SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN versus THE SUPERINTENDING ENGINEER T.B.P.H.L.C. CIRCLE ANANTAPUR
[2019] 5 S.C.R. 152, Supreme Court of India, 2019
Outcome: Case Partly allowed (Granted)
Segment: Body
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SRI K. MARAPPAN (DEAD) THROUGH SOLE LR.
BALASUBRAMANIAN
v.
THE SUPERINTENDING ENGINEER T.B.P.H.L.C.
CIRCLE ANANTAPUR
(Civil Appeal Nos.159-170 of  2010)
MARCH 27, 2019
[RANJAN GOGOI, CJI, SANJAY KISHAN KAUL AND
K.M. JOSEPH, JJ.]
Arbitration Act, 1940: Respondent- State invited tender for
carrying out irrigation works – Appellant quoted the lowest rates
and entered into three agreements – Under the agreements, appellant
raised 9 claims – Arbitrator rejected claim Nos.6 and 8 whereas he
awarded various sums in regard to the other claims – Respondent-
State filed the applications for setting aside the award under ss.30
and 33 of the Act – Appellant moved suits for making the award
decree of the Court under the Act –  Certain claims which were
awarded by the Arbitrator, however, did not meet with approval of
the sub-Judge and he agreed with the respondent-State – High Court
found that the arbitration awards were totally unsustainable in view
of clause 59 of the Agreement – In the instant appeals, the appellant
raised claim no.1, 3, 4, 7 and 9 only – Claim No.1 was made towards
extra lead of 4 kms/6 kms - stone and metal – The case of the
appellant-contractor was that contractor was to quarry and take
stones and metal from a specified quarry which was located at a
shorter distance than from where the contractor had to actually
quarry the stones and metal and thereafter transport the materials
to the work site, which
resulted in extra rate and extra expenditure
and, therefore, claimed  Rs. 15 per cubic meter – Held: Under clause
59 while extension of time on account of delay or hindrance was
allowed, any claim for compensation on account of delay or
hindrance on account of any cause did not lie – Since Claim no.1
was based on the expenditure which the contractor had purported
to incur on this score,  he was entitled to difference in the rate – The
claim for Rs.15/- per cu.m. was based on abnormal increase in
transport charges due to increase in cost of fuel, automobile spare
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parts etc – If escalated rates are claimed then it may attract the
wrath of Clause 59 – The amount must be awarded on the basis of
the cost of conveyance being calculated at the rate of Rs.13.75 –
The decision of sub-court is sustained exercising power under
Art.142 under this claim.
Claim No.3 – Non-supply of food grains as per the conditions
of the agreement –  Under the food for work programme of the
Central Government, food grains were to be made available by the
respondent and part of the wages of the works was to be supplied
by the appellant in food grains as part of the contractual obligation
– It was the case of the appellant that the food grains were not
supplied though it was available – Consequently, the appellant had
to supply food grains to his workers by procuring the food grains
at higher prices from the open market – The arbitrator noted the
argument of the State that the relevant clause only contemplated
making available food grains, if it was available – The arbitrator
proceeded to award various sums under the three contracts on the
basis that the appellant was constrained to expend money for
supplying his workers by purchasing food grains from the open
market – Held: In terms of agreement, the appellant was to supply
the food grains only if the food grains were made available by the
Government – Therefore, it is totally untenable for the appellant to
set up a case that attracted by the clause which resulted from the
representation and
negotiation, he submitted his tender –  Appellant
was not bound to pay the fair wages to the workers and he was not
also liable to offer food grains apart from fair wages – A perusal
of the clause would make it clear that what was contemplated was
if the food grains were available and supplied, the appellant was to
make use of the same, supplied it to the workers ‘in lieu of wages’.
Claim No.4 – Reimbursement of short supply of cement – It
was the case of the appellant-contractor that in order to achieve
progress, he procured cement from outside –  The department
contended that cement was in fact supplied as per the contract and
the contractor was not authorized to purchase cement from outside
and further contractor did not produce any vouchers – Department
further relied on Clause 10 of the contract which provided that no
claim for compensation for non-supply of cement would lie – The
arbitrator, however, rejected all the contentions of the department
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and relied on s.70 of the Contract Act – The non-production of the
cement issue register and unstamped receipt by the department led
the arbitrator to raise an adverse inference against the department
–  The arbitrator proceeded to award varying sums under the three
contracts – Held: The correspondence between the appellant and
the department showed that the officers proceeded on the basis
that there was a shortage of cement – Therefore, this appeared to
be a case where sufficient cement may not have been supplied to
the appellant – The sub-court on the other hand found that none of
the correspondence by the officers indicated that the appellant was
given permission to buy cement from outside –  There was no
indication in any of the letters written by the appellant which were
the other sources from which he was procuring cement – The most
important obstacle for the appellant was the clause in the contract
namely, for procuring cement by the contractor, he must maintain
ledger and which may be open to scrutiny by the officer as and
when demanded – In this case, the appellant did not produce any
ledger/voucher showing purchase of cement from other sources –
There was no written permission produced to purchase cement from
other sources – The fact that there were neither vouchers nor any
ledger entries nor bills produced warrant interference with the award
– Claim is not accepted – Contract Act, 1872 – s.70.
Claim No.7 –
Claim on account of stock of materials
accumulated by the contractor for work in the project – The claim
of the appellant was that he had purchased various materials and
stocked at the work site for carrying out the work but the department
prevented appellant from carrying out the work and, therefore, the
appellant was entitled to the value of the materials which he had
collected at his expense – Appellant raised a claim for enhanced
compensation – He alleged that there was delay on the part of the
respondent on various grounds – This is apart from alleging other
factors like breakout of malaria, unfavourable weather and delay
in taking decision by the departmental officers, which contributed
to escalation in cost – Held: Insofar as the appellant did not use
any of the materials to carry out the work and set up the claim only
on the basis of assurance which was not admitted, the action of the
appellant in purchasing the materials would not result in establishing
his claim for compensation –  Clause 59 prevents the Court from
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awarding compensation on account of any factor relating to the
delay which may be due to any cause whatsoever – In such
circumstances, the appellant did not make out any cause for
compensation in regard to this claim.
Claim No.9 – Interest of 18% p.a. under the Interest Act –
Under Claim No.9 which related to interest at 18% under the Interest
Act, the interest was awarded @ 12% p.a. on all claims from the
date of the claim petition namely 23.11.1983 – The court took the
date on which the arbitrator entered upon the reference as 26.4.1988
and the date of the awards as 23.8.1988, and held that for the said
period, the arbitrator did not have the power to grant interest on
the amount found due – Therefore, the Court set aside the award of
interest for the period 26.4.1988 till 23.8.1988 and in regard to the
rest the award of interest was sustained by the Court – Correctness
– Held: The arbitrator awarded interest at 12% from the date of the
claim but excluded interest from commencement of proceeding till
date of award – As long as the agreement between the parties does
not prohibit grant of interest and the matter is referred to the
arbitrator, arbitrator would have power to grant interest pendente
lite – The sub Court was not justified in setting aside interest and
the interest as awarded by the arbitrator is restored – Interest.
Partly allowing the appeals, the Court
HELD:  1.1  In terms of Clause 59 of the Agreement, it
was not open to a contractor to
claim compensation which arose
on account of the fact that the work was delayed or hindrance
was caused to the work from any cause whatsoever.  The clause
interdicts raising claim for compensation by the contractor if the
employer poses hindrance to the work.  If work gets delayed on
account of the contractor himself, it is axiomatic that he cannot
claim compensation as it would amount to a person taking
advantage of his own wrong.  Delay from any cause cannot found
a claim for compensation.  It may also happen that the work may
get delayed not due to the fault of the employer.  There may be
natural causes such as natural calamities which may cause delay
in carrying out the work. Even in such cases, Clause 59 cast an
embargo against a claim by the contractor.  This interpretation
would give full play to the words ‘delays from any cause
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whatsoever’.  Equally, if there is hindrance to the work from any
cause whatever, a claim for compensation would not lie. While
compensation on account of delay and hindrance is impermissible,
what Clause 59 provides however, is that reasonable extension
of time be allowed.  Request for extension of time must arise
from causes beyond the control of the contractor.
[Paras 26,  27] [171-C-G]
1.2  Claim No.1 relates to claim for extra lead for carrying
out the work of quarrying stone and metal from a quarry located
at a greater distance from the work site.  As far as the said claim
is concerned, it cannot be associated with a delay to the work for
any cause whatever within the meaning of Clause 59.   The claim,
on the other hand is, on account of the appellant carrying out
work of quarrying from a site which was located further away than
the site which was specified under the contract. [Paras 29, 30]
[172-D-E; 173-D]
1.3  The claim for Rs.15/- per cu.m. was based on abnormal
increase in transport charges due to increase in cost of fuel,
automobile spare parts etc. If escalated rates are claimed then it
may attract the wrath of Clause 59.  The claim of extra lead cannot
be denied.  The claim of Rs.15/- per cu.m., if it is over and above
the amount which is already received will be in the teeth of the
contractual provision which is relied on by the sub Court for which
he has not taken any exception to in which case the
amount as
ordered by the sub Court is to be awarded to him under this
claim.  This means the amount is to be worked out as provided in
the letter dated 13.11.1982.  In other words, the amount must be
awarded on the basis of the cost of conveyance being calculated
at the rate of Rs.13.75 and the amount must be calculated and
paid by exercising power under Article 142 to sustain the decision
of the Sub Court under this claim. [Para 41] [177-G-H; 178-A-C]
2.  Non-supply of food grains as per the conditions of the
agreement
2.1   The original tender conditions contemplated supply of
wheat at Rs.115/- per quintal, if available. The appellant was to
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supply the food grains only if the food grains were made available
by the Government.  Therefore, it is totally untenable for the
appellant to set up a case that attracted by the clause which
resulted from the representation and negotiation, he submitted
his tender. May be at the time of entering into the contract
following his representation and negotiation the clause was
incorporated which provided for supply of rice or wheat and other
terms.  In other words, at the time when appellant submitted his
tender which may have been lesser than the estimated rate by
about 10 to 12%, the negotiated clause was not there.  On this
score, the case sought to be built up around the clause being
attractive cannot be accepted. [Para 53] [184-G-H; 185-A-B]
2.2 As regards the supply of food grains, the appellant is
not correct in having contended that the appellant was duty bound
to supply food grain even if the food grains were not supplied by
the department. A perusal of the clause relating to supply of food
grain would show that food grains would be supplied, if available.
Again, the words “if offered” is conspicuous.  The words in the
clause which provided that the appellant shall supply food grain
to the labourers is not to be considered in isolation.
[Para 54] [185-B-D]
2.3 The sub Court was right in holding that the
correspondence referred to by the arbitrator did not show that
the food grains were actually available with the department and
department was only
trying to get the food grains from the
administration with which the food grains was available.   No doubt
the contractual provision which provides that the appellant is to
keep accounts and produce accounts relating to receipts and
distribution may assume relevance when appellant receives food
grains from the department and distributes.  But at the same
time the appellant is putting up the claim for compensation and
that too a claim which runs into a fairly large sum.  There would
certainly be material to evidence the actual purchase and further
actual supply to the workers or payment as alleged.  Even
assuming everything that the appellant says is correct about the
fact of the negotiated settlement, there is virtually no material
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except the appellants statement that the appellant paid for the
price of food grains to the workers.  Further, the claim involves
payment of price of rice at escalated rates for period beyond the
contract also and it invites the wrath of Clause 59.  The award of
the claim by the arbitrator cannot be sustained. [Para 63]
[188-G-H; 189-A-C]
3.  Reimbursement of short supply of cement.
3.1   The claim is not hit by Clause 59 as the appellant was
not claiming compensation for any delay.  The Sub-Court while
setting aside the award had held that Cement is a controlled
commodity and it could not be purchased from outside, without
valid permit. It was found that the appellant did not produce any
document to show that cement was actually purchased from
outside.  The source was not mentioned. The appellant did not
produce any permission from the Department for purchasing
cement from outside.  Even if purchased, it was to be checked by
check measure but there was no check measurement. The tabular
statement shown by the appellant, only represents the theoretical
requirement in the quantity of cement.  In the letters of the
Officers, there is no reference about the use of cement by the
appellant which was brought from outside. The letters written by
the appellant also complained only of inadequacy of supply of
cement and there is no mention of use of cement which he brought
from outside. More importantly, he referred to the
contractual
provision to find that the Government is entitled to recover the
cost of theoretical quantity which is not used and use of any lesser
amount in comparison to theoretical amount would only enure to
the Department. The contract provides that cement will be
supplied at cost by the Department inter alia and the cost of cement
issued will be recovered from the contractor’s bill at the rate
specified. The contract also contains the theoretical requirement
of important materials which include cement. The rate of recovery
is shown as Rs.416/- per metric tonne.[Paras 67-69] [191-A-G]
3.2   A perusal of the contractual provisions yields the
following inevitable result. Cement is a scarce material to be
supplied by the Department. The appellant was to maintain
separate ledger for the item for which cement was supplied by
the Department. The issue price was Rs.416/- per metric tonne.
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The cost of cement at the said rate was to be recovered from the
appellant’s bill at the issue rate. Thus, if the value of the work is
Rs.100/- and the value of the cement is Rs.5/-, the appellant would
get only Rs.95/-.  There are theoretical requirements in regard
to the use of cement.  It is not unnatural for the Department to
prescribe for the theoretical requirement. This is to ensure that
it is used exactly as per the theoretical requirement so that the
structure on the one hand is built in a safe manner and at the
same time nothing in excess is used so as to avoid wastage of
scarce material. There are three situations which are
contemplated. In the first situation, it is provided that if materials
are drawn according to the schedule and are short used then the
excess quantity is to be returned to the Department in good
condition and for the same the contractor will not get any payment.
Furthermore, if the short-used material is not returned to the
Department, their cost will be recovered at the market rate or at
the issue rate which is greater plus wastage charges and sales
tax. The second situation is where the materials are drawn in
excess of theoretical requirements. The contract contemplates
that in such a situation, the excess drawn quantity must be
returned to the Department in good condition and otherwise there
will be recovery at the issue rate plus 100% surcharge or market
rate whichever is higher plus storage and taxes. The third
situation contemplated is that if the materials are short drawn or
short used it is specifically provided that in such a situation, the
saving due to short drawal/ use should be secured to the
Government by recovering the cost thereto at issue rate from
the contractor. Further, the contract contemplates that if materials
are required to be procured by the contractor, he must maintain
separate ledger for each of the item which are so required to be
procured by the contractor.  [Paras 71-74] [193-C-H; 194-A-E]
3.3  In respect of short used material, though, properly
drawn the recovery would be in addition to the recovery for the
cost of materials which is returned.  This would mean that if the
appellant had indeed secured cement from outside, the appellant
was obliged under the Contract to maintain a separate ledger.
Further the Contract contemplates that there could be recovery
from the bill of the Contractor for the cost of cement which is
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actually not supplied to the contractor and it will be based on the
theoretical requirement. Thus, the mere fact that there has been
excess recovery meaning thereby that without issuing the cement
to the appellant the amounts have been recovered would not mean
that the appellant would be able to substantiate his claim that
there was inadequate supply of cement. That is a matter which
must be substantiated with reference to other material.  From
the correspondence, it would appear that the officers proceeded
on the basis that there is a shortage of cement.  Therefore, this
appears to be a case where sufficient cement may not have been
supplied to the appellant.  However, under Clause 10 of the
agreement no right to compensation lies for short supply of
cement. There is no indication in any of the letters written by the
appellant which the other sources were from which he was
procuring cement.  The most important obstacle for the appellant
is the clause in the contract namely, for procuring cement by the
contractor, he must maintain ledger and which may be open to
scrutiny by the officer as and when demanded.  In this case, the
appellant has not produced any ledger showing purchase of
cement from other sources.  There is no written permission
produced to purchase cement from other sources. No voucher
has been produced by the appellant to establish purchase of
cement from outside. [Paras 74, 75, 80, 82] [174-D, F-H;
196-F-G; 197-D-F]
3.4    A party is supposed to produce the best evidence or
rather the evidence which under the contract is contemplated.
The failure on the part of the appellant to produce the ledger has
fatal consequences.  The matter becomes further aggravated by
the failure on the part of the appellant to even produce vouchers
or bills in support of the claim to purchase the cement from outside
sources. A contractor may have without written permission but
for the purpose of the work purchased cement from outside.  But
certainly, the fact that there are neither vouchers nor any ledger
entries nor bills produced to hold that the matter may warrant
interference with the award under Section 30. The claim is not
accepted. [Para 86] [198-G-H; 199-A-C]
4.  Claim on account of stock of materials accumulated by
the contractor for work in the project.
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As regards this claim, the claim appears to be that appellant
collected materials and it was lying at the site.  Admittedly, the
appellant has not used this material for the purpose of doing the
work.  Only the case set up by the appellant is that he was given
an assurance that he will be permitted to carry out the work and
therefore, since he has spent money for the same, he must get
the amount which is claimed for having spent on the material.
Insofar as the appellant has not used any of the materials to carry
out the work and sets up the claim only on the basis of assurance
which has not been admitted, the action of the appellant in
purchasing the materials cannot result in establishing his claim
for compensation.  The appellant raised a claim for enhanced
compensation.  He alleged that there was delay on the part of the
respondent on various grounds.  This is apart from alleging other
factors like breakout of malaria, unfavourable weather and delay
in taking decision by the departmental officers, which contributed
to escalation in cost.  Correspondence was exchanged with the
Executive Engineer and the Superintending Engineer, the
Superintending Engineer and the Chief Engineer and finally
between the Chief Engineer and the Government.  It appears
that at that stage appellant invoked the arbitration clause and a
panel of arbitrators gave their award.  In fact, the work itself was
stopped.  Clause 59 prevents the Court from awarding
compensation on
account of any factor relating to the delay which
may be due to any cause whatsoever.  In such circumstances, the
appellant has also not made out any cause for compensation in
regard to this claim. [Para 87] [199-C-H]
5.   Interest of 18% per annum under the Interest Act.
As far as the question relating to interest is concerned, the
arbitrator has awarded interest at 12% from the date of the claim
but excluded interest from commencement of proceeding till date
of award.  As long as the agreement between the parties does
not prohibit grant of interest and the matter is referred to the
arbitrator, arbitrator would have power to grant interest pendente
lite. The sub Court was not justified in setting aside interest and
the interest as awarded by the arbitrator is restored.
[Paras 88, 89] [200-A-C; 201-C]
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Assam State Electricity Board & Ors. v. Buildworth (P)
Ltd. (2017) 8 SCC 146 : [2017] 7 SCR 123 ; Jugal
Kishore Prabhatilal Sharma v. Vijayendra Prabhatilal
Sharma   (1993) 1  SCC  114 : [1992] 2  Suppl.  SCR
118; The National Highways Authority v. Afcons-Apil
Joint Venture  (2017) 8 SCC 146 – relied on.
Smt. Aruna Kumari v. Government Of Andhra Pradesh
and Anr.  AIR 1988 SC 873 : [1987]  SCR 624 ; Gujarat
Water Supply & Sewerage Board v. Unique Erectors
(Gujarat) (P) Ltd. & Anr.  AIR 1989 SC 973 :  [1989] 1
SCR 318 – referred to
         Case Law Reference
[1989] 1 SCR 318
  referred to
    Para 19
[2017] 7 SCR 123
  relied on
    Para 88
[1987] SCR 624
  referred to
    Para 89
[1992] 2  Suppl. SCR  118
  relied on
    Para 89
(2017) 8  SCC 146
  relied on
    Para 89
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.159-
170 of 2010.
From the Judgment and Order dated 31.12.2007 of the High Court
of Andhra Pradesh at Hyderabad in Civil Misc. Appeal Nos. 479, 93, 94,
480, 481 and 95 of 1990, CRP Nos. 303, 304, 305, 1039, 1040 and 1041
of 1990.
Ramamoorthy, Sr. Adv., Mrs. Revathy Raghavan, Perumal
Muthukumar,  S. Muthukrishnan,, Advs. for the Appellant.
Ms. Prerna Singh, Guntur Prabhakar, Advs. for
the Respondent.
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The Judgment of the Court was delivered by
K.M. JOSEPH, J. 1. These appeals are directed against the
judgment rendered by the High court in Civil Miscellaneous Appeal
Nos.479, 93, 94, 480, 481 and 95 of 1990 and Civil Revision Petitions
Nos.303, 304, 305, 1039, 1040 and 1041 of 1990. The appeals arise out
of arbitration proceedings conducted under the Arbitration Act, 1940
hereinafter referred to as ‘the Act’. By the impugned judgment, the
High Court set aside the orders passed by the Sub-Court granting the
decree in terms of the Arbitration Award though in a modified way in
respect of certain claims raised by the appellant. The Court also rejected
the petitions filed by the appellant challenging the decision of the sub-
Court refusing to make the Award decree of the Court in regard to
certain claim. In short, by the impugned judgment the High court found
that the arbitration awards were totally unsustainable in view of Clause
59 of the Agreement.
2. A tender was invited on 18.9.1978 by the respondent- State for
carrying out irrigation works. The appellant having quoted the lowest
rates which ranged between about 10-12% less than the standards
specified rate, appellant entered into Agreement No.10/78-79 on
10/03/1979. Equally, the appellant entered into Agreement No. 11/78-79
on 10/03/1979. He also entered into Agreement No.14/79-80 on
28/06/1979. The work was to be completed within 18 months from the
date of handing over the possession. It would appear
that the site was
handed over to the appellant in regard to Agreement No.10/78-79 on
16.11.1979. As far as the Agreement No.11/78-79 is concerned, the site
was handed over on 21.4.1979. The site was handed over to the appellant
in regard to Agreement No.14/78-79 on 28.06.1979. Under the
agreements, raising various claims, the appellant originally filed claim on
28.11.1983 before a panel of three arbitrators. The panel rendered its
awards. The awards came to be challenged by the appellant and the
awards were set aside. An arbitrator came to be appointed on petition
filed by the appellant. He entered upon reference on 26.4.1988 and passed
three awards on 19.8.1988. The appellant had, in fact, raised 9 claims.
The arbitrator rejected claim Nos.6 and 8 whereas he awarded various
sums in regard to the other claims. Claim No.9, no doubt, related to
interest. The respondent-State filed the applications for setting aside the
award under Section 30 and 33 of the Act. The appellant moved suits
for making the award decree of the Court under the Act. Certain claims
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which were awarded by the Arbitrator, however, did not meet with
approval of the learned sub-Judge and he agreed with the respondent-
State. It is this judgment which generated the appeals and revision
petitions before the High Court which stand decided by the High Court
by completely agreeing with the contentions of the respondent-State
and holding mainly that the awards are in the teeth of clause 59 of the
Contract.
3. We heard Mr. Ramamoorthy, the learned senior counsel for
the appellant and we also heard Ms. Prerna Singh, learned counsel for
the respondent.
4. Though various claims have been raised in the appeals, the
appellant has finally chosen to press before us only the contentions in
regard to Claim Nos.1,3,4,7 and 9. The awards relate to 3 different
agreements entered into by the appellant with the respondents but the
claims are all identical in their content in regard to all the three agreements
though different amounts have been awarded under the same. Therefore,
we may set out the claims with which we are to deal with.
Claim No.1 - towards extra lead of 4 kms/6 kms- stone and metal.
Claim No.3 – Non-supply of food grains as per the conditions of
the agreement.
Claim No.4 – Reimbursement of short supply of cement.
Claim No.7 – Claim on account of stock of materials accumulated
by the contractor for work in the project.
Claim No.9 – Interest of 18% per annum under the Interest Act.
5. Learned senior counsel
for the appellant would contend that
the appellant is certainly entitled to the amounts as awarded by the
Arbitrator under these claims. He would submit that the award of the
arbitrator is immune from judicial interference unless it be that the
arbitrator has misconducted himself or it be that an error apparent on
the face of the record is betrayed by the award. It is for the arbitrator to
construe the contract and sift the materials before him. His finding on
facts cannot be rendered vulnerable in proceedings under Sections 30
and 33 of the Act. As far as Clause 59 is concerned it is his contention
that the said Clause would not stand in the way of the claims as awarded
and which are pressed before us being countenanced in law.
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6. Per contra learned counsel for the respondent would support
the judgment of the High Court and would contend that Clause 59 of the
agreement would bar the claims canvassed by the appellant. Before we
deal with Clause 59 it is appropriate to appreciate what happened before
the arbitrator, the sub-Court and finally in the High Court.
PROCEEDING BEFORE THE ARBITRATOR
Claim No.I-Extra lead
7. The case of the appellant was that the appellant was to quarry
and take stones and metal from a specified quarry which was located at
a shorter distance than from where the appellant contractor had to actually
quarry the stones and metal and thereafter transport the materials to the
work site. This resulted in extra rate and therefore extra expenditure.
The claim of the appellant was Rs. 15 per cubic meter. The arbitrator
rejected the arguments of the respondent that the appellant on his own
went ahead and carried out quarrying from the quarry located further
away. The arbitrator also found that the claim was tenable under Section
70 of the Contract Act. It is accordingly that the arbitrator awarded
compensation at the rate of Rs.15 cubic meter for the amounts as claimed.
Claim No.III
8. Claim No.3 related to default on the part of department in making
supply of food grains. In short, under the food for work programme of
the Central Government, food grains were to be made available by the
respondent and part of the wages of the works was to be supplied by the
appellant in food grains as part of the contractual obligation and it is the
case of the appellant that the food grains were not supplied though it
was available. Consequently, the appellant had to supply food grains to
his workers by procuring the food grains at higher prices from the open
market. The arbitrator noted the argument of the State to be that the
relevant clause only contemplated making available food grains, if it was
available. The arbitrator relied on the correspondence to arrive at the
conclusion that though food grains were available it was still not supplied
to the appellate. The arbitrator proceeded to award various sums under
the three contracts on the basis that the appellant was constrained to
expend money for supplying his workers by purchasing food grains from
the open market.
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Claim No.IV
9. As far as claim No.4 is concerned, it related to short supply of
cement. Under the contract the arbitrator noted that the department
was to supply cement to the contractor. The value of the cement was
fixed at Rs.416/- per tonne. It was the case of the appellant-contractor
that in breach of its contractual obligation, the department however did
not make sufficient supply of cement. In order to achieve progress in
the works it is the case of the appellant that he procured cement from
outside. He also appears to have pointed out recoveries were made as
though supply of cement was effected by the department when it was
not the case. The department contended that cement was in fact supplied
as per the contract and the contractor was not authorized to purchase
cement from outside. Department further contended that contractor did
not produce any vouchers. Department further relied on Clause 10 of
the contract. Clause 10 provided that no claim for compensation for
non-supply of cement would lie. The arbitrator, however, rejected all the
contentions of the department and relied on Section 70 of the Contract
Act. The non-production of the cement issue register and unstamped
receipt by the department led the arbitrator to raise an adverse inference
against the department. The arbitrator proceeded to award varying sums
under the three contracts.
Claim No.VII
10. Claim No.7 which is pressed before us related to a
claim on
account of material accumulated by the appellant for the work in the
project was particularly awarded by the arbitrator. The claim of the
appellant was that he had purchased various materials and stocked at
the work site for carrying out the work but the department prevented
appellant from carrying out the work and, therefore, the appellant was
entitled to the value of the materials which he had collected at his expense.
The arbitrator after excluding sand awarded certain sums under the 3
contracts.
Claim No.IX
11. Finally, under Claim No.9 which related to interest at 18%
under the Interest Act, the interest was awarded at the rate of 12% per
annum on all claims from the date of the claim petition namely 23.11.1983.
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Proceedings before Court under Sections 30/33 and 17 of the Act.
12.         The sub-Court held inter alia as follows:
As far as Claim No.I is concerned, namely, extra lead, the sub-
Court proceeded to agree with the arbitrator that the appellant is entitled
to extra lead. As far as the quantum of extra lead is concerned, the court
found that the arbitrator was not correct in fixing the extra lead at Rs.15
per cubic meter. The reasoning in this regard was that there was no
material in support of the same. On the other hand, the Court reasoned
that there was a procedure for settling such claims for extra items. As
per correspondence, the court found that the difference would only be
Rs.3.23 whereas it was found that the arbitrator has awarded at the rate
of Rs.15 which would amount to giving Rs.24 for extra lead of 6
kilometers. This was found to be an error apparent and having regard to
the fact that the matter was pending for a long time and the present
proceedings constituted the second round of litigation, the court proceeded
to modify the amount and direct that the extra lead would be calculated
as per the procedure extant.
13. As far as Claim No.III is concerned namely, the breach found
by the arbitrator in the matter of supply of food grains, the court
proceeded to set aside the award of the arbitrator. It was found that the
misconstruing the contract, the arbitrator had awarded a sum of Rs.93
lakhs in all the three contracts put together which is
without any
justification as the arbitrator has exceeded his jurisdiction. Contrary to
the finding recorded by the arbitrator the court found that there was no
evidence to show that the food grains were available. The Court
reappraised A-22 and A-25 and took the view that it did not support the
finding by the arbitrator that the food grains were actually available. It
was further found that there is no evidence to show that the appellant
had given extra wages for non-supply of food grains by the department.
There is no evidence according to the court to show that the appellant
had purchased food grains at the open market rates as the appellant had
not produced the register to show that he had procured and supplied
food grains from outside. The appellant was bound to pay fair wages.
14. As far as the claim No.IV is concerned, which related to
short supply of cement to the appellant, the Court set aside the award
passed by the arbitrator.
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15. It was found inter alia by the Court that the appellant did not
mention the source through which he had obtained the cement. There
was no evidence before the arbitrator to show that the appellant was
permitted to bring his own cement and use it in his work. As per the
terms of the agreement the appellant was not allowed to use the cement
other than the cement supplied by the Government. There is no evidence
before the arbitrator to show any check/measurement taken at the time
of alleged use by the Contractor. The tabular statement produced before
the arbitrator by the appellant was found to be only theoretical
requirement of the quantity of cement for such work.
16. The contractual provisions were ignored by the arbitrator. In
none of the letters written by the officers referred to by the arbitrator in
the awards, the Engineers admitted about the alleged use of cement
brought from outside by the appellant.
17. There was no clause in the contract permitting the contractor
to use his own cement and claim reimbursement. The arbitrator exceeded
his jurisdiction.
18. As regards Claim No.VII is concerned, which related to claim
for value of the material stored by the appellant at his site, the court
proceeded to set aside the award. The case of the appellant appears to
have been that he collected the materials on the basis of the assurance
of the department that further construction work will be entrusted to him
but no
letter of assurance was produced. The provisions of the agreement
were only for finished work. The Additional Advocate General’s argument
that the Government had no objection in the contractor selling away
material after paying royalty charges etc. to the Government was noted.
Under Section 70 of the Contract Act, the Government has got option
either to pay compensation or restore the material to the contractor.
19. As far as the claim for interest is concerned, the court relying
on the judgment of this Court in Gujarat Water Supply & Sewerage
Board vs. Unique Erectors (Gujarat) (P) Ltd. & Anr. reported in AIR
1989 SC 973 and taking the date on which the arbitrator entered upon
the reference as 26.4.1988 and the date of the awards as 23.8.1988, it
was found that for the said period, the arbitrator did not have the power
to grant interest on the amount found due. Therefore, the Court set
aside the award of interest for the period 26.4.1988 till 23.8.1988 in
regard to the rest the award of interest was sustained by the Court. The
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net result was the Court, partially, allowed the suits and passed modified
awards in favour of the appellant whereas it also allowed the petitions
filed by the respondent for setting aside the awards in the manner which
we have indicated above.
The findings of the High Court
20. In the impugned order, the Court has proceeded to allow the
appeals filed by the respondent-State and dismiss the revisions filed by
the appellant.
21. As far as Claim No.III is concerned which related to non-
supply of food grains, it was found as follows:
      “Apart from the fact that there is no such total liability on the
part of the Government to supply the food grains without which
he could have proceeded with. The very clause which has been
relied upon by the contractor for supply of the food grains reduced
to the effect that clearly such supply would be made only if
available, and therefore, it is not the case of the Contractor that
though food grains were available it is not supplied by Government.
There is no mention or any evidence in this regard let in on behalf
of the contractor. Therefore, it is again the compensation which
comes within the bar of Clause 59.”
22. In regard to Claim No.IV, the following is the finding by the
High court:
    “In the Claim No.4 the reimbursement of non-supply of cement
is again is similar such obligation as the one stated to be in the
earlier claim and even on this account, nothing has been pointed
out on behalf of the contractor on
facts or in details as to how it
can be taken out from the claim for compensation as barred under
Clause 59.”
23. As regards Claim No.I relating to extra lead, the High Court
proceeded to hold as follows:
    “The Claim No.1 relates to extra lead of 4 K.m for stone and
metal is again attributable to the alleged delays, laches and breach
on the department as complained by the contractor and therefore,
such claim once again amounts to a compensation within the
parameters of the bar as provided under Clause 59. Since we
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have found that the claims under item 2,5,3,4 and 1 exfacie squarely
come under the bar of Clause 59 in view of the very maintainability
which go to the very root itself, these claims are squarely barred
under Clause 59 as held in the aforesaid decision of the Supreme
Court in the case of Ramnath International Construction Pvt.
Limited (2 Supra).”
24. It is found that claim No.2,5,3,4,1 is ex-facie case under the
bar of Clause 59 and finally it was held as follows:
    “Having regard to the reasons as given, especially, the
authoritative pronouncement by the Apex Court on the very
question, we hold that the claims of the contractor are not
sustainable and accordingly both the awards of Arbitrator dated
19-06-1985 and 19-06-1968 and the judgement and decree in O.P.
No.118 of 1988 dated 07-10-1988 to the extent of awarding claims
in respect of the Claims Nos.1,2,3,4,5,7 are set aside and
consequently we hold since the very claim being held to be not
entitled, question of awarding any interest does not arise.”
Decisions and Findings
25. Since the impugned decision is based on Clause 59, it is now
necessary to refer to the same. It reads as follows:
“59. Delays and extension of time: No claim for compensation on
account of delays or hindrances to the work from any cause
whatever shall lie, except, as hereinafter defined. Reasonable
extension of time will be allowed by the executive Engineer or by
the officer competent to
sanction the extension for unavoidable
delays, such as may result from causes, which, in the Opinion of
the Executive Engineer, are undoubtedly beyond the control of
the contractor. The Executive Engineer shall assess the period of
delay or hindrance caused by any written instructions issued by
him, at twenty five per cent in excess of the actual working period
so lost.
     In the event of the Executive Engineer failing to issue necessary
instructions and thereby causing delay and hindrance to the
contractor, the latter shall have the right to claim an assessment
of such delay by the superintending Engineer of the Circle whose
decision will be final and binding. The contractor shall lodge in
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writing with the Executive Engineer a statement of claim for any
delay or hindrance referred to above, within fourteen days from
its commencement, otherwise, no extension of time will be allowed.
    Whenever authorized alterations or additions made during the
progress of the work are of such a nature in the opinion of the
Executive Engineer as to justify an extension of time in
consequence thereof, such extension will be granted in writing by
the Executive Engineer or other competent authority when ordering
such alterations or additions.”
26. It is our view that it will not be open to a contractor to claim
compensation which arises on account of the fact that the work is delayed
or hindrance caused to the work from any cause whatsoever. To
demystify this further, it means that should the work be delayed on account
of reasons which are attributable either partially or entirely to the employer
namely the respondent herein, the claim for compensation is barred.
Equally, the clause interdicts raising claim for compensation by the
contractor if the employer poses hindrance to the work. If work gets
delayed on account of the contractor himself, it is axiomatic that he
cannot claim compensation as it would amount to a person taking
advantage of his own wrong. Delay from any cause cannot found a
claim for compensation. It may also happen that the work may get delayed
not due to the fault of the employer. There may be natural causes such
as natural calamities
which may cause delay in carrying out the work.
Even in such cases, in our view, Clause 59 would cast an embargo against
a claim by the contractor. This interpretation gives full play to the words
‘delays from any cause whatsoever’. Equally, if there is hindrance to
the work from any cause whatever, a claim for compensation would not
lie.
27. The heading of Clause 59 is ‘delays and extension of time’.
While compensation on account of delay and hindrance is impermissible,
what Clause 59 provides however, is that reasonable extension of time
be allowed. Request for extension of time must arise from causes beyond
the control of the contractor. It is further provided in clause 59 that if
delay or hindrance is caused by any written instruction by the Executive
Engineer then the period of the delay or hindrance is to be assessed at
25% in excess of the actual working period so lost. It is further provided
that if delay and hindrance is caused to the contractor as a result of the
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Executive Engineer failing to issue necessary instructions, the contractor
will have the right to claim and assessment of the delay by the
Superintending Engineer of the Circle. The contractor is to lodge a
statement of claim for any delay or hindrance within 14 days from its
commencement, failing which no extension for time will be allowed. Still
further Clause 59 declares that whenever authorised alterations or
additions which are made during the progress of the work are of such a
nature which justify an extension of time, extension can be granted in
writing by the Executive Engineer or other competent authority when
ordering such alterations or additions. In short, under clause 59 while
extension of time on account of delay or hindrance can be granted.
Claim for compensation on account of delay or hindrance on account of
any cause will not lie.
28. Now that we have elucidated the true scope of Clause 59, we
must ponder whether the High Court was right in placing Clause 59 side
by side with Claim No.I and find that claim is in the teeth of Clause 59.
29. Claim No.I as we have already noted relates to claim for
extra lead for carrying out the work of quarrying stone and metal from a
quarry located at a greater distance from the work site. As far as the
said claim is concerned, we would think that it cannot be associated with
a delay to the work for any cause whatever within the meaning of Clause
59. What is involved
in the claim is the right to claim compensation by
reason of the fact that the appellant-contractor though had to quarry
from the specified quarry under the contract which was located nearer
to the work site was compelled to carry out the work of quarrying, both
stone and metal, from a quarry located at a greater distance and to
transport the same to the work site. The claim is based on the expenditure
which the appellant had purported to incur on this score. Though case of
delay within the meaning of Clause 59 is sought to be set up, there is no
support sought to be drawn from the second limb of Clause 59 which
deals with hindrance to the work from any cause whatsoever. Therefore,
we can safely confine our focus on the question whether the claim stands
barred by virtue of Clause 59 on account of it arising out of delay. In this
case, we must further notice that, in fact, before the arbitrator apparently
Clause 59 was not as such pressed or at any rate seriously pressed.
Before the civil court, in the counter affidavit filed, the State did not lay
store by the said contention. It is in the additional counter affidavit filed
that the contention based on Clause 59 was apparently raised by the
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State. Be that as it may, since the arbitrator is the creature of the contract,
and therefore, he is bound by the contract, though late in the day, it may
be, that the objection was raised, we cannot rule out the said contention
as it is a matter that goes to the root of the matter. In fact, we would
approve of the view taken by the High Court in regard to effect of
Clause 59 qua Claim Nos.2 and 5. The appellant has, also, not pressed
these claims before us. The only aspect which remains is the contention
which is urged on behalf of the respondent that Clause 59 would be
infringed as escalated amounts are given beyond original period are
canvassed by the appellant.
30. We would think that while it is true that the case under Claim
No.I extends to the period beyond the original period of the contract
(namely 18 months from the date of handing over of site), the claim
cannot be one which is on account of delay from any cause whatsoever.
The claim, on the other hand is, on account of the appellant carrying out
work of quarrying from a site which was located further away than the
site which was specified under the contract. Be it for the original period
of the contract or for the period beyond the contract, the appellant has
had to quarry from the site located further away. Necessarily in regard
to expenses, he must be paid for the difference in the rate. The last area
of inquiry would be whether having regard to the fact that the civil court
has agreed with
the arbitrator that appellant is entitled to extra lead at
which rate it should be paid? It is here that we must remind ourselves of
the jurisdiction to interfere with an award under the Act. In calculating
compensation at the rate of Rs.15/- per cubic meter, has the arbitrator
acted without any material? Has he overlooked any contractual
injunction? Does the Civil Court have the power to re-appraise the
materials in substituting or modifying the award on merits?
31. In this regard, we must notice the provisions in the Act relating
to the power of the court when an award is challenged. Section 15 of
the Arbitration Act, 1940 reads as follows:
“15.Power of Court to modify award. The Court may by order
modify or correct an award-
(a) where it appears that a part of, the award is upon a matter not
referred to arbitration and such part can be separated from the
other part and does not affect the decision on the matter referred;
or
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(b) where the award is imperfect in form, or contains any obvious
error which can be amended without affecting such decision; or
(c) where the award contains a clerical mistake or an error arising
from an accidental slip or omission.”
32. Section 16 of the Arbitration Act deals with the power to
remit the matter. We may straight away rule out the question of remitting
the award having regard to the efflux of time and also improbability the
arbitrator being available even otherwise for the purpose of redoing the
matter. Coming to Section 15 of the Act, the power available to the
Court to modify the award was available inter alia when a part of the
award is not referred to arbitration and such part can be separated from
the other part and clearly Clause (a) is applicable as it is not the case of
either party that the matter relating to the amount to be paid by way of
extra lead was not a matter which was referred to arbitration.
33. Under Clause (c), an award can be modified if it contains a
clerical mistake or there is an error which arises from an accidental slip
or omission. There cannot be any doubt that this is not a case where
there is clerical mistake or an error arises from an accidental slip or
omission. Lastly, the power of the court to modify extend to a case
where the award is imperfect in form. Certainly, it is not the situation in
the facts of the case. Of course, where the award contains an obvious
error
which can be amended without affecting such decision. Court has
power to modify. When the Sub court modified the sale at which the
amount is to be calculated would affect the ‘decision’ of the ‘arbitrator’.
It is not the sale of Rs. 15/ C.M., not an essential part of the ‘decision’ of
the arbitrator.
34. In the light of the above discussion and proceeding on the
basis that there is no power to modify the award we would consider the
legality and correctness of the civil court decreeing the claim in regard
to Claim No.1 by modifying the award of the arbitrator.
35. In the award, it is the case of the appellant that the Executive
Engineer has clearly given the rates and arbitrator has found as follows:
“2.4 the claimant has claimed Rs.15/ cu.m. The Ld. Arbitrator at
vol.2 page 283 has noted:
“In fact the Department itself recommended to the Government
vide 87 letter of C.E. to Government for sanctioning enhanced
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rates because of escalation of costs. The Department had not
disputed correctness of extra rate claimed by contractor. On
the other hand by its representation and conduct it has accepted
the rate as workable rate. The claim is also tenable and legally
tenable and legally grantable, applying the principles of Sec.70
of the Contract Act. Hence I find the claim of the contractor
for higher rates at Rs.15/ C.M. is just reasonable and legal..”
For Agreement No.10, Rs.7,68,825/- is awarded.
For Agreement No.11, Rs.12,38,250 is awarded and
For Agreement No.14, Rs.9,59,325 is award.
The total is Rs.29,66,400/-”
36. The further case of the appellant is that the standard rate for
the period stated by the Executive Engineer is Rs.13.75 cu.m. and the
contractor has claimed Rs.15/-cu.m. which is accepted by the
Department. It is contended by the appellant that as per the finding of
the arbitrator the sub-Court, the extra lead would relate to beyond the
agreement period.
37. He had claimed at the rate of Rs.15/- cu.m. which was
accepted by the department as is clear from letter dated 23/11/1982
written by the Executive Engineer to the Superintending Engineer.
38. Appellant drew support from letter dated 23.11.1982 written
by the Executive Engineer to the Superintendent Engineer. We may also
notice the following statement however in the said letter.
“After gaining practical experience it has been found possible to
utilize this quarry only for major quantities of two
contracts of Sri
DV. Krishna Reddy & Co., against the total No. of seven works
for which the stone from that quarry is proposed to be utilized.
The quarry from which the stone is being obtained by Sri K.
Marappan is at a distance 3.45 KM MR + 1.447 KM CT. He is
obtaining the entire metal and stone totally from this quarry.”
39. The sub Court, on the other hand, has found that the assumption
made by the arbitrator about Rs.15/- cu.m. over and above the quoted
rates is without any basis. The sub-Court relied on the provisions in the
agreement relating to the manner in which the rates were to be derived.
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The sub Court proceeded to make reference to the clause in the
agreement.
The Clause reads as follows:
“VII. a) Procedure for working out rates for supplemental items:
The contractor is bound to execute all supplemental items that
are found essential, incidental and inevitable during execution of
main works at the rates to be worked out as detailed below:-
i) Supplemental items directly deducible from similar items in
the original agreement:-
The rates shall be derived by adding to or subtracting from the
agreement rate of such similar items, the cost of difference in
quantity of materials or labour between the new item and the
similar item in the agreement worked out with reference to the
schedule of rates adopted in the sanctioned estimate with which
the tenders were compared plus or minus overall tender
percentage.
ii) New items (a) similar items, the rates of which cannot be
directly deduced from the original agreement.
b) Purely new items which do not correspond to any item in the
agreement.
    The rates shall be estimate rate plus or minus overall tender
percentage.
NOTE: The term estimate rate used in (i) and (ii) and (a) & (II)
(b) above means the rate of sanctioned estimate with which the
tenders were compares, or if no such rate is available in the
estimate the rate derived with reference to the scheduled of rates
adopted in the sanctioned estimate with which tenders are
compared.
     Whether the need for
execution of excess quantity beyond
the quantities stipulated in the agreement is noticed, the contractor
should give notice in writing to the Exe. Engineer, who will in turn
shall obtain orders of the competent authority before commencing
execution of the excess quantity of work.
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For all items of work in excess of the quantities shown in Schedule
‘A’ of the tender the rate payable for such item shall be either
tender rate or SS rates for the items plus or minus overall tender
excess accepted by the competent authority whichever is less.
The SS rates means the rates with which estimate is prepared for
comparing the tender.
40. Thereafter, the sub court referred to the actual calculation
made in Exhibit B.3 the letter dated 23.11.1982 written by the Executive
Engineer to the Superintending Engineer which is in fact relied upon by
the appellant himself. The sub Court proceeded to find that the difference
in rates for 2 kms and 6 kms works out to 3.23 per cu.m. and that the
cost of conveyance of material of all kinds RR stones and spass as
provided in the estimate is Rs.9.81 per cu.m. which was in accordance
with the standard schedule rate for 2 km. lead. The rate fixed for 6 kms
lead was Rs.15/- over and above the quoted rates of Rs.8.80 which is
arrived apparently after deducting actual rate by which the appellant
had quoted his rates which was nearly 10-12% less than the estimated
rates. The result was that the arbitrator gave Rs.24/- per cu.m. as against
Rs.13.75 which is without deduction. In the written submission before
us, the appellant has not questioned the applicability of the clause relating
to supplemental item in regard to the extra lead. Therefore, we need not
be detained by the question whether the provision as such is
applicable
in respect of claim based on extra lead. If that be so, the question would
be whether it is a case whether arbitrator has awarded Rs.15/- in place
of Rs.13.75 in which case we would be inclined to agree with the appellant
that the award in this regard should be sustained in its entirety. But the
question is whether the arbitrator has actually awarded Rs.15/- cu.m.
over and above the amount which the appellant already received on the
basis of the actual lead in the contract.
41. The arbitrator, in fact, found that the claim of the appellant for
higher rates at Rs.15/- per cu.m. is reasonable and legal and on the basis
of the tabular statement which was prepared by the appellant and
awarded different sums under the three different contracts. It would
appear that the claim for Rs.15/- per cu.m. is based on abnormal increase
in transport charges due to increase in cost of fuel, automobile spare
parts etc. If escalated rates are claimed, then it may attract the wrath of
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Clause 59. We would think that the claim of extra lead cannot be denied.
The claim of Rs.15/- per cu.m., if it is over and above the amount which
is already received will be in the teeth of the contractual provision which
is relied on by the sub Court for which he has not taken any exception to
in which case we would think that the amount as ordered by the sub
Court is to be awarded to him under this claim. This means the amount
is to be worked out as provided in the letter dated 13.11.1982. In other
words, the amount must be awarded on the basis of the cost of
conveyance being calculated at the rate of Rs.13.75 and the amount
must be calculated and paid. Mindful though we are of the limitation
under Section 15 (b) of the Act to modify, we would in the facts of the
case, rely on Article 142 to sustain the decision of the Sub Court under
this claim.
CLAIM NO.III
42. Coming to Claim No.III, namely, on account of non-supply of
food grain, we have already found that while the arbitrator has awarded
the amount of compensation, the sub Court has set aside the award. The
main contention of the State which found favour with the sub Court is
that the clause actually provided for supply of food grain provided it is
available. The arbitrator found that food grains were not supplied despite
the fact that they were available and this finding by the arbitrator was
found to be perverse. The claim of the appellant was that under the
agreement, the appellant was to supply the labourers a certain quantity
of foodgrains as part of the wages. The labourers were also making
such demand as it would be beneficial to them also. The appellant
therefore had to supply food grains from the market at the market value
which led him to incur extra expenditure. The labourers according to
appellant were not willing to work otherwise. It is necessary to advert to
the actual contractual provisions in relation to supply of food grain. The
clause in one of the contract relating to food grains reads as follows:
“FOOD GRAINS:
1. The cost of the work is estimated to be Rs.1,16,15,713/-
approximately. Against this estimate 17,500 quintals of wheat at
Rs.115/- per quintal, if available, will be supplied to the contractor
for being issued as wages to labourers employed on the work.
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2. The tenderer shall bear the transport and other incidental charges
for the transportation of wheat from nearest F.C.I. Wheat godown
to the site of the work. He shall be responsible for the safe custody
and storage of wheat at his own cost and ensure issue to the
labourers of the quantity of wheat calculated at a price not
exceeding Rs.1-25 per K.G. in lieu of the amount of wages payable
to them.
3. The contractor shall be responsible to produce the Accounts of
receipts, distribution etc., of what to the labourers as and when
required by the Engineer incharge of the work.
4. The supply of wheat to the contractor for issue to the labourers
will be regulated from time to time according to the assessment
of the Engineer in-charge of the work.
5. The department is not liable for any compensation on account
of any fluctuation of market price of wheat or deterioration in
quality of the wheat. The contractor is bound to accept the agreed
quantity of wheat at the stipulated rate, if offered. Similarly, he
shall have no claim for the supply of extra quantity of wheat on
the ground of excess or enlarged scope of work and where the
Department declines to supply extra wheat, no claim for
compensation on this account shall be entertained by the
Department.
6. The tender will be deemed to have satisfied himself about the
availability of wheat and the rates quoted by him in the tender
should take into account that aspect for completing the work
according to the
specifications and conditions incorporated in the
agreement.”
43. It was further provided that the labourers were to be supplied
wheat at a rate not exceeding Rs.125 per quintal but the quantity to be
supplied to the labourers and rates are subject to the approval of the
Executive Engineer.
44. The appellant relied particularly on the contents under the
heading ‘Negotiation’. It reads as under:
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“NEGOTIATIONS.
During further investigation I do hereby agree for the supply of
rice in place of wheat. I also agree to receive either wheat or rice
or both to the quantity of 17,500 quintals. I also agree for a rate of
Rs.115/- per quintal of coarsed rice and Rs.130/- per quintal for
fine rice. I also agree to supply coarsed rice at a rate not exceeding
Rs.125/- and fine rice not exceeding Rs.140/- per quintal to the
labourers. The other conditions and clauses covered by the tender
relating to the supply of food grains remain unchanged.
In case of short supply of either wheat or rice compared to the
quantity of 17,500 quintals, I shall have claim for compensation on
this account.”
45. The first thing we have to deal with is whether the High court
was wrong in rejecting the said claim. The reason for rejecting the claim
by the High Court are as follows:
1. There is no such total liability on the part of the Government to
supply the food grains without which he (apparently the
appellant) could proceeded with.
2. The very clause which has been relied upon by the contractor
for supply of food grains reduced to the fact that such supply
would be made only if available and therefore it is not the case
of the contractor that though foodgrains were available it is not
supplied by the Government.
3. There is no mention of any evidence in this regard let in on
behalf of the contractor. It is thereafter that the High Court
holds that therefore it is again the compensation which comes
within the bar of Clause 59.
46. At first blush, the claim relating to food grain even as understood
by the High court does not appear to have anything to do with
compensation for delay. The case based on hindrance also does not
appear to be made. We shall, however, consider the matter in some
detail.
47. The High Court has not adverted to the clause in the contract
under the heading ‘negotiation’ which we have referred to. Instead the
High court has proceeded on the clause which undoubtedly contemplated
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supply of food grain only subject to availability. The clause after the
negotiation was carried out however brought about the following changes:
In place of wheat, the appellant agrees to take either wheat or
rice and the price at which it was to be supplied to the workers was also
stipulated. The other conditions in the contract relating to the food grain
remained unchanged. This means that it could be said that it was subject
to availability and we have also referred to clause which provides that
appellant is bound to accept the quantity at the stipulated rate, if offered.
However, a significant change which was brought about was that in
case of short supply of either wheat or rice compared to a specific
quantity of 17,500 quintals, the appellant was given the right to claim for
compensation. Therefore, this clause, in our view, brings about the change
which has not been considered by the High court. Since the sub Court
has given other reasons, it may be necessary to consider what sub Court
has held.
48. The sub Court takes note of the provisions under the heading
‘negotiation’ which we have referred to except the condition that in
case of short supply the appellant will have the right to claim compensation
on this account. The sub Court proceeds to hold the conditions are
incorporated with a view to cast a duty to receive a particular quantity
of food grain in lieu of cash and to supply them to labourers at a stipulated
rate and it is for the benefit
of the State as the State would receive the
food grains under the food for work programmes under the Government
of India scheme free of cost. Further, it is for the benefit of the labourers.
The sub Court proceeded to further hold that the purpose of the food for
work programme was to create employment and the contractor is not to
get any benefit out of this condition. The contractor is bound to make
record of the food grains received from the Government and supplied to
the labourers at the specified rate. He cannot sell the food grains at the
market rate. He is the happiest person and need not discharge the burden
cast under the condition relating to food grains if food grains are not
supplied. The appellant was trying to take advantage of this. There is no
promise to supply a particular quantity of food grain. The appellant has
no obligation to supply food grains to the labourers if the Government did
not provide him food grains. The Sub Court also did not find favour with
the contention of the appellant that taking the attractive clause of supply
at subsidized rate, he quoted lesser rate and, therefore, for non-supply
he is entitled to be compensated. It is found that the appellant is not
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entitled to compensation as it is not an attractive clause. The Court further
found that the arbitrator was carried away by the letters written by the
Engineers wherein they have opined that the contractor quoted lesser
rates on account of this attractive clause. It would become an attractive
clause only if the Engineers concerned permitted the appellant to misutilise
the grain by selling the food grain by the contractor in the open market.
The appellant is bound to pay fair wages under the contract (It is true
that under the contract clause the appellant shall not pay less than the
fair wages).
49. It is found that department officers misunderstood the food
for work in their letters. The arbitrator relied on such letters as if the
Engineers are the master to interpret the term of the contract. It was
further found that there is absolutely no basis that food grains were in
plenty with the Government. The sub Court further finds that the reliance
placed by the arbitrator at Exhibit A.22 for availability was not justified.
He referred to Exhibit A.22 with annexure also. The contention of the
appellant was that he promised to the labourers that he would pay a
portion of their wages by way of food grain at specified rate and he had
to supply the food grains at the subsidized rates as promised by purchasing
the food grains at higher rates. The sub Court finds that there is no
evidence produced before the arbitrator to show
that he purchased food
grains from the open market and supplied those food grains to the
labourers at the subsidized rates. In case of supply of food grains, the
appellant was bound to maintain record of proper distribution but the
appellant has not produced any such register, it is reasoned by the sub
Court. Next it is found that the appellant even it is true that he agreed
that the workers are to be supplied a certain portion of the wages in food
grains, he cannot fix wages in such a manner that the contractor would
get any advantage out of it as it is not contemplated under the scheme.
He has to pay the fair wages and besides fair wages he had to provide
additional facilities by providing food grains at the subsidized rates. The
question of supply of food grains to worker by appellant in the event of
non-supply of the same by the Government did not arise. It is further
found that there is no provision in the agreement to the effect that in
case of failure to supply food grains the Government is liable to
compensate the loss that may be sustained on account of failure of the
department to supply food grains, and the arbitrator patently exceeded
jurisdiction.
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50. The first thing that stands out in the reasoning of the sub-
Court is the absence of any reference to the clauses specifically under
the heading ‘negotiation’ which specifically confers a right of
compensation in case of short supply of either wheat or rice compared
to the quantity of 17,500 quintals (Agreement No.11/78-79). This means
that while the parties contemplated that a part of the wages was to be
paid by way of supply of food grains at the stipulated price, the obligation
of the appellant was to take the food grain supply from the Food
Corporation godown and carry it to the work site. He was to further
supply the said food grains to the workers at a higher specified rate in
view of the fact that he would incur certain expenses. This undoubtedly
was subject to availability. But introduction of the clause in the contract
that in case of short supply of either wheat or rice in comparison to the
actual quantity which was agreed to be supplied, the appellant will have
a claim for compensation on the said count has been missed by the sub
Court as also the High Court.
51. The sub-court has proceeded to find that the case of the
contractor appellant that the clause providing for supply of food grains
was an attractive clause, was not correct. We are inclined to agree with
the said finding. In the claim filed by appellant what is stated inter alia
is as follows:
“(ii)…………The tender documents provided for supply of wheat
at the quantities mentioned
above. It also provides that the charges
on account of the storage, transportation, the cost of the container
as fixed by the Government, and sales tax have to be borne by the
contractor. The contract condition also further stipulates that the
contractor has to supply the wheat to the labourers consistent
with their requirement and at the rates not exceeding Rs.125/-
per quintal. It is also mentioned in the contract that a particular
quantity of wheat at Rs.115/- per quintal, will be supplied to the
contractor for being issued as wages to labourers employed on
the work. On the representation made by the contractor on this
clause there was negotiation and agreement was arrived at
between the contractor and the Department to the effect that the
contractor will receive the quantity of grains to be supplied either
as wheat or as rice or both, further stipulating the rate at which it
is to be supplied fixing the rate at Rs.115/- per quintal for coursed
rice and at Rs.130/- per quintal for fine rice and also stipulating
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the rates at which the contractor is to pay to the labourers, retaining
the other conditions and clauses covered by the contract relating
to the supply of food grains.
(iii) In short the agreement stipulates that the food grains will be
supplied by the Department to the contractor at the specific rates,
which of course are competitive rates as against the rates of the
grains to be acquired from the open market. The contractor took
this important and attractive aspect into consideration and submitted
his tender at the most competitive rate only on account of the
advantage he would derive from the department supplying the
food grains at specific rates which he would pass on to the
labourers.”
52. A perusal of the aforesaid averments will reveal that the tender
document contemplated supply of wheat of a particular quantity at Rs.
115/- per quintal and the contractor was to supply at Rs.125/- per quintal
to workers. Thereafter, it is stated that on a representation made by the
contractor there was negotiation and an agreement was arrived at
between the contractor and the department. The contractor was to
receive the quantity of food grains either as wheat or rice or both. In
other words, reference is made to the clause coming under negotiation.
It is thereafter stated that in short, the agreement stipulated that the food
grains will be supplied at specific rate which were competitive rates as
against the rates in the open
market. It is further alleged that the
contractor took this important and attractive aspect into consideration
and submitted his tender at the most competitive rate only on account of
the advantage he would derive from the department.
53. It is to be noted that even according to the appellant, the tender
documents provided for supply of wheat. The contract was settled by
calling tenders. The appellant submitted his tender which turned out to
be the lowest. At the time of submitting his tender the condition relating
to the negotiated settlement could not have been there. If that is so, the
original tender conditions contemplated supply of wheat at Rs.115/- per
quintal, if available. The appellant was to supply the food grains only if
the food grains were made available by the Government. Therefore, it is
totally untenable for the appellant to set up a case that attracted by the
clause which resulted from the representation and negotiation, he
submitted his tender. May be at the time of entering into the contract
following his representation and negotiation the clause was incorporated
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which provided for supply of rice or wheat and other terms. In other
words, at the time when appellant submitted his tender which may have
been lesser than the estimated rate by about 10 to 12%, the negotiated
clause was not there. On this score, the case sought to be built up around
the clause being attractive cannot be accepted.
54. Secondly, as regards the supply of food grains, the appellant is
not correct in having contended that the appellant was duty bound to
supply food grain even if the food grains were not supplied by the
department. The sub-Court is correct in concluding that appellant was
duty bound to supply food grains only if it was supplied to him by the
department. This is because despite the clause resulting from negotiation,
the other conditions remained intact. A perusal of the clause relating to
supply of food grain would show that food grains would be supplied, if
available. Again, the words “if offered” is conspicuous. The words in
the clause which provided that the appellant shall supply food grain to
the labourers is not to be considered in isolation.
55. The sub-Court is not correct in coming to the conclusion that
the appellant was bound to pay the fair wages to the workers and he
was also liable to offer food grains apart from fair wages. A perusal of
the clause makes it clear that what was contemplated was if the food
grains were available and supplied, the appellant was to make use of the
same supplied it to the workers ‘in
lieu of wages’.
56. There are a few aspects which remain. Firstly, what is urged
before us is that the under the negotiated clause the department agreed
to supply a definite quantity of food grains. In agreement No.11, it was
17500 quintals. We proceed on the basis that in other two agreements,
different quantities as claimed by the appellant was mentioned. We notice
that in the claim while the appellant has referred to the negotiated clause
relating to supply of rice and also providing for the quantity, there is no
reference to the clause that appellant will be entitled to compensation if
there is short supply of food grains. This clause is also not considered
either by the sub court or by the High Court. Very interestingly this is
what the arbitrator has said.
“It is argued for the Department that agreement clause is that
contractor is not entitled for compensation even if there is non
supply of food grains. I do not agree with this submission because
the words used in the agreement are ‘short supply’. The agreement
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does not state that the contractor has no claim in case of non
supply of food grains. The counsel for the contractor submits that
his clause was subsequently negotiated because intention of the
parties was that contractor cannot insist on wheat alone or rice
alone and if there is short supply either of rice or wheat, then for
that short supply contractor has no claim for compensation. I am
inclined to agree with the submission of the counsel of the
contractor that so called clause in the agreement does not apply
and it is not a bar to the contractor claiming compensation.”
57. However, in the contractual provision which we have extracted,
we notice that right to claim compensation is reserved to the contractor
in case of short supply. But then, the case of the appellant is not of short
supply but of non-supply. The appellant in his written submission also in
paragraph 3 stated as follows:
“The Agreement at Vol.3, Pg.71, 72 refers to this head. At Pg.72
after the head ‘Negotiations’ the clause reads as under:
“….In case of short supply of either wheat or rice compared to
the quantity of 17,500 quintals, I shall have claim for compensation
on this account.”
58. Further, it is relevant for us to notice the discussion by the
arbitrator regarding the quantum of compensation. The arbitrator relies
upon the Statement No.3 appended to claim No.III wherein he has shown
the prevailing rate of rice in the open market during the
period November
1979 to October 1982. The amount which he has paid for the labourers
for purchase of food grain on the basis of rates in the open market, the
price of food grain payable to labourers for purchase of food grain as
per the agreement condition and the extra amount involved due to non
supply of food grain by the department. The arbitrator found that the
statement shows that the extra amount paid varies between Rs.162/-
and Rs.211/- per quintal in the said period. On striking an average, it
came roughly to about Rs.185/- per quintal which the appellant paid to
the workers for non supply, finds the arbitrator. Further the arbitrator
found that the labourers cannot purchase rice from the fair price shops
because they were not rice card holders. The arbitrator referred to the
communication to the Executive Engineer dated 23.7.1987 wherein he
has stated that 1000 to 1200 workers work daily in each works and the
rates for the food grain in the open market are increasing day by day,
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therefore he has no hesitation in awarding price increase by restricting it
to 180% though the contractor’s statement shows 185%. Thereafter,
the arbitrator awarded as follows:
“The quantity agreed to be supplied by the Department namely
rice to the contractor under agreement No.10 is 13,200 quintals,
under agreement No.11, it is 17,500 quintals and under agreement
No.14, it is 20,000 quintals. In the tabular statement contractor
claimed difference of rates for 15,521 quintals under agreement
No.10 and 20,804 quintals under agreement No.11 and 22,195
quintal under agreement No.14. Thus he claimed higher rates for
58,520 quintals where as the Department agreed to supply him a
total quantity of 50,700 quintals is multiplied by Rs.180.00 being
the difference in price he has incurred an additional expenditure
of Rs.91,26,0000.00. Accordingly he is entitled to compensation
for Rs.23,70,000.00 under agreement No.10/1978-79 and
Rs.31,50,000.00 under agreement No.11/1978-79 and
Rs.26,00,000.00 under agreement No.14/1979-80.”
59. The arbitrator refers to Exhibit P.1 to P.4 letters. Arbitrator
also refers to Exhibit B.3 to B.7 letters wherein it is stated that contractor
was suffering as he has incurred expenditure on this account as there
was a condition in the agreement to give food grains as part of the
wages and his aspirations and objectives were not fulfilled because he
has quoted less rates. The arbitrator make reference to the negotiations
where rice took
the place of wheat and thereafter the arbitrator enters
the finding that the rice was available. He relies on Ex.A-27 where the
Executive Engineer speaks about 1000 to 1200 workers working daily at
each work and the rates for food grains in the local market was increasing
day by day. According to the arbitrator, there is correspondence that
abundant quantity of food grains was available but no adequate
arrangements were made to supply the food grains to the contractor. In
the letter written by the Chief Engineer to the State Secretary, he notes
the case of the appellant that the appellant has quoted lesser rates relating
to supply of food grain at stipulated issue rates. The quantum in the
three contracts is noted as also the rate and the amount, the value in
rupees is noted. The Superintending Engineer has agreed that the food
grain could not be supplied since allotment was not received even though
there is stipulation in the agreement to supply food grain if available. The
aspirations of the appellant could not be fulfilled, it is stated. It is noted
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that the price structure of various materials is increased from the date of
tender i.e. 10.11.1978. In relation to wheat it is shown an increase of
147%. There is an increase in the case of rice to the extent of 178%.
This letter is written on 30.11.1982 Exhibit B-7.
60. First letter written by appellant is dated 30/06/1979. In the
said letter this is what he says:
“I had requested on several times for the supply of food grains
but so far no food grains were supplied to me. I request to make
arrangement for the early supply of food grains. In this connection,
I wish to state that I had engaged labours on the term that food
grains will be supplied to them as a part of their wages and I am
supplying food grains to them by purchasing in the local market.
Hence, urgent action may be taken for the supply of food grains
early otherwise, I have to invest extra finance…”
61. Therefore, the case set up by him is that he has purchased
food grains from local market and supplied. In the letter dated
27/08/1980 he states inter alia that he had engaged labourers on terms
that rice or wheat will be supplied to them as a part of their wages. He
complains that no food grains was supplied. Then he says on the terms
agreed to by him he had paid the price of the quality of rice that was
cheapest in the market. As can be seen in the second letter the case
appears to be that he was paying the labourers the price of rice and he
is departing
from the case that he was supplying the food grains.
62. In the next letter dated 16/07/1981 he states that he had to go
in for additional finance on account of non-supply of food grains. He
repeats the same complaint about huge financial outlay on account of
non-supply at the specific rate of Rs.115/- per quintal which was actually
available, in the last letter dated 07/10/1982.
63. We are of the view that the sub Court is right in holding that
the correspondence referred to by the arbitrator did not show that the
food grains were actually available with the department and department
was only trying to get the food grains from the administration with which
the food grains was available. As long as there is some material which
substantiated appellants claim before the Arbitrator, the Court hearing
the petition under Article 30 and 32 would not reappraise the material to
come to the conclusion that the arbitrator went wrong in arriving at a
finding of fact. At the same time, if virtually there were no material then
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it becomes a case of no evidence. No doubt the contractual provision
which provides that the appellant is to keep accounts and produce accounts
relating to receipts and distribution may assume relevance when appellant
receives food grains from the department and distributes. But at the
same time the appellant is putting up the claim for compensation and
that too a claim which runs into a fairly large sum. There would certainly
be material to evidence the actual purchase and further actual supply to
the workers or payment as alleged. Even assuming everything that the
appellant says is correct about the fact of the negotiated settlement,
there is virtually no material except the appellants statement that the
appellant paid for the price of food grains to the workers. Further, the
claim involves payment of price of rice at escalated rates for period
beyond the contract also and it invites the wrath of Clause 59. We would
therefore think that the award of the claim by the arbitrator cannot be
sustained.
CLAIM NO.IV
64. As regards, claim No. 4 is concerned, it arises from alleged
short supply of cement. First of all, we have to find as to whether it is hit
by the embargo contained in Clause 59 and also advert to the finding of
the High Court. In this regard, the High Court holds that the obligation is
similar in nature to the earlier claim, namely, claim no. 3 and nothing is
pointed out on behalf of the appellant on facts or in details as to how it
can be
taken out of Clause 59. We have to ascertain what exactly is the
claim raised by the contractor.
65. The claim in brief is as follows:
Cement is one of the items to be supplied by the Department at
specific issue rates. The appellant, accordingly, perceiving the same as
attractive quoted 10 to 12% lesser than the estimate rate. Cement was
to be supplied at the issue rate of Rs.416/- per metric tonne. Right from
the beginning, there was short supply. The appellant had no other option
but to get cement from other sources. Large quantities were so brought
from other sources. The Department being aware agreed specifically
and by conduct that they will recoup the cement. The appellant had no
intention to give cement free to the Department. The quantity of cement
used by the contractor for the project had been quantified and noted in
the measurement book and the USR (Unstamped Receipt). The quantity
of cement supplied by the Department is correctly noted in the cement
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issue register maintained by the Department. Recoveries had been
effected without the actual issue of such quantity by the Department as
evidenced by the document like USR and other entries. The appellant
appended a tabular statement of quantity of cement used for the work,
the quantity which was issued by the Department and the balance quantity
which constituted the basis of the claim.
66. The arbitrator in regard to the said claim finds inter alia that in
the letter dated 17.08.1980, the Engineer had stated that there is short
supply and he was bringing cement from other sources and action may
be taken to return the extra quantity of cement. He notes that in the
counter of the Department, there is no denial about the quantity of work
done by the appellant and also the quantity of cement used by him by
bringing from other sources. He further finds that it is stated that the
exact short supply of cement can be shown only after taking all
measurements. The details in the claim statement which also include,
apparently, the tabular details was not denied in the counter. Though, the
cement issue register and the USR were called for by the appellant,
they were not produced. Adverse inference was drawn. The arbitrator
further noted that in the bill the quantity of cement used has been
recovered, though the quantity has not been issued and in the last bill,
more quantity was given representing part reimbursement. The letters
of the Department were also found to support the case of the appellant.
Referring to the objection in the counter that no vouchers were produced
by the appellant, it was brushed aside as immaterial as it is found that it
is proved that he was bringing cement from other sources to complete
the work except a small quantity under Agreement No.14. Reliance is
placed on Section 70 of the Contract Act. The argument without a plea
in the counter by the Government pleader that the appellant was saving
cement out of the quantity supplied by the Department was found
untenable on the basis that engineers would not have permitted it. As far
as, clause 10 of the Agreement prohibiting any claim for compensation
for non-supply or delayed supply, the arbitrator found that appellant is
only asking for return of cement brought by him and used in the
construction on the assurance of the Department that it will be
reimbursed. In total 3790 metric tonnes of cement were found to be
brought by the appellant. Rejecting the claim of the appellant for market
rate and applying the departmental issue rate of Rs.416/- per tonne
different amounts were awarded under the three different contracts.
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67. We would think that this claim cannot be said to be hit by
clause 59 as appellant is not claiming compensation for any delay. On
the other hand, his case is that, contrary to the agreement that he would
be supplied the cement it was not supplied and he had to use cement by
spending money from his pocket and he only wanted that cement actually
used which is in excess of the cement issued to be given to him. More
importantly, the amount awarded is at the rate fixed in the original contract
and no escalation is given.
68. The Sub-Court, however, set aside the award. The Sub-Court
finds as follows: -
Cement is a controlled commodity and it could not be purchased
from outside, without valid permit. It was found that the appellant did not
produce any document to show that cement was actually purchased
from outside. The source was not mentioned. The appellant did not
produce any permission from the Department for purchasing cement
from outside. Even if purchased, it was to be checked by check measure
but there was no check measurement. The tabular statement shown by
the appellant, only represents the theoretical requirement in the quantity
of cement. He referred to the contractual provisions in this regard which
we will refer to. In the letters of the Officers, there is no reference
about the use of cement by the appellant which was brought from outside.
The letters written by the appellant also complained only of inadequacy
of supply of cement and there is
no mention of use of cement which he
brought from outside. More importantly, he referred to the contractual
provision to find that the Government is entitled to recover the cost of
theoretical quantity which is not used and use of any lesser amount in
comparison to theoretical amount would only enure to the Department.
69. We must refer to the contractual provision which has not been
referred to by the Arbitrator. The contract provides that cement will be
supplied at cost by the Department inter alia and the cost of cement
issued will be recovered from the contractor’s bill at the rate specified.
The contract also contains the theoretical requirement of important
materials which include cement which are set out. The rate of recovery
is shown as Rs.416/- per metric tonne. However, the important aspects
which weighed with the Sub-Court are contained in the following
provisions relating to the scarce materials like cement. It reads as follows:-
SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN
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“The contractor is expected to use the scarce materials like cement
and steel as per the theoretical requirements shown above.
      A schedule of quantities of important materials like steel cement
etc., required for execution in accordance with the requisite
specifications is appended hereto for which recovery will be
affected. If these materials drawn according to a schedule are
short used, the excess quantity so drawn should be returned to
the Department in good condition and no payment will be made to
the contractor therefore. If they are not so returned to the
department, their cost will be recovered at the market rate
prevailing at the time of supply or the issue rate whichever is
greater plus storage charges plus sales tax if leviable.
    If materials are drawn in excess of theoretical requirements
indicated in the appended schedule, the excess quantity should be
returned to the Department in good condition. If they are not so
returned to the Department their cost will be recovered at issue
rate plus 100% surcharge or market rate whichever is higher plus
storage and sales tax if leviable.
      If materials are either short drawn or short used (though drawn
according to schedule) (1) the savings due to short drawal/ use
should be secured to Government by recovering the cost thereof
at issue rate from the Contractor. In the case of materials short
used, though drawn according to schedule this recovery will be
in
addition to the recovery to be made for the cost of materials not
returned as stipulated above.
   The Executive Engineer will decide the approximate
requirements of explosives. If they are drawn in excess of the
same, the excess quantity should be returned in the Department
in good condition. If they are not so returned to the Department
their cost will be recovered at issue rate plus 100% surcharge
over from the contracting bill.
      The Contractor should maintain separate ledgers for each of
the items which are either supplied by the Department or required
to be procured by the Contractor and permit the Exec. Engineer
or his authorized subordinate or scrutinize the Registers any time
and note in account of the materials on hand.”
                                                            (Emphasis supplied)
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70. Let us see what the contract has really provided for. We are
doing this for the reason that the Sub-Court set aside the award in regard
to this claim. The appellant filed revisions against the judgment of the
Sub-Court. We have noticed that essentially, the High Court proceeded
based on the Bar under Clause 59. The matter has not been dealt with
as such by the High Court. Here also after finding that Clause 59 will
not come in the way of the claim, we could have remitted back the
matter to the High Court for consideration of the matter. Having regard
to the long efflux of time, we are undertaking the task of considering the
matter.
71. A perusal of the contractual provisions which we have referred
to yields the following inevitable result. Cement is a scarce material to
be supplied by the Department. The appellant was to maintain separate
ledger for the item for which cement was supplied by the Department.
The issue price was Rs.416/- per metric tonne. The cost of cement at
the said rate was to be recovered from the appellant’s bill at the issue
rate. Thus, if the value of the work is Rs.100/- and the value of the
cement is Rs.5/-, the appellant would get only Rs.95/-.
72. The next question is the effect of the other provisions which
we have quoted. We have already noted that there are theoretical
requirements in regard to the use of cement. It is not unnatural for the
Department to prescribe for the theoretical requirement. This is to ensure
that it
is used exactly as per the theoretical requirement so that the
structure on the one hand is built in a safe manner and at the same time
nothing in excess is used so as to avoid wastage of scarce material.
There are three situations which are contemplated. In the first situation,
it is provided that if materials are drawn according to the schedule and
are short used then the excess quantity is to be returned to the Department
in good condition and for the same the contractor will not get any payment.
Furthermore, if the short-used material is not returned to the Department,
their cost will be recovered at the market rate or at the issue rate which
is greater plus wastage charges and sales tax. An example which we
may take, would be if the requisite specifications is that 10 metric tonnes
of cement is to be drawn and he draws 10 metric tonnes but he actually
used only 8 metric tonnes there will be a short use of 2 metric tonnes
which he would have to return to the Department.
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73. The second situation is where the materials are drawn in
excess of theoretical requirements. The contract contemplates that in
such a situation, the excess drawn quantity must be returned to the
Department in good condition and otherwise there will be recovery at
the issue rate plus 100% surcharge or market rate whichever is higher
plus storage and taxes.
74. The third situation contemplated is that if the materials are
short drawn or short used it is specifically provided that in such a situation,
the saving due to short drawal/ use should be secured to the Government
by recovering the cost thereto at issue rate from the contractor. Thus, in
the example, we have taken if 10 metric tonnes is actual quantity as per
the specifications which can be drawn but if only 8 metric tonne is drawn
by the contractor while he was to use 10 metric tonnes, the saving due
to short drawal was secured to the Government by recovering the cost
thereto at the issue rate from the contractor. This means that instead of
10 metric tonnes, if 8 metric tonnes is drawn, the contractor would still
be liable for recovery from his bill for the entire 10 metric tonnes, though,
he has actually drawn only 8 metric tonnes. In respect of short used
material, though, properly drawn the recovery would be in addition to
the recovery for the cost of materials which is returned as we have
noted above. Further, the contract contemplates that if materials
are
required to be procured by the contractor, he must maintain separate
ledger for each of the item which are so required to be procured by the
contractor.
75. This would mean that if the appellant had indeed secured
cement from outside, the appellant was obliged under the Contract to
maintain a separate ledger. Further the Contract contemplates that there
could be recovery from the bill of the Contractor for the cost of cement
which is actually not supplied to the contractor and it will be based on
the theoretical requirement as we have already referred to above. Thus,
the mere fact that there has been excess recovery meaning thereby that
without issuing the cement to the appellant the amounts have been
recovered would not mean that the appellant would be able to substantiate
his claim that there was inadequate supply of cement. That is a matter
which must be substantiated with reference to other material.
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76. But there are two situations which can arise. Cement may be
available with the Department and the Contractor draws only lesser
quantity than provided in the specifications which is based on technical
requirements. In such a case, undoubtedly the Clauses which we have
adverted to would apply. What however would be the position if cement
is not available and consequently the Contractor is not supplied and he is
not in a position to draw cement. In such a scenario also, will it be a case
of drawal of cement by the Contractor which is less than the specified
quantum? It would be so, but it may have different implications.
77. At this juncture, we may look at the correspondence which
may throw light. In the letter dated 30.06.1979 written by the appellant
to the Executive Engineer, we find there is no mention even about the
inadequate supply of cement. Next letter is dated 26.07.1980. This is a
letter where reference is made to all the three contracts. There is a
reference in this letter no doubt about the purchase of cement from
other sources. He seeks return of the cement so that extra quantity of
cement may be reimbursed. There is no reference to any particular
quantity and there is no reference to which the other sources are.
78. The next letter is dated 16.07.1981. Here the reference is
made to Agreement No.10/78-79. In this letter there is no complaint
about the cement. Finally, there is letter dated 07.10.1982 which is
addressed by the appellant to
the Superintending Engineer. Here the
reference is made to the Agreement No.11/78-79. No doubt in the body
of the letter he also adverts to the other contracts. Substantially, the
letter is one where he makes various complaints and finally, he makes a
claim for enhancement. Here he says in this letter that there is inadequate
and irregular supply of cement which affected his steady progress of
work during 1979, 1980 and 1981. He says inadequate supply caused
him substantial loss to the work done. A look at the correspondence by
the departmental officers at this juncture may be not out of place. Letter
dated 13.11.1982 written by the Executive Engineer to the Superintending
Engineer inter alia reads as follows:
“It is a fact that there was difficulty in obtaining and procuring
cement for the project. The enclosed table indicates the available
cement in the division. The total cement is used on this project
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alone for the works of Sri K. Marappan. It can also be seen from
the statement the maximum percentage of cement available was
spared to the works of Sri K. Marappan. Extreme efforts have
been made for additional allotment of cement with great difficulty
some additional allotment have been obtained as clarified in the
statement. On the face of the over all shortage of cement and the
possibilities of securing the full requirement of cement being bleak,
the contractor could not be forced to increase the rate of progress
which he was capable of managing, since most of the work carried
out upto March, 81 being at lower levels of the dam. This shortage
of cement was felt continuously. Reference is invited to the letter
of Superintending Engineer No. 1230 CE dt. 13.6.81 and 831 CE
dt. 27.4.79 wherein request for additional quantity of cement was
made to Chief Engineer.
79. In letter dated 18.11.1982 written by the Superintending
Engineer to the Chief Engineer within 5 days of letter dated 13.11.1982
Superintending Engineer recommended completion through the same
contractor with enhancement. In letter dated 30.11.1982 written by Chief
Engineer to the Special Secretary to Government, Irrigation Department,
it is inter alia stated:
“It is a fact that there was a difficulty in procuring the cement for
this project. Overall shortage of cement and the possibilities of
securing the full requirement of cement being bleak, the
contractor
could not be forced to increase the rate of progress which he was
capable of managing. The shortage of cement was felt
continuously from the starting of the work till to-day.”
80. From the correspondence, it would appear that the officers
proceeded on the basis that there is a shortage of cement. Therefore,
this appears to be a case where sufficient cement may not have been
supplied to the appellant. However, it is to be remembered under Clause
10 of the agreement no right to compensation lies for short supply of
cement. Here the case of the contractor appellant which is accepted by
the arbitrator is that this is not a case where compensation for short
supply of cement is made by the appellant. All that the appellant is seeking
is to be given, is the quantity of cement, which he brought from other
sources or the monetary equivalent.
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81. We proceed on the basis that the claim for return of the cement
does not involve infraction of Clause 10 which forbids compensation on
account of short supply of cement. The question, however, arises whether
the arbitrator has misconducted himself in arriving at the amount of cement
supposedly brought from other sources by the appellant to carry out the
work. As far as the monetary equivalent is concerned as we have already
noted it is at the issue price fixed under the contract itself and it is not an
escalated amount so the measure of the amount of reimbursement may
not attract Clause 59. The only point, therefore, which remains is whether
there was any basis for the arbitrator to have found that the appellant
had indeed brought the quantity of cement from other sources and used
it for the works in question.
82. The arbitrator has proceeded on the basis of the admitted
correspondence between the officers to find that there is shortage of
cement. The sub-court on the other hand finds that none of the
correspondence by the officers indicate that the appellant was given
permission to buy cement from outside. There is no indication in any of
the letters written by the appellant which the other sources were from
which he was procuring cement. The most important obstacle for the
appellant is the clause in the contract which has been referred to by us
and which is referred to by the sub-Court, namely, for procuring cement
by the contractor, he must
maintain ledger and which may be open to
scrutiny by the officer as and when demanded. In this case, the appellant
has not produced any ledger showing purchase of cement from other
sources. There is no written permission produced to purchase cement
from other sources. No voucher has been produced by the appellant to
establish purchase of cement from outside.
83. The arbitrator, however, has found that even non-production
of vouchers is not material as it is proved that appellant has purchased
cement from outside. There are two things which apparently the arbitrator
has taken note of. The arbitrator finds that there is no denial about the
quantity of the work done by the contractor and also about the quantity
of cement used for bringing from other sources. It is stated in the counter
affidavit that exact short supply of cement can be shown only after
taking over of measurement. It is further found that measurement was
already taken. The second aspect is arbitrator finds that as the unstamped
receipt and the cement issue register though called for by the appellant
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was not produced, adverse inference must be drawn. If the matter as
alleged is not denied or is admitted then it may not be necessary to
adduce evidence to prove the same. This principle is equally applicable
before the arbitrator as it is before the court of law. Perhaps it is all the
more applicable in the case of proceedings before an arbitrator.
84. We are in one sense handicapped by the fact that the appellant
has not produced the counter affidavit filed by the State before the
arbitrator. It is true that if the case pleaded by the State amounts to
admission that the cement was brought from outside by the appellant
and the matter was only regarding the measurement to be carried out
that may give the impression that the arbitrator particularly having regard
to the non-production of the unstamped receipt and cement issue register
despite being called for had some justification for coming to the conclusion
that the appellant had procured cement from outside. Then the further
question would be the only quantity of cement which was purported to
be bought from outside by the appellant.
85. State definitely has a case, however, that there is no evidence
by the appellant having procured cement from outside sources as he has
not produced vouchers as that is seen dealt with by the arbitrator. The
exact quantity of cement purchased from outside is not pleaded. Instead
what the appellant contended for and what was accepted
by the arbitrator
was that the quantum of cement which was used could be found out
from the quantum of work done. This is clear from the statement even
on the basis that when a particular quantum of work is done, as per the
theoretical requirement for cement involved in such work, the quantity
of cement actually used by the appellant has been arrived at and after
deducting the quantum of cement which was actually issued, the balance
amount of cement which the appellant has used for the work from outside
source has been arrived at. We have referred to the contractual provision
and it would be hazardous to arrive at the amount of cement, used from
other sources based on quantum of work done.
86. But arbitrator overlooks the fact that under the contract the
appellant was supposed to make entries in the ledger. A party is supposed
to produce the best evidence or rather the evidence which under the
contract is contemplated. The failure on the part of the appellant to
produce the ledger has fatal consequences. The matter becomes further
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aggravated by the failure on the part of the appellant to even produce
vouchers or bills in support of the claim to purchase the cement from
outside sources. This is even if we are to ignore the fact that there is no
written permission for purchase of cement from outside. We proceed on
the basis that a contractor may without written permission but for the
purpose of the work purchased cement from outside. But certainly, the
fact that there are neither vouchers nor any ledger entries nor bills
produced which persuades us to hold that the matter may warrant
interference with the award under Section 30. We are not inclined to
accept the claim.
CLAIM NO.VII
87. As regards this claim, the claim appears to be that appellant
collected materials and it was lying at the site. Admittedly, the appellant
has not used this material for the purpose of doing the work. Only the
case set up by the appellant is that he was given an assurance that he
will be permitted to carry out the work and therefore, since he has spent
money for the same, he must get the amount which is claimed for having
spent on the material. We are of the view that insofar as the appellant
has not used any of the materials to carry out the work and sets up the
claim only on the basis of assurance which has not been admitted, the
action of the appellant in purchasing the materials cannot result in
establishing his claim for compensation. It is to be noticed that the
appellant raised a claim for
enhanced compensation. He alleged that
there was delay on the part of the respondent on various grounds. This
is apart from alleging other factors like breakout of malaria, unfavourable
weather and delay in taking decision by the departmental officers, which
contributed to escalation in cost. Correspondence was exchanged with
the Executive Engineer and the Superintending Engineer, the
Superintending Engineer and the Chief Engineer and finally between the
Chief Engineer and the Government. It appears that at that stage appellant
invoked the arbitration clause and a panel of arbitrators gave their award.
In fact, the work itself was stopped. Clause 59 prevents the Court from
awarding compensation on account of any factor relating to the delay
which may be due to any cause whatsoever. In such circumstances, we
are of the view that the appellant has also not made out any cause for
compensation in regard to this claim.
SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN
v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]
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CLAIM NO.IX
88. As far as the question relating to interest is concerned, the
arbitrator has awarded interest at 12% from the date of the claim but
excluded interest from commencement of proceeding till date of award.
The question relating to interest is no longer res integra as we find that
the issue has been dealt with in a recent judgment of this Court in Assam
State Electricity Board & Ors. v. Buildworth (P) Ltd. reported in 2017
(8) SCC 146 to which one of us was a party. As long as the agreement
between the parties does not prohibit grant of interest and the matter is
referred to the arbitrator, arbitrator would have power to grant interest
pendente lite. The Court inter alia held as follows:
“21. The next aspect of the matter relates to the award of interest
for the period from 7-3-1986 to 31-12-1997. The arbitrator awarded
a lump sum of Rs.20 lakhs for a period of 11 years. The High
Court set aside the award of interest on the ground that Section
29 of the Arbitration Act, 1940 contemplates the award of interest
only from the date of the decree. The issue as to whether interest
could be awarded for the pre-reference period and pendente lite
under the Act of 1940 is not res integra. In Irrigation Deptt., State
of Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508, a Constitution
Bench of this Court held that: (SCC pp.533-34, para 44)
“44….. Where the agreement between the parties does not prohibit
grant of interest
and where a party claims interest and that dispute
(along with the claim for principal amount of independently) is
referred to the arbitrator, he shall have the power to award interest
pendente lite. This is for the reason that in such a case it must be
presumed that interest was an implied term of the agreement
between the parties and therefore when the parties refer all their
disputes – or refer the dispute as to interest as such – to the
arbitrator, he shall have the power to award interest. This does
not mean that in every case the arbitrator should necessarily award
interest pendente lite. It is a matter within his discretion to be
exercised in the light of all the facts and circumstances of the
case, keeping the ends of justice in view.”
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89. The sub Court set aside the award of interest for the period
from 26.4.1988 till the date of the award namely 19.8.1988 which is the
pendente lite interest. This is on the basis that arbitrator has no power to
award interest on amounts found due. This is purportedly followed in the
judgment of this Court in Smt. Aruna Kumari vs Government Of Andhra
Pradesh And Anr. reported in AIR 1988 SC 873. This Court took the
view that entering upon reference is to be taken as the date of
commencement of arbitration proceedings for calculation of interest.
And this Court took the view therein that there is no power to grant
interest from the date of commencement of arbitration. However, in
view of the decision in Jugal Kishore Prabhatilal Sharma vs.
Vijayendra Prabhatilal Sharma 1992 (1) SCC 508 as followed in The
National Highways Authority vs. Afcons-Apil Joint Venture  2017
(8) SCC 146, the sub Court was not justified in setting aside interest and
the interest as awarded by the arbitrator is restored.
90. Accordingly, we partly allow the appeals. The award in so far
as it relates to Claim No.I, as accepted by the sub-Court is restored
along with interest on the same as awarded by the arbitrator. The amount
shall be calculated and paid within two months of production of certified
copy of this judgment.
Devika Gujral
                    Appeals partly allowed.
SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN
v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]