U.O.I vs M/S. Concrete Products & Const. Co. Etc

3. The respondents/contractors purchased HTS wires from established sources in terms of the various clauses of the contract. The material was used in the manufacture of sleepers. Payment for the sleepers was made by the contractors at the lowest price quoted by the suppliers. The quotation was also scrutinized alongwith the supporting documents. The Railway authorities release the payment to the respondent contractors only upon their satisfaction, upon scrutiny of all the relevant documents.

4. A new contract was entered into between the parties in May, 1997. The railway administration changed the policy and allowed the respondents/contractors to purchase the HTS wires, subject to escalation as noticed above. By letter dated 12th July, 1997, the railways administration informed the respondents that the Railway Board had found that excess payments had been made between 1989 and November, 1994 under escalation clause for HTS wires. It was stated that the amounts paid to the contractors were more than the prevalent market price. Therefore, a sum of Rs. 1,80,92,462/- was recoverable from M/s Concrete Products and Construction Company, respondent in C.A. No. ____________ (arising out of SLP(C) No. 5384 of 2013) and a sum of Rs.1,78,09,789/- was recoverable from M/s. Kottukulam Engineers Private Limited, respondent in C.A. No. ______ (arising out of SLP(C) No. 5385 of 2013). It was also pointed out that the aforesaid sums would be recoverable from the sums due and payable to them in the current/running contracts.

5. The contractors (respondents herein) challenged the aforesaid recovery by filing Writ Petition No. 11805 and 10814 of 1999, before the High Court of Madras. The railway administration took up the preliminary objection, pleading that the writ petition is not maintainable as the dispute has to be referred to arbitration. The objection of the appellant was accepted. The High Court appointed a Former Judge of the Madras High Court as the arbitrator to adjudicate the dispute. The contractors/respondents herein challenged the aforesaid order of the learned Single Judge by filing Writ Appeal Nos. 251 and 252 of 2000, on the plea that the arbitrator had to be appointed in terms of the agreement. By order dated 22nd March, 2000, the writ appeals were allowed, and the order of the learned Single Judge was set aside. The matter was remanded back to the Single Judge for disposal in terms of the agreement.

6. The railway administration challenged the aforesaid order of the Division Bench, before this Court by filing SLP No. 18244 and 18245 of 2004. Special leave was granted in both the special leave petitions and the same were converted to Civil Appeal Nos. 2999 and 3000 of 2005. By a short order passed on 2nd May, 2005, the disputes between the parties were referred by this court for adjudication by an Arbitration Tribunal consisting solely of Mr. Justice K. Venkataswami, a former Judge of this Court. This order was passed without going into the merits of the disputes and the submissions made by the learned Solicitor General on behalf of the railways, that in view of the specific condition contained in the contract, the dispute cannot be referred to an arbitrator other than the authority referred to in the contract. This Court directed that the matter shall be referred to Mr. Justice Venkataswami. It was, however, made clear that the order shall not be treated as a precedent. Pursuant to the aforesaid order of this Court, the matter ultimately reached the arbitrator. At the conclusion of the arbitral proceedings, the final award was rendered on 24th June, 2006. The sole arbitrator directed the appellants to refund the amount awarded as follows:-

The railway administration challenged the common arbitration award in O.P. No. 142 & 143 of 2007 under Section 33 of the Arbitration and Conciliation Act, 1996 before High Court of Madras. The learned Single Judge dismissed the arbitration petitions filed by the railway administration by its order dated 30th November, 2010. Thereafter the contractors filed applications before the High Court for direction to the railways to make payments of the amount. Thereafter Application Nos. 780 & 781 of 2011 were filed in the O.P. Nos. 142 & 143 of 2007 by the contractors seeking a direction from the Court directing that the amounts awarded by the learned Sole Arbitrator be paid from the amount deposited by the railway administration with the High Court along with the accrued interest as on date on the aforesaid amount. These applications were allowed by order dated 24th February, 2011. The High Court directed that the awarded amount deposited by the railways in the Court for satisfying the outcome of the original petitions which was subsequently converted into fixed deposit receipts, be dispersed to the respondent contractors.

21. In view of the aforesaid, the appeals are allowed and it is directed that the respondents shall not be entitled to any interest on the amount which was recovered by the appellant, till the date of award and thereafter till the date when the amount awarded was deposited in the High Court, i.e. from 12th July, 1997.

22. The appeals are allowed in the aforesaid terms.

March 3, 2014.