IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD SATURDAY, THE EIGHTEENTH DAY OF APRIL TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE GHULAM MOHAMMED and THE HON'BLE SRI JUSTICE P.SWAROOP REDDY CIVIL MISCELLANEOUS APPEAL NO : 2424 of 1998 (Appeal under Section ____ against the order/decree in OP no. : 67 of 1997 dated 08/06/1998 on the file of the court of thePrincipal Senior Civil Judge, L.B.Nagar) Between: A.Narahari Rao S/o. Sri A. Mallaiah R/o 12-5-29/2 Tarnaka Secunderabad ..... APPELLANT AND 1 Union of India Union of India Rep. by Executive Engineer Telecom., Civil Division No. 1 Barkatpura, Hyderabad 2 Sri S.K.Ahuja O/o Chief Engineer (Arbitration) Department of Telecom., Mohan Singh Place, 6th floor, Baba Kharak Singh Marg, New Delhi - 110 001, (2nd Res. Arbitrator has no interest in the Lis. Hence he is not necessary party to the appeal) .....RESPONDENT(S) Counsel for the Appellant:MR.K.PRABHAKAR Counsel for the Respondent No.: MR.A.RAJASHEKAR REDDY CIVIL MISCELLANEOUS APPEAL NO : 2434 of 1998 (Appeal under Section ____ against the order/decree in OS no. : 636 of 1996 dated 08/06/1998 on the file of the court of thePrincipal Senior Civil Judge, L.B.Nagar) Between: A.Narahari Rao S/o. Sri A. Mallaiah R/o 12-5-29/2 Tarnaka, Secunderabad ..... APPELLANT AND 1 Union of India Union of India Rep. by Executive Engineer, Telecom., civil Division No. 1, Barkatpura, Hyderabad 2 Sri S.K.Ahuja O/o Chief Engineer (Arbitration) Department of Telecom., Mohan Singh Place, 6th floor, Baba Kharak Singh Marg, New Delhi - 110 001. 2nd Respondent is not necessary to this party) .....RESPONDENT(S) Counsel for the Appellant:MR.K.PRABHAKAR Counsel for the Respondent No.: MR.ANDAPALLI SANJEEV KUMAR CIVIL REVISION PETITION NO : 2733 of 1999 Petition under Section ____ of CPC., to revise/against the order dated ______ in NO : of 0 on the file of the court of the Between: A.Narahari Rao S/o Sri. A.Mallaiah 12-5-29/2, Tarnaka Hyderabad ..... PETITIONER AND The Union of India, The Union of India, rep. by its Executive Engineer Telecom Civil Division No. 1 HYDERABAD .....RESPONDENT Counsel for the Petitioner: MR.K.PRABHAKAR Counsel for the Respondent No.: . The Court made the following : GM & PSR, JJ. C.M.A.Nos 2424 and 2434 of 1998 and C.R.P.No. 2733 of 1999 Judgment (Per P. Swaroop Reddy, J.) The above three cases are filed against the orders and decree passed by the learned Principal Senior Civil Judge, Ranga Reddy District as detailed below. As the issue involved for adjudication in all the matters is one and the same, they are heard together and/are being disposed of by this Common judgment. For the sake of convenience, the parties herein would be referred to as they are arrayed before the trial court, as in O.S.No. 636 of 1996. S.No. CMA.No. OP.No. Filed 1 C M A . 2 4 2 4 of 1998 O.P.No. 67 of 1997 B y the first respondent in the trial court. 2 C M A . 2 4 3 4 of 1998 O.S.No. 636 of 1996 By the plaintiff 3 C R P . 2 7 3 3 of 1999 I.A.No.1930 of 1998 in O.S.No. 636 of 1996 By the respondent/ Plaintiff 2. O.S.No. 636 of 1996 is filed by the plaintiff under section 14 of the Arbitration Act 1940 read with section 26 and order 7 rule 1 and 2 of CPC to make the Award passed by the second defendant on 25.9.1996 Rule of the Court in respect of the work of construction of administrative building for TTTC at Gachibowli, Ranga Reddy District covered by agreement No.7/TCDH/89-90 and for interest @ 24% per annum. 3. O.P.No. 67 of 1997 is filed by the Union of India represented by the Executive Engineer, Telecom, Civil Division No.1, Barkatpura, Hyderabad, for setting aside the Award. 4. The facts are as follows: The plaintiff, a contractor entered into an agreement with the first defendant, Union of India for construction of Administrative building for TTTC at Gachibowli – the agreement being No.T/TCDH/89-90. During the execution of the work certain disputes arose between the parties, which were referred to Arbitrator. The second defendant herein was appointed as Sole Arbitrator, who passed Award on 25.9.1996. The plaintiff received the award on 5.10.1996 and wanted it to be made Rule of the Court. The first defendant-Union of India contended that the Arbitrator failed to consider all the pleadings of the first defendant and its documents; has gone beyond purview of the agreement entered into between the parties and passed the Award, which is not in accordance with law. Before the trial court no oral evidence was adduced but only Ex A-1, the original Award was marked. On a consideration of the material before him, the learned Senior Civil Judge partly allowed O.S.No. 636 of 1996 and made the Award Rule of the court with the following modifications: i) Claim No.6 at page No.6 and additional claim No.1 at page 7 and 8, the amount arrived at by the defendant No.2 Arbitrator shall be paid to the plaintiff by the defendantNo.1 after deductions an amount of Rs.24,80,957.00 paid by the defendant No.1 towards escalation charges under Cl.10 CC for the prolonged period of contract. ii) Under additional claim No.2 at page 9 of Ex A-1, Award, the plaintiff is entitled for an additional claim of RS.4,60,000-00 instead of Rs.6,90,000.00 awarded. The plaintiff is entitled for 15% interest on the said amount from the date of Award till the date of realization. and dismissed O.P.No. 67 of 1997 filed by the Union of India. Aggrieved by the same the plaintiff filed the appeals and revision as detailed above. 5. Now the learned counsel for the plaintiff assailed the judgment of the learned Senior Civil Judge on the ground that under section 30 of the Arbitration Act, there were no grounds for modifying the Award and the learned Senior Civil Judge has erroneously disallowed the claims under additional claim No.1 and claim No.6, as well as additional claim No.2; whereas the learned Assistant Solicitor General, appearing for the Union of India contends that even the amounts awarded by the learned trial Judge under these two claims are erroneous and the rate of interest granted @ 15% per annum is on high side. 6. The following three points would arise for consideration in these appeals. i) Whether under section 30 of the Arbitration Act, the present Award could not have been modified by the learned Senior Civil Judge? ii) Whether the amounts reduced under Additional Claim No.1 and Claim No.6 are in order? iii) Whether the learned Senior Civil Judge was justified in reducing the amount under claim No.2? 7. Point No.ii: The stipulated date of commencement of work in this case was 14.07.1989 and the date of completion of contemplated work was 13.08.1991; but it could be completed in September, 1995. The reasons stated for prolongation are change of site for construction; change in the lay out plan and change in the type of structure, which delayed in revising structural design. There was also delay in supplying material like Cement and Steel. There were also delays in communicating the decisions passed on site condition and on account of fixing other agencies for completion of works like filling under floor etc. Considering the above circumstances, the first defendant granted extension of time till the actual date of completion of work – 30-9-1995 without any levy of compensation. 8. The plaintiff contended that due to the delays caused by the first defendant, there was escalation of market price; rates of material and labour charges went up and he informed the same vide letter dated:4.4.1990 (marked as C-10 before the Arbitrator). He demanded 20% extra over and above the agreement rates and requested for closure of the contract in the alternative. Subsequently, the plaintiff further demanded revised rates vide his letter dated:23.7.1992 marked as C-30 before the Arbitrator. He demanded the rates as noted in Annexure-B for the quantities of work executed beyond the stipulated date of completion of work and upto June, 1992. The learned Arbitrator found that the delay has occurred on account of the responsibility of the first defendant who has granted extension of time and held that that the plaintiff is fully entitled for compensation towards increased cost of performance. He relied on a decision of the Hon’ble Supreme court in Hyderabad Municipal Corporation v. Krishna Swamy[1]. 9. The learned Arbitrator further held that the plaintiff prayed for revised rates as per his letter dated:23.7.1992 marked as C-30 for the work executed beyond August 1991 till June, 1992, as per Annexure-B and held that the same is not justified as revised rates cannot be demanded by the plaintiff subsequently. He further held that at best the demand made by the plaintiff for payment of increased rate of interest of 20% above the agreed rate, as demanded in letter 4.4.1990, marked as Ex C-10, can be considered for the work executed beyond the stipulated dates of completion i.e., 30-8-1991 to 23.7.1992; that the value of the work done by the plaintiff and paid by the first defendant as per R-34 is for Rs.24,93,945.00 between 14.8.1991 and 23.7.1992 and 20% out of that comes to Rs.4,98,789.00 and allowed the claim to that extent. 10. With regard to the additional claim No.1, the learned Arbitrator held that as discussed in claim No.6, the claimant is fully entitled for compensation towards the increased cost due to the breaches and prolongation caused by the first defendant. The plaintiff vide his letter dated:23.7.1992 (C-30) prayed for revised rates as per Annexure-B for the works executed beyond 23.7.1992 till completion. As per Annexure-B, the revised rates demanded by the claimant are about 43% above the agreement rates and in addition to escalation under clause 10CC. 11. On the basis of material placed before him the learned Arbitrator held that the rates demanded by the plaintiff were based on the market rate prevailing during that period. The escalation paid under clause 10CC is 32% on net value of work and about 16% of increased value of the work done for the period between June, 1989 to September, 1995 i.e., for about six years period; that in case the escalation between the period of July, 1992 and September, 1995 is considered, it would be approximately 16/2 – 8% on the revised rates demanded by the plaintiff vide Annexure-B. 12. The leaned trial Judge held that when the work executed by the plaintiff for the prolonged period was accepted by the first defendant without any demur, the revised rates demanded by the plaintiff at 43% are reasonable and justified; but held that in view of the cooperative attitude of the first defendant and with a view to mitigate the losses he is allowing 20% above the agreement rates paid on the gross value of the work, apart from escalation charges paid under clause 10CC. 13. The learned Arbitrator held that as per R-34, the quantum of work executed during the period from 24.7.1992 till the date of completion of work was worth of Rs.1,28,54,934 + Rs.4,62,930, which comes to Rs.1,33,17,864.00 and 20% of that comes to Rs.26,63,573.00. 14. Before the learned Senior Civil judge, it was contended that as per the agreement, in case of delay the contractor is not entitled for any compensation, except extension of time. There is bar from claiming compensation under escalation claim for the prolonged period of the contract and the contractor is not entitled for claim No.6 and the escalation charges paid under clause 10CC are liable to be deducted from the claim. When revised charges have been awarded by the Arbitrator the escalation charges paid specifically for the period extended, are liable to be deducted and the Arbitrator erroneously awarded the revised rates apart from the escalation charges paid. The learned Senior Civil Judge held that enhanced rates ordered by the Arbitrator towards the revised rates for the extended period of contract, apart from the escalation charges paid by the first defendant for the prolonged period of contract without deducting the escalation charges already paid, is an error apparent on the face of the record, if not legal misconduct and held that under claim No.6 and additional claim No.1, the claim awarded by the Arbitrator is to be allowed subject to the amount of escalation charges paid by the first defendant for the prolonged period of contract, being deducted and to pay the amount by deducting the escalation charges already paid from the payment made for the prolonged period of contract, as it would amount to double payment. 15. Now the contention of the learned counsel for the Plaintiff is that the plaintiff is entitled under both counts for the escalation as per clause 10CC and additional amount awarded @ 20% on the basis of market rate. This contention cannot be accepted at all, as the plaintiff cannot claim in both ways – on the basis of escalation as per clause 10CC and additional amount on the basis of the market rates. 16. It is the contention of the learned counsel for the plaintiff that the learned Arbitrator having held that 43% and above the contract rates are reasonable, but awarded only 20%, which itself is unjustified. We are not at all impressed with the contention of the learned counsel for the plaintiff, as there is no question of his being entitled for the amount under two counts, as discussed above. Thus this point is answered against the plaintiff. 17. Point No.iii: This point relates to reduction of amount under claim No.2. The contention of the plaintiff with regard to claim No.2 is that the learned Arbitrator held that the construction of West Block was originally with RCC beams and slab which was subsequently changed to waffle slab for which special type of centering and shuttering was required and the plaintiff during the execution of the work intimated the first defendant vide his letter dated:21.6.1993 demanding extra rates @ Rs.150.00 per square meter over and above the agreement rates, which were not refuted by the first defendant. The quantum of work executed was 4600 square meters. As the first defendant has not refuted the claim in any way, the Arbitrator awarded @ Rs.150.00 per square meter for 4600 square meters and a total sum of Rs.6.90 Lakhs was awarded. 18. The contention of the first defendant is that even assuming that the entire contention of the plaintiff with regard to change of roof and spending of additional expenditure is true also, the original specification amount has to be deducted from out of the amount awarded. The learned Senior Civil Judge accepted this contention which was reasonable and reduced the amount representing the value of the original rate, which was calculated at Rs.50.00, deducted the same and allowed Rs.4.60 Lakhs instead of Rs.6.90 Lakhs. We see no illegality in this finding of the learned Senior Civil Judge, as in case there is enhanced rate, the original rate has to be obviously deducted and the claimant cannot be paid, in addition to the original rate. This point is also accordingly answered against the plaintiff. 19. Point No.i Now coming to point No.1 i.e., whether in view of Section 30 of Arbitration and Conciliation Act, the present Award could not have been modified by the learned Senior Civil Judge, comes up for consideration. 20. The contention of the learned counsel for the appellant is that there are absolutely no circumstances for the learned trial judge to modify the Award of the Arbitrator, as the scope of the trial judge under section30 of the Act is very limited for setting aside or modifying the Award. 21. The contention of the learned Assistant Solicitor General appearing for the respondents is that the learned Arbitrator erred in calculating the amount by almost giving the amount twice i.e., the same amount under two counts and there was sufficient material for modifying the award and there is no illegality. 22. The learned counsel for the appellant relied on a decision of the Hon’ble Supreme Court in U.P. Hotels v. UP State Electricity Board[2]. In this decision, the Hon’ble Supreme Court held that even in case where there is an error of the construction of the agreement or even when there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction under Section 30 of the Arbitration Act, that in order to set aside the Award there must be wrong proposition of law laid down in the Award, as the basis of the Award. 23. In another decision of the Hon’ble Supreme Court in M/s. Sudershan Trading Co. v. Govt. of Kerala[3], the Hon’ble Supreme Court observed that “when the amounts are awarded by the Arbitrator by taking a particular view of the contract, the court cannot substitute its own decision”. 24. In H.P. State Electricity Board v. R.J. Shah[4], the Hon’ble Supreme Court held that “If award is in excess of the jurisdiction of the arbitrator then it is liable to be set aside but if the award is within jurisdiction on the basis of construction of the contract, which the arbitrator was required to do, then the court cannot set aside merely because another view was possible.” In this decision, the Hon’ble Supreme Court observed that “this court has, over the years, had occasions to deal with the cases of awards where there was want of jurisdiction in contradiction to the cases where there was an error in exercise of the jurisdiction. A series of decisions by different Benches of this court have held that the Award is liable to be set aside, if there is error of jurisdiction, but not if the error is committed in exercise of jurisdiction.” 25. The learned counsel for the appellant has also relied on certain other decisions. None of the above decisions are applicable to the facts of the present case, as already referred, the learned trial court has observed that “the Arbitrator has awarded revised rates and escalation charges as well, which is apparent on the face of the record. Similar is the case with regard to other amounts also, where again amount is almost awarded twice.” In these circumstances, the contention that in view of Section 30 of the Act, the civil court has no power to modify the award is un-tenable. We do not see any material to take a different view from the view taken by the learned trial Judge. The point is answered accordingly. 26. In view of the above finding, the escalation charges paid under claim No.6 to a tune of Rs.3,44,159-00 and escalation charges paid under additional claim No.1, to a tune of Rs.24,80,957.00 are liable for deduction. 27. C.R.P.No. 2733 of 1999 As per the grounds mentioned in the Revision petition, the entire grievance of the petitioner is on the merits, which is not tenable. Accordingly, the revision petition is liable to be dismissed. 28. In the result, the both the civil miscellaneous appeals, as well as the civil revision petition are dismissed. As per the pronouncements of the apex court from time to time, the rate of interest awarded by the learned Arbitrator is reduced to 6% per annum from the date of award. There shall be no order as to costs. ___________________________ GHULAM MOHAMMED, J. Dated:18--04--2009 *BVS ________________________ P. SWAROOP REDDY, J. [1] AIR 1985 SC 607 [2] AIR 1989 SC 268 [3] AIR 1989 SC 890. [4] 1999 (4) SCC 214