M/S. Asian Techs Ltd vs Union Of India & Ors

3. The appellant, Asian Techs Ltd entered into an agreement dated 2.9.1986 with the Union of India for construction of 'Provision of Lab and Administrative Block' etc for NPOL at Kakkanad, Cochin. The probable amount of contract was Rs. 3,58,96,665/-, and the construction was to be completed before 8.9.1988. The period of the contract 2 was 24 months. Ext R1 is the agreement and Ext R1(a) is the General conditions of contract known as IAFW - 2249. According to the appellant, due to the delay caused by the respondent, the project could not be completed by 30.6.1990. According to the appellant, the delay was because the site of the work proposed was changed by the respondent subsequent to the signing of the agreement. Also, the design and structural particulars of the building were fundamentally altered by the respondent by omitting the basement floor itself. The respondent nominated the suppliers of prime cost items belatedly. They did not finalize the design and structural particulars of the work within the period of the contract which expired on 8.9.1988 and dragged on the works, resulting in suspension of the ongoing works and making the labour and machinery items idle. By efflux of time the cost of labour, fuel, materials etc. increased. The respondents assured to settle the rates for extra items across the table and persuaded the petitioner to continue to carry out and complete the works. The respondent No. 2 allowed unconditional extension of time at the first instance on 10.11.1988 and then from time to time, without levy of liquidated damages. There was no agreement of whatsoever nature in respect of rates for works carried out between 8.9.1988 and 30.6.1990, or on rates for extra and altered items. The respondent did not pay even at the agreed rates in the agreement in respect of certain items and avoided reference to rates in the MES schedule of rates for many other items, for which rates were to be derived. The contract stipulated settlement of rates for extra items of work involved by Respondent No. 2, 3 being the accepting officer.

4. The respondents prepared the last bill on 27.2.1991 for works completed on 30.6.1990, which was received under protest on 7.5.1991. The general condition 7(d) of IAFW 2249 forming part of the contract reserved rights of the petitioner and Respondent No. 2, to correct any mistake in fixation of rates at any time, even after receipt of the last payment. It is alleged that the respondent No. 2 failed to communicate any decision on objections to incorrect fixation of rates, duly notified from time to time by the petitioner. The rates were fixed by a board of subordinate officials, behind the back of the petitioner, violating the contract, and thus huge amounts due and payable to the petitioner were wrongfully withheld.

5. The petitioner invoked the arbitration clause in the agreement for settlement of the disputes and differences which arose and sent a demand notice dated 10.12.1991 for payment of Rs. 1,24,58,108/- together with interest thereon. Respondent No. 2 on 15.6.1992 intimated readiness and willingness to refer the disputes and differences as specified in the notice dated 10.12.1991 to arbitration. The Chief Engineer Air Force was appointed the sole Arbitrator on 15.12.1992 and the respondents participated in arbitration proceeding without any demur or protest.

8. The appellant has further alleged that the High Court ignored a long line of decisions of this Court declaring that it is not open to the Court to examine the correctness of a non-speaking award on a reappraisal of evidence, nor for that purpose 5 was it permissible to interpret the contract. It is alleged that the High Court did not refer to the memorandum of appeal filed by the respondents. It is alleged that the High Court without stating any reason rejected the contention of the petitioner that the Commander Works Engineer (CWE) was not the competent authority to fix the rates for extra, deviated and additional items under the contract entered into with Respondent No. 2 and beyond the period of contract and that his pecuniary jurisdiction was only up to Rs. 20,000/-, stipulated in MES Regulation, 1968 and that no final decision on the objections of the petitioner against erroneous fixation of rates was ever communicated by the Chief Engineer, who is the accepting officer. It is alleged that the High Court erroneously assumed that extensions of time granted by Respondent No. 2. from time to time, deprived the petitioner of its right for due payment at the then prevailing rates for delayed works at the instance of the respondents.

If any work, the rate for which cannot be obtained by any of the methods referred to in paras (A) to (E) above, has been ordered on 8 the contractor, the rate shall be decided by the G.E. On the basis of the cost to the Contractor at Site of Works plus 10% to cover all overheads and profit. Provided that if the contractor is not satisfied with the decision of the G.E. He shall be entitled to represent the matter to the C.W.E. Within seven days of receipt of the G.E.'s decision and the decision of the C.W.E. Thereon shall be final and binding.

If any alterations or additions (other than those authorised to be executed by day work or for an agreed sum) have been covered up by the Contractor without his having given notice of his intention to do so, the Engineer-in-Charge shall be entitled to appraise the value thereof and in the event of any dispute the decision of the G.E. Thereon shall be final and binding.".

All the above facts show the repeated defaults by the respondents due to which the contract could not be completed in time.

15.Moreover, Regulation 439 of the MES Regulations 1968 fixes the pecuniary jurisdiction of the CWE at Rs. 20,000/- only. It is evident that the CWE has no jurisdiction to decide the dispute where the valuation is above Rs. 20,000/-, as in the present case. The finality of the decision of the CWE applies only where the dispute is not exceeding Rs. 20,000/-. Hence, in our opinion, the arbitrator was within his jurisdiction to decide the matter in question.

19. For the reasons given above we are not in agreement with the view taken by the High Court that the award of the arbitrator was without jurisdiction. In the facts and circumstances of the case, we allow these appeals and set aside the impugned order of the High Court and restore the award of the arbitrator. No costs.

07th September, 2009