1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION jmi ARBITRATION PETITION NO. 165 OF 2007. Union of India, acting through Chief Engineer, Central Railway, CSTM & Anr. ..Petitioners. vs. M/s. Saloja & Sons. ..Respondent. .... Mr. Suresh Kumar, for Petitioners. Mrs. Shilpa Kapil, for Respondent. .... CORAM : S.J. KATHAWALLA, J. DATE : 6TH DECEMBER 2010. P.C. The Petitioners Union of India through its Chief Engineer, Central Railway, CSTM and DEN (Sought East) Mumbai Division Central Railway, CSTM has filed the above Petition under section 34 of the Arbitration and Conciliation Act, 1996 impugning the Award dated 3rd January 2007 passed by the Arbitral Tribunal in C.A. No. A/138/PA Division dated 12th December 1997. 2. The Petitioners have challenged the said Award on the ground that the Arbitral Tribunal has pursuant to claim nos. 3, 4 and 5 of the Respondent wrongly awarded a sum of Rs.1,00,000/- to the Respondent and has further wrongly awarded an amount of Rs. 1,67,281.50 paise towards claim no.6 which pertains to payment of interest. It is the case of the Petitioners’ that the Award passed by the learned Arbitrator is opposed to the contractual provisions. 2 3. The Respondent has in Claim Nos.3, 4 and 5 claimed an amount of Rs.7,38,510/-, Rs.4,25,236/- and Rs.2,95,992/- towards under utilization of overhead expenses, labour force and machinery, respectively. Mr. Suresh Kumar appearing for the Petitioners has first drawn my attention to clause 2.3 of the Award which is reproduced hereunder : “CLAIM NO. 3-UNDER UTILIZATION OF OVERHEAD EXPENSES. CLAIM NO.4-UNDER UTILIZATION OF LABOUR FORCE. CLAIM NO.5-UNDER UTILIZATION OF MACHINERY. The above three claim nos. 3, 4 and 5 are discussed hereunder : The work has prolonged upto 31/12/2000 and acordingly, completion period of the contract has been extended upto 31/12/2000 without L.D. By Respondents. The Arbitral Tribunal is of the opinion that due to the delay on the part of Respondents in handing over site and making available suitable construction drawings, the claimants have suffered financial loss to some extent on account of under utilization of over head expenses, labour force and machinery upto 31/12/2000 (not upto 30/09/2004 as claimed by them). However, it is difficult to calculate exact loss suffered by the claimants for which they have preferred the modified claims of (a) Claim 3 – Rs.7,38,510.00 (b) Claim 4 – Rs. 4,25,236.00 (c) Claim 5 – Rs.2,95,992.00. Considering merit of case, the Arbitral Tribunal considers a lumpsum awards of Rs.1,00,000.00 as a reasonable amount to cover financial losses for all the three claims preferred by claimants.” 4. Mr. Suresh Kumar has also drawn my attention to clause 17(3) of the terms and conditions of the contract governing the parties which is reproduced hereunder : 3 “17.(3) In the event of any failure or delay by the Railway to hand over the contractor possession of the land necessary or the execution of the land necessary or the execution of the works or to give the necessary notice to commence the works or to provide the necessary drawings or instructions or any other delay caused by the Railway due to any other cause whatsoever, then such failure or delay shall in no way affect or vitiate the contract or alter the character thereof or entitle the contractor to damagers or compensation therefore but in any such case, the Railway may grant such extension or extensions of the completion date as may be considered reasonable.” 5. Mr. Suresh Kumar has therefore submitted on behalf of the Petitioners that in view of the Agreement between the parties contained in clause 17(3) of the contract, the Respondent in the first place were not entitled to claim any amounts towards under utilization of overhead expenses, labour force or machinery due to delay on the part of the Respondent in handing over site and making available suitable construction drawings. It is submitted that the Arbitrator therefore, erred in granting an amount of Rs.1,00,000/- to the Respondent in claim nos.3, 4 and 5 i.e. for under utilization of overhead expenses, labour force and machinery, in view of the alleged delay in handing over site and making available suitable construction drawings. Mr. Suresh Kumar has submitted that even otherwise, the Arbitrator has in paragraph 2.3 of the Award which is reproduced hereinabove held that it is difficult to calculate the loss suffered by the Respondent as claimed in claim nos. 3, 4 and 5. The burden of proving the loss suffered would be on the Respondent and a lumpsum Award of Rs.1,00,000/- could not have been awarded by the Arbitrator without any basis. Though the learned Advocate 4 appearing for the Respondent has tried to submit that the Arbitrator is justified in granting a lumpsum amount of Rs.1,00,000/- towards the claim nos. 3, 4 and 5, she could not point out how the learned Arbitrator could have considered the claim nos. 3, 4 and 5 of the Respondent which are opposed to clause 17.3 of the terms and conditions of contract, and even otherwise she was unable to point out the basis on which the learned Arbitrator came to the conclusion that a lumpsum amount of Rs.1,00,000/- is payable by the Petitioners to the Respondent. The submissions made by Mr. Suresh Kumar are therefore correct and the Award of Rs.1,00,000/- towards claim nos. 3, 4 and 5, is completely erroneous, unjust, opposed to the contractual provisions and is therefore set aside. 6. As regards granting of interest by the learned Arbitrator (claim no.6), Mr. Suresh Kumar has drawn my attention to clause 16(2) of the terms and conditions of the contract governing the parties and has submitted that the said clause bars payment of interest. Clause 16(2) is reproduced hereunder : “16(2). No interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the Contract, but Government Securities deposit in terms of sub-clause (1) of this Clause will be repayable (with) interest accrued thereon”. (emphasis supplied). 7. Mr. Suresh Kumar has submitted that the Arbitral Tribunal has granted an aggregate amount of Rs.1,67,281.50 to the Respondent towards interest on the ground that the Petitioners have delayed the release of the final bill, release of security deposit and interest on the amount of Rs.1,00,000/- awarded by the Arbitrator towards claim nos. 3, 4 and 5. He has further submitted that the 5 learned Arbitrator has granted the said interest amount in violation of the above clause 16(2) of the general conditions of the contract which bars payment of interest by the Petitioners. The learned Advocate for the Respondent also agrees that in view of the judgment of the Hon’ble Supreme Court in Sree Kamatchi Amman Constructions vs. The Divisional Railway Manager (Works), Palghat and Others, decided on 20th August 2010 that Arbitral Tribunal could not have awarded interest contrary to clause 16(2). 8. In the circumstances, the Award is set aside only to the extent of an amount of Rs.1,00,000/- granted towards claim nos. 3, 4 and 5 and the amount of Rs.1,67,281.50 granted towards the interest. The rest of the Award is upheld. 9. The Arbitration Petition is accordingly, disposed of. [ S.J. KATHAWALLA, J. ]