IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arbitration Appeal No.: 8 of 2007 Reserved on.: 29.6.2009. Date of decision : 24 .7.2009. State of H.P and another …Appellants. Versus M/s R.K. Construction Company …Respondent. Coram The Hon’ble Mr. Justice R.B.Misra, Judge. The Hon’ble Mr. Justice Deepak Gupta, Judge. Whether approved for reporting? 1No. For the Appellants: Mr. R.K.Bawa, Advocate General with Mr. P.K.Sharma, Addl. Advocate General and Mr. P.M.Negi, Deputy Advocate General. For the Respondent : Mr. J.S.Bhogal Sr. Advocate with Mr. B.C.Verma, Advocate. Per Deepak Gupta, J. (oral) This appeal is directed against the judgement dated 10th January, 2007 passed by the learned Single Judge of this Court in Arbitration case No. 50 of 2005. Briefly stated, the facts of the case are that the work of construction of New MLA Hostel at Vidhan Sabha, Shimla, was awarded to the respondent here-in-after referred to as the contractor. The work was to be completed on or before 25.3.1999 but was actually completed on 31.7.2000. Disputes 1 Whether the reporters of the local papers may be allowed to see the Judgment? 2 arose between the parties and the same were referred for adjudication to Shri D.S.Nirmohi, Chief Engineer (Retd.) as sole arbitrator by this Court. The contractor filed a petition setting forth five claims claiming a sum of Rs. 70,41,184/- in all. After hearing both the parties, the arbitrator passed an award on 30.4.2005 and awarded sum of Rs.23,06,677/- in favour of the contractor. Objections to the award were filed which were dismissed by the impugned judgement. Hence, the present appeal. One of the points raised before us is that the arbitrator himself had approved certain rates of various items as Chief Engineer and therefore, he should not have entered into reference. The learned Single Judge has held that these rates had already been approved before 31.7.2000. The arbitrator in question took charge as Chief Engineer thereafter and the only action he took was to convey the rates already approved by his predecessor on 4.8.2000. He had, therefore, not expressed any opinion on the matter. Even otherwise this objection was never raised during arbitration proceedings and as such could not have been permitted to raise at the belated stage. From the record it stands established that the appellant- State participated in the arbitration proceedings before the 3 Arbitral Tribunal without raising any objection to the constitution of the Tribunal at any stage. The learned Single Judge has rightly held that the appellant was precluded from challenging the award on this ground. Further more in this case Shri D.S.Nirmohi was appointed by the Court and no objection was ever raised to his appointment. The finding of the learned Single Judge that the award of the arbitrator is not vitiated on this ground is absolutely legal and correct and calls for no interference. The next argument raised is with regard to the interpretation of clause 12 of the contract agreement. It has been strenuously argued that the learned Single Judge has wrongly held that only the “Engineer-in-charge” of the work is competent to determine the rates under clause 12. Clause 12 reads as follows:- “CLAUSE 12.- The Engineer-in-Charge shall have power to make any alterations in, omissions from additions to or substitutions for, the original specifications, drawings, designs and instructions, that may appear to him to be necessary during the progress of the work, and the contractor shall carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in- charge, and such alterations, omissions, additions, or substitutions shall not invalidate the contract and any altered, additional or substituted work which the contractor may be directed to do in the manner above 4 specified as part of the work shall be carried out by the contractor on the same conditions in all respect on which he agree to do the main work. The time for the completion of the work shall be extended in the proportion that the altered, additional or substituted work bears to the original contract work, and the certificate of the Engineer-incharge shall be conclusive as to such proportion. Over and above this, a further period to the extent of 25% of the time so extended shall be allowed to the contractor. The rates for such additional, altered or substituted works under this clause shall be worked out in accordance with the following provisions in their respective order : (i) If the rates for the additional, altered or substituted work are specified in the contract for the work, the contractor is bound to carry out the additional, altered or substituted work at the same rates, as are specified in the contract for the work. (ii) If the rates for the additional, altered or substituted work are not specifically provided in the contract for the work, the rates will be derived from the rates for a similar class of work as are specified in the contract for the work. (iii) If the rates altered, additional or substituted work includes any work for which no rate is specified in the contract for the work and cannot be derived from the similar class of work in the contract, then such work shall be carried out at the rates entered in Himachal Pradesh Schedule of rate 1987 of tender minus/plus percentage which the total tendered amount bears to the estimated cost of the entire work put tender. 5 (iv) If the rates for the altered, additional or substituted work cannot be determined in the manner specified in clauses (i) to (iii) above, then the rates for such work shall be worked out on the basis of the schedule of rates of the district, specified above minus/plus the percentage which the total tendered amount bears to estimated cost of the entire work put to tender. Provided always that if the rate for a particular part/parts of the item is not in the schedule of rates, the rate for such part or parts will be determined by the Engineer-in-charge on the basis of the prevailing market rates when the work was done. (v) If the rates for the altered, additional or substituted work cannot be determined in the manner specified in sub-clause (i) to (iv) above, then the contractor shall, within 7 days of the date of receipt of order to carry out the work, inform the Engineer-in- Charge of rate which it is his intention to charge for such class of work, supported by analysis of the rate/rates claimed, and the Engineer-in-Charge shall determine the rate or rates on the basis of prevailing market rates, and pay the contractor accordingly. However, the Engineer-in-charge, by notice in writing, will be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable. But under no circumstances, the contractor shall suspend the work on plea of non-settlement of rates of items falling under this clause. (vi) Except in case of items relating to foundations, provisions contained in sub-clause (i) to 6 (v) above shall not apply to contract or substituted items as individually exceed the percentage set out in the tender documents (referred to herein below as “deviation limit”) subject to the following restrictions:- (a) The deviation limit referred to above is the net effect (algebrical sum) of all additions and deductions ordered. (b) In no case shall the addition/deductions (arithmetical sum) exceed twice the deviation limit. (c) The deviations ordered on items of any individual trade included in the contract shall not exceed plus/minus 50% of the value of that trade in the contract as whole or half the deviation limit, whichever less. (d) The value of additions of items of any individual trade not already included in the contract shall not exceed 10% of the deviation limit.” This point has been considered in a number of cases including a judgement of a Division Bench of this Court wherein one of us ( R.B.Misra, J) was a member in Arbitration Appeals No. 5 and 6 of 2006 decided on 26th May, 2009. Clause 12 has been interpreted in the aforesaid judgement. It has been clearly held that clause 12(v) of the contract nowhere provides for the approval of rates determined by the Engineer-in-Charge by some engineer superior to him. This view has also been taken by this Court in Executive Engineer, HPPWD vs. Rajesh Thakur, 2004 (2) Shim.L.C.42. A bare reading 7 of clause 12(v) shows that no further approval is required by any higher authority. This issue is accordingly decided against the appellant. As far as interest is concerned, the learned arbitrator has only awarded interest @ 11 % per annum from 31.1.2000 till date of award. There is no illegality in this part of the order since the contractor was deprived of the amount legally due and payable to him. In view of the above discussion the appeal filed by the State is dismissed. No order as to costs. ( R.B.Misra) Judge. 24th July, 2009. (Deepak Gupta) ™ Judge.