact that even though the time is the essence of the contract under clause 17(4) of the agreement, the clause was never invoked while terminating the contract. The second respondent has also referred to the judgment of the Apex Court reported in A.I.R. 1979 SC 720 (M/S.Hind Construction Vs State of Maharashtra) and held that time is not the essence of the contract between the parties with regard to this project is concerned. He also referred to the various documents and the oral evidence of R.W.1, who is the Deputy Chief Engineer and R.W.3, the Section Engineer, while arriving at conclusion with regard to issue No.4. 18. The second respondent/Arbitrator has given sufficient reasons and has also applied the correct decisions of the Hon'ble Supreme Court to answer issue No.2 in favour of the first respondent. Thus, it is a reasoned one which is not open to any interference by this court under Sec.34 of the Act 1996. 19. Issue No.3 is whether the first respondent is entitled to compensation for the loss suffered due to floods. This is a pure question of fact. The second respondent/ Arbitrator after elaborately dealt with the evidence in this regard held that the first respondent is entitled for compensation for the losses suffered due to flood in December 1996. The Arbitrator has also referred to Exh.C9 which is a letter dated 18.01.1997, which was marked by the first respondent containing the list of loss of items in the floods in December 1996 and found that this letter was not at all disputed by the petitioner. However, the second respondent/ Arbitrator restricted the compensation for the loss of material only and rejected the other claims in this regard. This issue being a pure question of fact, this court can hardly interfere with the above said findings of the second respondent/ Arbitrator. 20. Issue No.4 & 5 were held against the first respondent and therefore they need not be gone into in the absence of any challenge to them by the first respondent. 21. Issue No.6 is relating to the entitlement of confirmation to the first respondent for the loss incurred due to off-loading of work and profit. This issue was decided in favour of the first respondent in view of Arbitrator's finding in Issue Nos.1, 2, 9 and 15. The Arbitrator has also adhered to the law in this regard by relying on the judgment of the Hon'ble Supreme Court reported in A.I.R. 1984 SC 703 (M/s.Brijpal Singh Vs State of Gujarat). 22. I am in agreement with the reasons given by the Arbitrator for deciding the issue in favour of the first respondent and therefore the challenge to the same is hereby rejected. 23. Issue No.7 is held against the first respondent and therefore the same need not be gone into in the absence of challenge by the first respondent. 24. For Issue No.8, after going through Exh.C69 (Bills submitted for Br.No.129 dt.24.07.1998) and after referring the clause 17(4) of GCC, the second respondent/ Arbitrator held that 17(4) GCC could not be invoked as contended by the petitioner. The second respondent/ Arbitrator has also referred to the Hon'ble Supreme Court judgment reported in A.I.R. 1979 SC 720 (cited supra) in this context and found that the ratio laid down in the above decision is applicable to the facts of the case on hand and therefore held that the first respondent is entitled to release of Bank Guarantee and security deposit. 25. This is also a reasonable finding based on fact and law which is hardly open to challenge under Sec.34 of the Act 1996. 26. Issue Nos.9 and 15 were taken together by the second respondent/Arbitrator who found that in view of the findings under Issue No.1 & 2, the petitioner is not entitled to counter-claim under heads of risks and cost and further clause 61(1) (vii) of GCC is not applicable. 27. The findings to the above two issues are based on the findings under Issues Nos.1 & 2 and therefore the same are to be upheld. 28. Issue No.10 deals with payment of interest and the Arbitrator after going through clause 16(2) of GCC and after referring to five decisions of Hon'ble Supreme Court awarded interest @ 18% per annum which in my view cannot said to be arbitrary or illegal. 29. In issue No.11, the Arbitrator directed both the parties to bear their own cost and dismissed the counter-claims made by the petitioner in Issue Nos.12, 13 & 14. After evaluating the entire evidence, which includes the heavy flooding which is an Act of God, the second respondent/ Arbitrator dismissed the counter-claims under Issues 12 to 14 and as these issues are also decided based on the peculiar facts of the case, the findings could not be interfered with by this court under Sec.34 of the Act 1996. 30. Thus, the award under challenge is a reasoned one and the same has been passed on the basis of proper evaluation of the evidence adduced before the arbitral tribunal. I am aware of the limited scope of Sec.34 and if the parameters as contemplated under Sec.34 are applied to the award under challenge, the same could not be interfered with by this court. Though a number of grounds have been raised on behalf of the petitioner, they are all attempts made on behalf of the petitioner to assail the award as if Sec.34 petition is an appeal. 31. In (2006)11 SCC 181 (cited supra), the Hon'ble Supreme Court held that the 1996 Act makes provision for the supervisory role of courts and this supervisory role is to be kept at a minimum level and the interference envisaged only in cases of fraud, or bias, violation of natural justice etc. The Hon'ble Supreme Court further held that interference on the ground of patent illegality is permissible only if the illegality goes to the root of the matter and also the public policy violation should be so unfair and unreasonable so as to shock the conscience of the Courts. The relevant paras reads as under: "52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the courts jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. 58. In Renusagar Power Co. Ltd. v. General Electric Co.5 this Court laid down that the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality. A narrower meaning to the expression public policy was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd. v. Saw Pipes Ltd.6 (for short ONGC). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly7 wherein the applicability of the expression public policy on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act. In ONGC6 this Court, apart from the three grounds stated in Renusagar5, added another ground thereto for exercise of the courts jurisdiction in setting aside the award if it is patently arbitrary. 59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter." 32. In the unreported judgment dated 15.12.2006 in O.P.No.547 of 2006 (cited supra), I had an occasion to deal with and decide an award passed by an Arbitral Tribunal against the Southern Railway. Based on the facts and circumstances of that case, I observed as under: "11. Insofar as the 1st claim is concerned, after holding that the extraordinary floods happened on 15.12.96 is an act of God, respondents 2 and 3 in their majority award awarded a sum of Rs.20.8 lakhs. The 4th respondent in her minority award after accepting that the floods that happened on 15.12.96 was an unusually heavy discharge of more than 1 lakh cusecs from Ponniar river awarded a sum of Rs.18.36 lakhs for the 1st claim. Thus all the arbitrators have unanimously upheld