Case: State of Rajasthan Vs. M/S. Nav Bharat Construction Company

. In this case the claim had been for Rs. 12,93,260. The Arbitrator awarded as follows: “M/s. Unique Builders Ltd. the claimant is entitled to receive from Paradeep Port Trust a sum of Rs. 8,51,315 with interest..” It was contended in that case that claims 2 and 7 (therein) could not have been awarded. This Court held that as the award was a lump sum award and as only Rs. 8,51,315 had been awarded against a claim of Rs. 12,93,260 it was not possible to say whether any amounts had been awarded against claims 2 and/or 7. Relying on this Mr. Lohadia submitted that even in this case it cannot be said whether any amounts have been awarded against claims alleged to be covered by the contract. We are unable to accept this submission. In this case the award itself states that the award of Rs. 29,96,060/- is against claims 1 to 39, except claim No. 30. Therefore this award is in respect of claims covered by the contract and to that extent the Umpire has misconducted himself. Even otherwise the claim for damages is not in a sum of Rs. 27.50 lacs as claimed. Claims 27 and 28 which deal with damages are for Rs. 3,07,038/- and Rs. 1,58,904.85. The other claims, included in the figure of Rs. 27.50 given to this Court appear to be claims at enhanced rates for the contracted work done during the extended period. Mr. Lohadia denied that Respondents had agreed to do work during the extended period at the contracted rate. Thus at this stage, unlike in Paradip Port Trust’s case (supra), it does appear on the face of the record that higher rates for items covered by the contract have been awarded. 25. As regards Claim No. 2 Mr. Luhadia fairly admitted that Clause 5.11(iii) of the Contract requires chiseling of stones on all sides. He however submitted that the rates given in Schedule G were only for chiseling of stones on one side. He submitted that this was clear from Note 1 under Schedule G which stated that Schedule G was based on B.S.R. 1975. He submitted that B.S.R. 1975 showed that such rates were only for chiseling stones on one side. He submitted that when the stone has to be chiseled on all sides the rates given in B.S.R. 1975 were to be applied. He submitted that claim No. 2 was based on those rates. We are unable to accept this submission of Mr. Luhadia. The Contract is very specific. The work specified in the Contract has to be done at the rates specified in Schedule ‘G‘. Even though Schedule G may be based on B.S.R. 1975 it is not exactly as B.S.R. 1975. Where in respect of a work specified in the contract the rate has been given in Schedule G that work could only be done at that rate. Works specified in the Contract does not become extra work. It is only in respect of extra work that rates specified in B.S.R. 1975 can be applied. To us it is clear that the claim No. 2 is contrary to the terms of the Contract. It is barred by Clauses 57, 60 and 61 of the Contract. As regards Claim No. 26, Mr. Luhadia relied upon the case of Tarapore & Co. v. State of M.P., reported in (1994) 3 SCC 521. In this case, the question was whether the contractor was entitled to claim extra amounts because he had to pay increased wages to his workers. This Court has held that the contractor would have tendered on the basis of the then prevailing wages and as the contract required the contractor to pay the minimum wages if the minimum wages increased it was an implied term of the contract that he would not be entitled to claim the additional amount. However, it must be noted that, in this case, there was no term in the contract which prohibited any extra claims being made because of the increase in wages. Clause 31 of the Special Conditions of the Contract, which has been reproduced hereinabove, specifically bars the contractor from claiming any compensation or an increase in rate under such circumstances. Not only that but the Respondents had with their initial tender put in a term which provided that if there was any increase in the minimum wages by the Government the rates quoted by him would be increased by the same percentage. At the time of negotiation this Clause was dropped. Thus, the Respondents had themselves specifically agreed not to claim any compensation or increase by reason of increase in wages. This claim could therefore not have been granted.26. It prima facie appears that the majority of the claims are against the terms of the Contract. However, there are also other claims which are not against the terms of the Contract. To merely set aside the Award on ground of misconduct would work hardship on the Respondent as they would then be deprived of claims which may be maintainable. In our view the correct course would be to set aside the award and refer the matter back to an independent Umpire appointed by this Court. The Umpire will fix his own terms and conditions. We however clarify that only those claims covered by the two applications will be considered. Of course the Umpire will decide how many of the 39 claims formed part of the claims made in the two applications. Needless to state that the terms of the contract will be kept in mind and claims contrary to terms of the contract will undoubtedly not be allowed. The Umpire will also decide whether the Respondent had agreed to do the contracted work done during the extended period at the same rates and/or whether the Respondent is entitled to increased rates and if so at what rate. The Umpire shall decide only on the basis of the materials already placed before the earlier Arbitrators and the earlier Umpire. 27.

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

Explanation:
1[ds]12. So far as the second ground is concerned, we have seen the two applications made by the Respondent. It prima facie appears that the two applications were for referring, in all, 28 claims to arbitration. The Respondent then made 39 claims before the Arbitrators. The Umpire has awarded in respect of all the 39 claims. If claims not referred to Arbitration have been dealt with and awarded the Umpire would have exceeded hisare unable to accept this submission. The Order dated 1st March, 1985 allowsdated 9th April, 1983 as part of application dated 5th October,It is in the context of claims raised in these two applications that the Arbitrators are instructed to decide all disputes between thewe are proposing to refer the matter back to an Umpire, we do not propose to go into the question as to whether or not the 39 claims were part of the two applications filed by the Respondent. In our view, this is a question which can be decided by the Umpire. All that we need to clarify is that if any claim did not form part of the two applications the same cannot be arbitrated upon and the Umpire will confine the reference to the claims made in the two applications. It must be mentioned that in the case of Orissa Mining Corporation Ltd. v. Prannath Vishvanath Rawlley, reported in (1977) 3 SCC 535  this Court has held that when an agreement is filed in Court and an order of reference is made, then the claim as a result of the order of reference is limited to that relief and the Arbitrator cannot enlarge the scope of reference and entertain fresh claims without a further order ofhowever, find that this point has in fact been urged both before the District Judge as well as before the High Court. This point, therefore, requires to bethe Respondents had fully acquainted themselves with the local conditions and had agreed to execute the work as per specifications and at the rates specified in ScheduleIt is only in respect of additional work that the Respondents were entitled to be paid at rates set out in B.S.R. 1975. Clause 12 provides that the Respondents had to make their own arrangements for petrol, diesel and lubricants. Clause 31 of the special conditions provides that the Respondent shall pay fair wages and comply with labour laws. The contract provides that the fact that the contractor had to pay fair/minimum wages and comply with labour laws would not entitle the contractor to claim compensation or rates higher than those tendered in the contract. Clause 57 of the special conditions provides that the rates quoted in Schedule G cover all possible eventualities and that no claim can be made in respect of items like source of material, availability of labour, means of approachare unable to accept this submission. In this case the award itself states that the award of Rs. 29,96,060/- is against claims 1 to 39, except claim No. 30. Therefore this award is in respect of claims covered by the contract and to that extent the Umpire has misconducted himself. Even otherwise the claim for damages is not in a sum of Rs. 27.50 lacs as claimed. Claims 27 and 28 which deal with damages are for Rs. 3,07,038/- and Rs. 1,58,904.85. The other claims, included in the figure of Rs. 27.50 given to this Court appear to be claims at enhanced rates for the contracted work done during the extended period. Mr. Lohadia denied that Respondents had agreed to do work during the extended period at the contracted rate. Thus at this stage, unlike in Paradip Portcase (supra), it does appear on the face of the record that higher rates for items covered by the contract have beenare unable to accept this submission of Mr. Luhadia. The Contract is very specific. The work specified in the Contract has to be done at the rates specified in Schedule ‘G‘. Even though Schedule G may be based on B.S.R. 1975 it is not exactly as B.S.R. 1975. Where in respect of a work specified in the contract the rate has been given in Schedule G that work could only be done at that rate. Works specified in the Contract does not become extra work. It is only in respect of extra work that rates specified in B.S.R. 1975 can be applied. To us it is clear that the claim No. 2 is contrary to the terms of the Contract. It is barred by Clauses 57, 60 and 61 of the Contract. As regards Claim No. 26, Mr. Luhadia relied upon the case of Tarapore & Co. v. State of M.P., reported in (1994) 3 SCC 521. In this case, the question was whether the contractor was entitled to claim extra amounts because he had to pay increased wages to his workers. This Court has held that the contractor would have tendered on the basis of the then prevailing wages and as the contract required the contractor to pay the minimum wages if the minimum wages increased it was an implied term of the contract that he would not be entitled to claim the additional amount. However, it must be noted that, in this case, there was no term in the contract which prohibited any extra claims being made because of the increase in wages. Clause 31 of the Special Conditions of the Contract, which has been reproduced hereinabove, specifically bars the contractor from claiming any compensation or an increase in rate under such circumstances. Not only that but the Respondents had with their initial tender put in a term which provided that if there was any increase in the minimum wages by the Government the rates quoted by him would be increased by the same percentage. At the time of negotiation this Clause was dropped. Thus, the Respondents had themselves specifically agreed not to claim any compensation or increase by reason of increase in wages. This claim could therefore not have been granted.It prima facie appears that the majority of the claims are against the terms of the Contract. However, there are also other claims which are not against the terms of the Contract. To merely set aside the Award on ground of misconduct would work hardship on the Respondent as they would then be deprived of claims which may be maintainable. In our view the correct course would be to set aside the award and refer the matter back to an independent Umpire appointed by this Court. The Umpire will fix his own terms and conditions. We however clarify that only those claims covered by the two applications will be considered. Of course the Umpire will decide how many of the 39 claims formed part of the claims made in the two applications. Needless to state that the terms of the contract will be kept in mind and claims contrary to terms of the contract will undoubtedly not be allowed. The Umpire will also decide whether the Respondent had agreed to do the contracted work done during the extended period at the same rates and/or whether the Respondent is entitled to increased rates and if so at what rate. The Umpire shall decide only on the basis of the materials already placed before the earlier Arbitrators and the earlier Umpire.