Case: Continental Construction Co. Ltd Vs. State Of Madhya Pradesh

This is an application under Article 136 of the Constitution for leave to appeal to this Court from the judgment and order of the High Court of Madhya Pradesh dated April 17, 1985. In order to appreciate the points involved, it is necessary to state that the petitioner entered into a contract dated March 31, 1970 with respondent, State of Madhya Pradesh for the construction of Rip Rap on right bond of Masonary Dam of Tawa Project. The contract could not be completed within the stipulated time because of alleged gross delay on the part of the State, according to the petitioner, in allotment of work and discharge of its obligations under the contract. The petitioner incurred unforeseen expenditure, it is claimed, to the tune of Rs. 5, 29, 812 and approached the Superintending Engineer for payment. Upon refusal of the Superintending Engineer to pay the claim and his refusal to refer the matter to arbitration, the petitioner moved the learned District Judge under Section 20 ofthe Arbitration Act, 1940 (hereinafter called the Act) for filing of the arbitration agreement and for reference of the disputes to the arbitration. On April 24, 1976 the learned District Judge allowed the petitioners application and directed the respondent, State of Madhya Pradesh to file the agreement in court and made a reference for specific question to the arbitration. The High Court on September 22, 1976 dismissed the States appeal against the order of the District Judge. Thereafter in March 1977 retired Engineer-in-Chief, PWD Bhopal was appointed arbitrator. There was an award dated October 29, 1978 on all the issues referred, partly allowing the petitioners claim. The award was filed in the court of the District Judge and the respondent filed objections to the award under Sections 30 and 33 of the Act and the petitioner filed replies. The District Judge made the award a rule of the court. The respondent appealed to the High Court. The High Court remanded the matter to the District Judge for fresh decision. The District Judge accepted the objections and set aside the award. The High Court by the impugned judgment dismissed the appeal of the petitioner. It is from this judgment of the High Court that the petitioner seeks leave to appeal to this Court

Court's reasoning:
We are unable to agree. This being a general question, in our opinion, the District Judge rightly examined the question and found that the appellant was not entitled to claim for extra cost in view of the terms of the contract and the arbitrator misdirected himself by not considering this objection of the State before giving theIn the aforesaid light, we are of the opinion, the High Court was right that the District Judge was entitled to examine the contract in order to find out the legality of the claim of the appellant regarding extra cost towards rise in prices of material and labour. As was pointed out by the learned District Judge Clauses 2.16 and 2.4 stipulated that the contractor had to complete the work in spite of rise in prices of materials and also rise in labour charges at the rates stipulated in the contract. There was a clear finding of the arbitrator that the contract was not rendered ineffective in terms of Section 56 of the Contract Act due to abnormal rise in prices of material and labour. This being so and the contractor having completed the work, it was not open to him to claim extra cost towards rise in prices of material and labour. The arbitrator misconducted himself in not deciding this specific objection raised by the State regarding the legality of extra claim of the appellant