M/S.Rashtriya Chemicals & Ferts. Ltd vs M/S.Chowgule Brothers & Ors

2. The appellant, a Government of India undertaking invited tenders for allotment of clearing, forwarding, 2 handling and stevedoring jobs at Mormugao Port initially for a period of one year commencing from 15th January 1983 upto 14th January 1984 but extendable at the option of the appellant for a further period of one year on the same terms and conditions except statutory increases in the wages of Dock labourers referred to in Clause 2.03 of tender notice. In response, the respondent submitted a tender which was accepted culminating in the issue of a work order dated 10th January 1983 in its favour. It is common ground that the appellant by its communication dated 13th October 1983 exercised the option available to it in terms of Clause 2.03 of the NIT and extended the contract for a further period of one year ending 14th January 1985.

4. It is not the case of the respondents that any revision in wages effective as on 15th January, 1984 was demonstrated before the appellant at any time before the commencement of the extended contractual period. What was alleged by the respondent was that pursuant to a settlement between the M.D.L.B. and the Dock workers the respondent had incurred an additional amount of Rs.24.74 4 lakhs towards the increase in the wages payable to such workers. A claim for reimbursement of the said amount was accordingly made by the respondent-company in terms of a legal notice served upon the appellant on its behalf, which claim was refuted by the appellant on the strength of Clause 2.03 of Schedule II to the notice inviting tenders forming part of the contract between the parties. The appellant asserted that the rates at which the contract was initially awarded had to remain firm throughout the period of one year from the date of award and were not subject to any escalation whatsoever. Rates for the extended period were also similarly to remain firm throughout the extended period subject to any statutory revision upto 15th January, 1984 being taken into consideration. Any subsequent increase in the wages payable to the Dock labourers granted retrospectively by the M.D.L.B. was according to the appellant wholly inconsequential.

5. Denial of the claim made by the respondent thus gave rise to a dispute which was in terms of the contract referred 5 to a panel of three Arbitrators for adjudication. Before the Arbitrators, the appellant disputed the claim on merits as also on the ground that the same was barred by limitation. The Arbitrators examined rival contentions urged before them but failed to arrive at a unanimous decision on the true and correct interpretation of Clause 2.03. Two awards, therefore, came to be made, one by Shri R.P. Bhatt who dismissed the claim and the other by M/s R.C. Cooper and N.A. Modi who held the respondents entitled to recover from the appellant a lump sum amount of Rs.61,73,067.90. It is noteworthy that while the award made by Shri R.P. Bhatt was a reasoned Award that made by the other two Arbitrators was not.

The arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error...."

24. In the result we allow this appeal but only in part and to the extent that the award made by the Arbitrators shall stand set aside except to the extent of a sum of Rs.8,63,953/- which amount shall be payable to the respondent-contractor with the interest @ 9% p.a. from 1st April, 1985 till the date of actual payment thereof.

25. The parties to bear their own costs through out the proceedings.

.......................................J. (AFTAB ALAM) .......................................J. (T.S. THAKUR) New Delhi July 7, 2010