THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLESRI JUSTICE G.V.SEETHAPATHY CMA No.2105 and CRP No.3081 of 2000 Date of Order: 12-4-2010 CMA NO.2105/2000: Between: 1. The Government of Andhra Pradesh, represented by the Superintending Engineer, YRPC Circle and another. ..Appellants And 1. M/s. S.V. Engineering Constructions Ltd., registered office at 40-6-3, Venkateswarapuram, Vijayawada and others. ..Respondents The Court made the following Order: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLESRI JUSTICE G.V.SEETHAPATHY CMA No.2105 and CRP No.3081 of 2000 COMMON JUDGMENT: (Per Hon’ble Sri Justice A.GOPAL REDDY) This Civil Miscellaneous Appeal and the Civil Revision Petition are directed against the orders dt. 23-3-2000 passed in OP Nos.362/1994 and 13/1996 on the file of Senior Civil Judge, Visakahpatnam, respectively, whereby and whereunder OP No.362/1994 filed by the Government under Sections 30 and 33 of the Arbitration Act, 1940 (for short “the Arbitration Act”) seeking to set- aside the award passed by the respondents 2 to 4 dt. 29-9-1992 has been dismissed and OP No.13/1996 filed by M/s. Sri Venkateswara Engineering Contractors, Vijayawada (hereinafter referred to as “the Contractor”) under Sec. 17 of the Arbitration Act to pass a decree in terms of the award dt. 29-9-1992 was allowed passing a decree making the award a rule of the court. The facts in nutshell, which give rise to filing of the appeal and the revision, are as under: In response to the invitation of tender for excavation of Yeleru Left Mail Canal from KM 95.00 to 101.500 including cement concrete lining by the Superintending Engineer, Irrigation and Project Development, Yeleru Reservoir Circle, Visakhapatnam (hereinafter referred to as “the employer”), the Contractor submitted its tender, which was accepted, vide L.S. Agreement No.24/80-8130-3-1981. The value of the work specified in the contract agreement is Rs.33,74,250/-. The work is to be completed within 15 months from the date of handing over of the site. The site was handed over on 16-3-1981 and the work should be completed on 15-6-1982. Since the contractor could not complete the work as per the schedule rate of progress, the employer issued several notices pointing out the short falls in various spells calling upon the contractor to achieve the rate of progress and complete the work within the stipulated time. Since the contractor could not complete the work in time, time was extended at the request of the contractor in several spells upto 31-1-1990 by penalizing for slow progress under Cl.60(b) of Preliminary Specifications (PS) to Andhra Pradesh Detailed Standard Specifications (APDSS). Even during the extended period, the contractor did not complete the work. As the Contractor voluntarily left the work without completion of the same, the employer forfeited EMD and FSD. On employer forfeiting EMD and FSD, the contractor invoked the arbitration clause under the agreement and respondents 2 to 4 were appointed as Arbitrators before whom the contractor filed claim statement under 12 heads, to which, the employer filed rebuttal statement. To the rebuttal statement, the contractor filed rejoinder. The arbitrators by the impugned award admitted the claims for the amounts mentioned in the table shown below. The details of claims, arbitral award thereon and the relief granted by the civil court are shown in the table below. Claim No. Claim for Amount claimed Amount awarded by the arbitrator Civil court decree 1 Refund of deposits, EMD 36,100/- 36,100/- Affirmed 2 Release of FSD withheld from bills 1,22,438/- 1,22,438/- Affirmed 3 Waiver of fines imposed and releasing payment 13,700/- 13,700/- Affirmed 4 Releasing payments withheld by allowing part rates 3,19,814/- 2,70,166/- Affirmed 5 Releasing payment for the work done but not paid 50,820/- 39,822/- Affirmed 6 Compensation towards idle labour charges paid due to delay in handing over s i t e from KM 100.075 to 100.275 30,000/- Rejected Affirmed 7 Payment for the work done beyond initial contract period at the schedule rates of Irrigation Circle, Visakhapatnam for the respective years 21,08,674/- 13,76,932/- Affirmed 8 Releasing excess amount recovered towards seinorage charges for earth used for embankment 20,921/- 20,921/- Affirmed 9 Payment of compensation for the overhead charges incurred during period from15-6-1982 to 31-1-1990 3,27,000/- 1,18,433 Affirmed 10 Compensation towards loss of productivity/profit 2,25,517 Interest at 15%on the amount awarded under various claims from 1-7-90 to the date of decree Affirmed 11 Payment of interest on amount of work done to a tune of about Rs.1,85,000/- for w h i c h payments were not made from 1/1984 to 12/1985 (both months inclusive) 66,600/- Disallowed Affirmed 12 Towards the cost of arbitration reference 8,300/- Each party should bear its own costs. Affirmed Total 33,29,884/- Sri Y.Chandra Sekhar, learned Special Government Pleader representing the Advocate General contended that claim Nos.7, 9 and 10 are hit by Clause 59 of Preliminary Specifications (PS) to Andhra Pradesh Detailed Standard Specifications (APDSS). Referring to the various decided cases of this court as well as the Apex Court, learned Counsel submitted that all the claims are prohibited under Cl.59 except extension of time for completion of the work. To buttress the said submission, reliance is placed on the following judgments: 1. RAMNATH INTERNATIONAL CONSTRUCTION PVT.LTD. V. UNION OF INDIA[1] 2. K.MARAPPAN V. SUPERINTENDING ENGINEER, T.B.P.H.L.C.CIRCLE[2] He further contended that claim No.10, towards loss of productivity/profit is again hit by clause 59 and to buttress the said submission, reliance is placed on the judgment of this court in APSRTC V. M/S. SEW CONSTRUCTIONS LIMITED ENGINEERS AND CONSTRUCTIONS[3] and DHIRUBAI D. & COMPANY, ENGINEERS & CONTRACTORS V. NIZAM SUGAR FACTORY LIMITED[4]. Further, the arbitrators cannot award interest from the date of award till the date of realization as held by this court in PRASAD AND COMPANY V. SUPERINTENDING ENGINEER (I.C)[5], and the same is liable to be set-aside. Sri B.Adinarayana Rao, learned counsel for the respondent- contractor would contend that once the work was forced to be done beyond the agreement period, the contractor is entitled to the compensation at scheduled rates, and in rebuttal to the claim statement, the employer has not rebutted the claims of the contractor. Once the arbitrators were not called upon to decide the claims, they are bound by the decision of the arbitrators. He further contends that in the grounds, they have not challenge the same as prohibited, which is barred by limitation. He further contended that in regard to claim No.10 though the employer invoked the prohibition contained in Cl.59 for the work don beyond the extended period the arbitrators can award the same. To substantiate the same he refers to the judgment of the Supreme Court in K.N. SATHYAPALAN (DEAD) BY L.Rs. V. STATE OF KERALA AND ANOTHER[6] and ASIAN TECHS LTD. V. UNION OF INDIA[7]. He further contended that Cl.59 does not bar entertaining of the claims by the arbitrator but bars award of the compensation etc., by the arbitrator. He lastly contended that there are no merits in the appeal and revision filed by the employer and prayed for dismissal of the same. Before we proceed to examine the rival contentions, as the entire gamut of the arguments revolve around interpretation of Cl.59 of Preliminary Specifications (PS) to Andhra Pradesh Detailed Standard Specifications (APDSS), it is appropriate to notice the same, which reads as under: "59. Delays and extension of time : No claims for compensation on account of delays or hindrances to the work from any cause whatever shall lie, except as hereinafter defined. Reasonable extension of time will be allowed by the Executive Engineer or by the office competent to sanction the extension for unavoidable delays, such as may result from causes, which, in the opinion of the Executive Engineer, are undoubtedly beyond the control of the contractor. The Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty five per cent in excess of the actual working period so lost. In the event of the Executive Engineer failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the superintending Engineer of the Circle whose decision will be final and binding. The contractor shall lodge in writing with the executive Engineer a statement of claim for any delay or hindrance referred to above, within fourteen days from its commencement, otherwise no extension of time will be allowed. Whenever authorized alterations or additions made during the progress of the work are of such a nature in the opinion of the Executive engineer as to justify an extension of time in consequences thereof, such extension will be granted in writing by the Executive Engineer or other competent authority when ordering such alterations or additions. In TARAPORE & Co. V. STATE OF M.P[8] while holding that mere lack of specific provision permitting the claim in question does not oust the jurisdiction of the arbitrator rejected the contention of the counsel that whatever is not excluded specifically by the contact can be the subject-matter of claim by the contractor and observed that ”such proposition will mock at the terms agreed upon. Parties cannot be allowed to depart from what they had agreed. Of course, if something flows as a necessary concomitant to what was agreed upon, the Court can assume that too, as a part of the contract between the parties.” Justice B.P.Jeevan Reddy (as His Lordship then was) speaking for the Bench in STATE OF ANDHRA PRADESH V. ASSOCIATED ENGINEERING ENTERPRISES, HYDERABAD[9] held that where Cl.59 of APDSS provided that neither party to the contract shall claim compensation "on account of delays or hindrances to work from any cause whatever", award passed by an arbitrator ignoring such express terms of the contract was bad. In ASSOCIATED ENGINEERING CO. V. GOVT. OF ANDHRA PRADESH[10], it was held by he Supreme Court that “The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.(para 24) An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialized branch of the law of agency (see Mustill and Boyd’s Commercial Arbitration, 2nd edn., p. 641). He commits misconduct if by his award he decides matters excluded by the agreement (see Halsbury’s Laws of England, Volume II, 4th edn., para 622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.” (Para 25) While approving the view of this court in ASSOCIATED ENGINEERING ENTERPRISES, HYDERABAD (9 supra), the Supreme Court in G.M.N.RLY. V. SARVESH CHOPRA[11] summed up the conclusions at para 17 as under (i) while deciding a petition under Section 20 of the Arbitration Act, 1940, the court is obliged to examine whether a difference which is sought to be referred to arbitration is one to which the arbitration agreement applies. If it is a matter excepted from the arbitration agreement, the court shall be justified in withholding the reference, (ii) to be an excepted matter it is not necessary that a departmental or an “in-house” remedy for settlement of claim must be provided by the contract. Merely for the absence of provision for in-house settlement of the claim, the claim does not cease to be an excepted matter, and (iii) an issue as to arbitrability of claim is available for determination at all the three stages — while making reference to arbitration, in the course of arbitral proceedings and while making the award a rule of the court. I n CH. RAMALINGA REDDY V. SUPERINTENDING ENGINEER[12], while considering the similar claim, namely, for payment of extra rates for work done beyond agreement time at schedule of rate prevailing at the time of execution, the Supreme Court observed thus: "claim 8 was for 'payment of extra rates for work done beyond agreement time at schedule of rate prevailing at the time of execution'. The arbitrator awarded the sum of Rs. 39,540. Clause 59 of the A. P. Standard Specifications, which applied to the contract between the parties, stated that no claim for compensation on account of delays or hindrances to the work from any cause would lie except as therein defined. The claim falls outside the defined exceptions. When extensions of time, were granted to the appellant to complete the work, the respondents made it clear that no claim for compensation would lie. On both counts, therefore, claim 8 was impermissible and the High Court was right in so holding. " After referring to the above three judgments, namely, ASSOCIATED ENGINEERING CO (10 supra); ASSOCIATED ENGINEERING ENTERPRISES, HYDERABAD (9 supra); and CH. RAMALINGA REDDY (12 supra), the Supreme Court in RAMNATH INTERNATIONAL CONSTRUCTION PVT. LTD (1 supra) while interpreting Section 11 of the General Conditions of Contract which relates to time, delay and extension, answered question No.1 (Whether claim No.24 of Hangar Contract and claim Nos.13 to 16 of road contact are unsustainable being in derogation of clause ( C ) of the contract, which prohibits any compensation as a result of extension of time granted by the department?) in the affirmative; and question No.2 (Whether the arbitrator committed a legal misconduct for not acting in term of clause 11 (C) of the contract though pleaded and submitted before him?) holding as follows: “As rightly held by the High Court, which decision we have affirmed while considering questions no. (i), clause 11 (C) of the General Conditions of Contract is a clear bar to any claim for compensation for delays, in respect of which extensions have been sought and obtained. Clause 11 (C) amounts to a specific consent by the contractor to accept extension of time alone in satisfaction of his claims for delay and not claim any compensation. In view of the clear bar against award of damages on account of delay, the arbitrator clearly exceeded his jurisdiction, in awarding damages, ignoring clause 11 (C ).” After referring to paras 26,28,30 of the judgment of the Supreme Court in ASSOCIATED ENGINEERING CO., (10 supra), and paras 21 and 22 of the judgment of the Supreme Court in RAJASTHAN STATE MINES & MINEERALS LTD., V. EASTRN ENGINERING ENTERPRISES & ANR[13], it was held at para 14 thus: “…Arbitrator clearly misconducted himself in awarding compensation under claim no. 24 under Hangar Contract and claim nos. 13 to 16 under the Road Contract which was rightly set aside by the High Court in the order impugned herein, on the ground that the Arbitrator had acted in excess of his jurisdiction”. This court in K.MARAPPAN (2 supra), after following the ratio laid down in the preceding judgments held that it is now settled by the Apex Court that in the circumstances where the contractor could not complete the work within a period as contemplated and sought extension, such delays cannot constitute a ground to mulct with any liability as against the Government or the employer. While holding claim No.2, which relates to compensation on account of workable rate for the work done beyond the agreement period; claimNo.3, which relates to non-supply of food grains as pr the conditions of the agreement; claim No.4 relating to reimbursement of short supply of cement; claim No.5 with regard to loss incurred by he contractor due to idle equipment and plan and claim No.1 relating to extra lead of 4 km for stone and metal amount to compensation within the parameters of the bar as provided under Cl.59 and set-aside the award. Keeping in view the legal principles as enunciated above, we will now deal with the submissions with respect to each claim. Claim No.7: This is a claim for payment of amount of Rs.21,08,674/- for the work done beyond the initial contract period alleging that entire site was handed over on 16-3-1981 and clearance for commencing the work in the reach from KM 100.075 to 100.275 was given during November, 1982 after stipulated date of completion ie.,15-6-1982. Thereafter, extension of time was granted by the Superintending Engineer upto 31-5-1983 and later upto 29-2-1984 by proceedings dt. 9-12-1982 and 8-11-1983. Thereafter, the work was suffered due to the interruptions mentioned and beyond the control of the contractor. Thereafter, he was forced to continue the work upto 31-1-1990. During the span of 8 years, there is appreciable increase in rates of materials and labour, as detailed in the claim petition. The employer in its rebuttal statement stated that the problem in handing the small bit was in no way hampered to the progress of the work. The contractor himself is responsible for prolongation of the work upto 31-1-1990. In spite of his failure in completing the work during the contract period and even during extended period, the contractor not completed the work and is not supposed to blame the employer. The contractor has not adhered to the targets fixed as per the agreement conditions. The delay in completing the work lies with the contractor only and the contractor is responsible for the delay and the employer will not take any responsibility for increase in cost of labour and the materials. The Arbitrators in their award accepted the claim to a tune of Rs.13,76,932/- stating that there was increase in cost of various items and adopting the increase in rates compared with SSR rates of the year 1980-81 on the grounds mentioned in para 7.0 onwards. In para 7.3 of the award, the arbitrators have noted about the five supplemental agreements and noticed that some of the items or part of the quantities included in the supplemental agreements were not executed. The employer in its rebuttal statement have omitted to mention supplemental agreement No.9/82-83 with agreement value of Rs.19,08,105/-. Major items in this agreement are canal lining which were executed and paid and why the employer failed to mention it is not clear. In para 7.6, from the payment particulars, it is noticed that 75% of the work was completed by the end of 1984. Had the payments been released in 1984 and 1985, had the department paid full rates for canal cutting for the reaches where full cutting was done, had the department settled the rates in time and paid fully for all supplemental items, the Contractor could have completed the work by the end of 1985 itself. If the contractor was really at fault, the employer could have terminated the contract under clause 60(a) or 61 or supplemented under cl.60(c). Even a notice under cl.60(a) or 61 was not issued, instead a half hearted notice under 60(c) of PS to APDSS was issued to the contractor on 25-1-1990 asking the contractor to complete the work and the employer could not establish fully the responsibility of the contractor for the delay in execution of the work. Indisputably, the supplemental agreements entered into between the contractor and the employer on 17-10-1981; 6-7-1981; 8- 1-1982; 19-6-1982 and 17-6-1989 for various amounts were mentioned in the award at para 7.3 of the award. In CH. RAMALINGA REDDY (12 supra), the Supreme Court approved the view taken by the Division Bench of this court in CMA No.1148/1986 referring to Cl.59 of APDSS and held that in the light of specific provision, such a claim is inadmissible. In RAMNATH INTERNATIONAL CONSTRUCTION PVT. LTD (1 supra) the Supreme Court fully agreed with the observation made in CH. RAMALINGA REDDY (12 supra), wherein it was categorically held that claim No.8 was for payment of extra rates for work done beyond the agreement time at schedule of rate prevailing at the time of execution. The arbitrator awarded the sum of Rs.39,540/-. Clause 59 of the A.P. Detailed Standard Specifications, which applied to the contract between the parties, stated that no claim for compensation on account of delays or hindrances to the work from any cause would lie except as therein defined. The claim falls outside the defined exceptions. When extensions of time, were granted to the contractor to complete the work, the employer made it clear that no claim for compensation would lie. On both counts, therefore, claim 8 was impermissible and the High Court was right in so holding. The same view has been taken by this court in M/S. SEW CONSTRUCTIONS LIMITED ENINEERS AND CONSTRUCTIONS (3 supra) and DHIRUBAI D. & COMPANY, ENGINEERS & CONTRACTORS (4 supra). In view of the same, it is difficult to accept contention of Sri B. Adinarayana Rao, learned counsel for the contractor that for the work done beyond the agreed period, the contractor is entitled to be paid at the rates as per SSR rates prevailing during the course of execution of the work and the arbitrators were not called upon to decide the bar under Cl.59. In OP No.362/99, the employer asserted that ignoring all factual things and ignoring the agreement conditions etc., the panel of arbitrators have erred in awarding claim No.7. Moreover the panel of arbitrators wrongly concluded in awarding this claim traveling beyond the scope of agreement conditions and their limitations without giving proper reasons and misconducted the proceedings. As held by the Supreme Court in SARVESH CHOPRA (11 supra) the issue as to arbitrability of claim is available for determination at all the three stages, namely, while making reference to arbitration, in the course of arbitral proceedings and while making the award a rule of the court. In view of the same, it is always open for the employer to question the award either under Section 30 or 33 or when the case is called upon to make the award a rule of the court. Therefore, the award of the arbitrators awarding a sum of Rs.13,76,932/-, as affirmed by the civil court, is liable to be set-aside and we accordingly do so. Claim No.9: The contractor claimed an amount of Rs.3,27,000/- towards compensation for the overhead charges incurred during the period from 15-6-1982 to 31-1-1990 ie., for a period of 8 years contending that he is forced to continue the establishment from 15-6-1982 to 31-1-1990 and this was an unexpected additional burden cast upon him and as they are no way responsible for the continuance of the work beyond the initial contract period, they are entitled to claim damages. The employer filed its rebuttal statement stating that the work was excavated beyond the agreement period only due to contractor’s faults and the contractor was permitted to continue the work under Cl. 60(b) which is a penal provision. Even under P.S. 59 which is a non-penal extension of time, there is a ban for payment of compensation. The conclusions reached while deciding claim No.7 equally applies to this claim also. Therefore, the award of the arbitrators towards compensation for the overhead charges incurred is beyond the scope of the agreement and is liable to be set- aside and we accordingly do so. Claim No.10: This claim relates to payment of compensation towards loss of productivity/profit to a tune of Rs.2,25,317/-. While claiming the above compensation, the contractor alleged that an amount of Rs.5,63,793/- is outstanding payment since 1-2-1990 and not paid so far in spite of their requests. Had the respondents released the above amounts without loss of time, they would have engineered a business twice the amount and derived a profit of at least 20%. Therefore, due to delay in payment of amount, the contractor suffered a loss of productivity/profit to a tune of Rs.2.25.317/-. The employer opposed the claim stating that as per the