Case: Bharat Coking Coal Ltd Vs. L.K. Ahuja

and ward staff to the extent of 18 members, he held that three watch and ward staff would have been enough and the period for which the same had been maintained comes down to 18 months and with reference to the pleadings raised in this Court on earlier occasion took note of the fact that possession had not been given since April 1984. Therefore, he reduced the period to 14 months. He rejected the claim that for the whole period from April 1986 it had retained the services of plumber, electrician, carpenters, supervisory, etc. and watch and ward staff and he held that the flats were not in such a condition that the appellant could have taken possession and, therefore, the entire claim cannot be justified. Having taken into consideration the fact that the watch and ward staff could be three, he awarded a sum @ Rs.10,000/- per month for 14 months. 20. The learned Additional Solicitor General submitted that there is absolutely no basis for awarding this item as no material had been placed before the arbitrator. We cannot say that in assessing such a situation, the arbitrator has exceeded his jurisdiction or that there was no material at all before him in assessing the situation that there was some delay in handing over the flats and watch and ward had to be maintained, he has awarded for a reduced period of 14 months @ Rs.10,000/- per month. Therefore, we cannot hold this conclusion as suffering from an error apparent on the face of the award. 21. Next two items regarding rolling margin and refund of security deposit had been rejected by the arbitrator and, therefore, do not require any consideration. 22. On the question of material escalation, the arbitrator considered the claim made in a sum of Rs.4,12,487.46 under this head. The arbitrator took note of the situation that it was not the contention of the appellant that the material referred under this head had not been used for the completion of the project but having secured a sum of Rs. 17,70,085/- by way of advance, the escalation would get off-set by the advance paid and further running accounts payments had been made from month to month which must have taken into consideration the rise in prices. He held that there was no evidence on record as to the nature of the purchases made by the claimant during the extended period although some purchases had been made attracting escalation in the prices. Secured advance was only made to the extent of 60 to 75%. Therefore, he held that 25% of the escalation has to be compensated on that basis and allowed half of the claim of the contractor. When there was no dispute as to the fact that materials had been used for the purpose of the project and the value thereof, the claim made by the appellant having been duly examined by the arbitrator and after giving due allowance by the arbitrator and after giving due allowance to the advances that have been made the award made by the arbitrator cannot be stated to be as one suffering from any error apparent on the face of the award. Therefore, this conclusion also cannot be interfered with.23. Claim No.8 has been rejected by the arbitrator. Now we proceed to consider claim No.9 for loss arising out of turnover due to prolongation of work. The claim made under this head is in a sum of Rs. 10 lakhs. The arbitrator rightly held that on account of escalation in wage and prices of materials compensation was obtained and, therefore, there is not much justification in asking compensation for loss and profits on account of prolongation of works. However, he came to the conclusion that a sum of Rs. 6,00,000/- would be appropriate compensation in a matter of this nature being 15% of the total profit over the amount that has been agreed to be paid. While a sum of Rs. 12,00,000/- would be the appropriate entitlement, he held that a sum of Rs. 6,00,000/- would be appropriate. He also awarded interest on the amounts payable at 15% per annum.24. Here when claim for escalation of wages bills and price for materials compensation has been paid and compensation for delay in the payment of the amount payable under the contract or for other extra works is to be paid with interest thereon, it is rather difficult for us to accept the proposition that in addition 15% of the total profit should be computed under the heading Loss of Profit. It is not unusual for the contractors to claim loss of profit arising out of diminution in turn over on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same. This aspect was very well settled in Sunleyn (B) & Co. Ltd. vs. Cunard White Star Ltd., [1940] 1 K.B. 740, by the Court of Appeal in England. Therefore, we have no hesitation in deleting a sum of Rs. 6,00,000/- awarded to the claimant.25. So far as interest that is payable is concerned, the arbitrator has appropriately considered the same and no real objection can be raised in this regard. As regards arbitration costs also there cannot be any serious dispute. Therefore, except for the sums coming under the heading No.5, that is, Refund of Sales Tax and claim for payment of losses arising out of turn over due to prolongation of work, other part of the award having been upheld by us, the award made by the arbitrator shall stand modified accordingly.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]On this aspect while dealing with the claim for extra works under claim No.6, the arbitrator adverted to the decision of this Court in State of Bihar & Ors. vs. Hanuman Mal Jain, 1997 (11) SCC 40 , wherein this Court interpreted a similar clause as laying down the procedure as to how a claim could be lodged and not to oust the jurisdiction of the arbitrator in deciding the dispute on merits. It is not clear from the pleadings raised on behalf of the appellant before the arbitrator whether the claim covered by the final bill as extra items to the tune of Rs. 91,013.72 is included in the extra item of works which had been rejected by the arbitrator. The arbitrator adverted to this aspect of the matter while deciding claim No. 6 and held that out of the claim of Rs. 1,02,517/-, Rs. 11,503/- had been paid leaving a balance of claim of Rs. 91,013/- which has been clearly allowed by him while consider claim No.1 regarding non-payment of final bill and having claimed Rs. 91,013.72 which had been allowed by him the contractor could not once again claim the same amount under another head and the arbitrator rejected this claim on two grounds, namely, that there is no order in writing by the Engineer-in-Chief and secondly even if it had been executed, it had been paidthese circumstances, it cannot be said that the item claimed for extra works referred to in the final bill is the same as the claim under claim No.6 for extra works wherever such a situation has arisen the arbitrator has examined the same, say for example, in regard to petrol, oil and lubricant, he has separately, treated the same. If appropriate pleadings had been raised, the arbitrator would have certainly considered this aspect and in the absence of the same we think that the view taken by the arbitrator in this regard cannot be interfered. Only two items which had been allowed by the arbitrator which have been adverted to by us as a sum of Rs. 49,513.02 which was still to be paid and a sum of Rs. 91,013.72 as extra items of works which was disclosed in the measurement book. Therefore, we find no infirmity on this aspect of the claim.16. Claim Nos. 2 and 3 not having been disputed before us, we now proceed to consider claim No.4. The arbitrator considered various aspects made under this head for claim for payment of labour escalation. The arbitrator took the view that the appellant alone was not responsible for prolongation of the works and there were lapses on the part of the contractor as well and both were responsible for the delay. The arbitrator, after into consideration that there was definitely a escalation between April 1983 and April 1984 in regard to wage bill of the claimant, took the view that s against a claim of Rs. 2,66,343/- awarded a sum of Rs. 1,30,000/-. When on the basis of the pleadings and overall view of the situation arising as to the rise in the cost of wages, having awarded a lumpsum amount under this head, we do not think it is necessary to interfere with the award on this aspect of the matter.17. The claim for refund of sales tax in a sum of Rs. 35,050/- has been upheld by the arbitrator on the basis that in terms of a notification issued by the Government which lays down that if the works had been handed over prior to 1.4.1984, sales tax was not leviable but the works having been executed on 31.5.1984, it cannot be said that the terms of the notification had been complied with and, therefore, no claim could have been made by the claimant and, therefore, an award of Rs. 35,050/- based on the notification dated 19.2.1985 would not be correct and, thus, this amount of award in a sum of Rs.35,050/- stands allowed. There is a clear error apparent on the face of the award in having allowed this claim by the arbitrator.18. Claim No.6 consists of four items. So far as the first item regarding extra work is concerned, the claim has been rejected by the arbitrator which we have adverted to while considering claim no.1 under final bill. The second item under this claim relates to watch and ward expenses. The arbitrator, after examining various aspects of the matter, took the view that the expenditure over watch and ward staff could not be more than Rs. 10,000/- per month for 14 months and the bill on that account would come down to Rs. 1,40,000/-. However, taking all the factors in respect of this claim, the expenditure under this head would not come to more than Rs. 84,000/- for the whole period and taking a lenient view of the matter, the arbitrator awarded a sum of Rs. 1,25,000/- under this head.19. The arbitrator considered the fact that the appellant took possession of the quarters for two days on 30.4.1984 and 1.5.1984 to accommodate delegation for the All-India Labour Union Congress but it was not in dispute that the same was handed over after a couple of days. Thereafter the quarters were allotted to employees in stages and actual delivery of possession was made on 10.3.1986. While the arbitrator considered that the claim on account of watch and ward to the tune of Rs. 7,09,000/- is fantastically high and in the written submissions it had been claimed that the building had to be maintained at a cost of Rs. 5,500/- per month, he doubts as to whether the claimant and retained any watch and ward staff to the extent of 18 members, he held that three watch and ward staff would have been enough and the period for which the same had been maintained comes down to 18 months and with reference to the pleadings raised in this Court on earlier occasion took note of the fact that possession had not been given since April 1984. Therefore, he reduced the period to 14 months. He rejected the claim that for the whole period from April 1986 it had retained the services of plumber, electrician, carpenters, supervisory, etc. and watch and ward staff and he held that the flats were not in such a condition that the appellant could have taken possession and, therefore, the entire claim cannot be justified. Having taken into consideration the fact that the watch and ward staff could be three, he awarded a sum @ Rs.10,000/- per month for 14cannot say that in assessing such a situation, the arbitrator has exceeded his jurisdiction or that there was no material at all before him in assessing the situation that there was some delay in handing over the flats and watch and ward had to be maintained, he has awarded for a reduced period of 14 months @ Rs.10,000/- per month. Therefore, we cannot hold this conclusion as suffering from an error apparent on the face of the award.On the question of material escalation, the arbitrator considered the claim made in a sum of Rs.4,12,487.46 under this head. The arbitrator took note of the situation that it was not the contention of the appellant that the material referred under this head had not been used for the completion of the project but having secured a sum of Rs. 17,70,085/- by way of advance, the escalation would get off-set by the advance paid and further running accounts payments had been made from month to month which must have taken into consideration the rise in prices. He held that there was no evidence on record as to the nature of the purchases made by the claimant during the extended period although some purchases had been made attracting escalation in the prices. Secured advance was only made to the extent of 60 to 75%. Therefore, he held that 25% of the escalation has to be compensated on that basis and allowed half of the claim of the contractor. When there was no dispute as to the fact that materials had been used for the purpose of the project and the value thereof, the claim made by the appellant having been duly examined by the arbitrator and after giving due allowance by the arbitrator and after giving due allowance to the advances that have been made the award made by the arbitrator cannot be stated to be as one suffering from any error apparent on the face of the award. Therefore, this conclusion also cannot be interfered with.23. Claim No.8 has been rejected by the arbitrator. Now we proceed to consider claim No.9 for loss arising out of turnover due to prolongation of work. The claim made under this head is in a sum of Rs. 10 lakhs. The arbitrator rightly held that on account of escalation in wage and prices of materials compensation was obtained and, therefore, there is not much justification in asking compensation for loss and profits on account of prolongation of works. However, he came to the conclusion that a sum of Rs. 6,00,000/- would be appropriate compensation in a matter of this nature being 15% of the total profit over the amount that has been agreed to be paid. While a sum of Rs. 12,00,000/- would be the appropriate entitlement, he held that a sum of Rs. 6,00,000/- would be appropriate. He also awarded interest on the amounts payable at 15% per annum.24. Here when claim for escalation of wages bills and price for materials compensation has been paid and compensation for delay in the payment of the amount payable under the contract or for other extra works is to be paid with interest thereon, it is rather difficult for us to accept the proposition that in addition 15% of the total profit should be computed under the heading Loss of Profit. It is not unusual for the contractors to claim loss of profit arising out of diminution in turn over on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same. This aspect was very well settled inSunleyn (B) & Co. Ltd. vs. Cunard White Star Ltd., [1940] 1 K.B.by the Court of Appeal in England. Therefore, we have no hesitation in deleting a sum of Rs. 6,00,000/- awarded to the claimant.25. So far as interest that is payable is concerned, the arbitrator has appropriately considered the same and no real objection can be raised in this regard. As regards arbitration costs also there cannot be any serious dispute. Therefore, except for the sums coming under the heading No.5, that is, Refund of Sales Tax and claim for payment of losses arising out of turn over due to prolongation of work, other part of the award having been upheld by us, the award made by the arbitrator shall stand modified accordingly.