Case: CHANDIGARH CONSTRUCTION CO. PVT.LTD Vs. STATE OF PUNJAB &amp; ANR

2. For the purpose of convenience and clarity the parties would be referred to in the rank assigned to them in the arbitration proceedings. Accordingly, the appellant herein would be referred to as the claimant, while the respondents would be referred to as the opposite party3. The proceedings in question arises relating to an Award passed under the Arbitration Act, 1940 (Act 1940 for short). The claimant and the opposite party had entered into a contract agreement dated 05.02.1985 for construction of Sutlej Yamuna Link Canal (Punjab) and in that regard to carry out the earth work, drainage behind lining and cement concrete lining of Raech RD 71.50 to 72.50 kms. The estimated cost of the project was at Rs.31 lakhs and the contract amount for the work was fixed at Rs.59,86,732/-. The work concerned was to be executed in eight months4. In respect of the said contract, the claimant contended that during execution, the scope of work was considerably increased on account of substantial increase of earth work, sloughing of banks, rebuilding of banks with self-draining material, various decisions by the department regarding rebuilding of banks and changes in the strata encountered during excavation due to incorrect geological data observations by the department prior to inviting tender. In that view, the claimant had raised a demand for the additional payment which was disputed by the opposite party, which led to an arbitral dispute. Since the agreement provided for resolution of disputes by arbitration the claimant took recourse to the same. In that background the claimant had sought for additional payment in the claim statement filed before the Arbitrator. The opposite party filed their objections disputing the claim put forth by the claimant. The learned Arbitrator on considering the rival contentions passed the Award dated 31.08.1994 and awarded the amount as claimed by the claimant to be paid by the opposite party with interest at the rate of 18% per annum as also the future interest at 18% per annum from the date of the Award to the date of payment. As required under Act, 1940 the said Award was to be made a Rule of Court for which purpose the Award was presented before the Court of the Senior Sub-Judge, Ropar. The opposite party filed objections in the said proceedings and contended that the Award passed by the Arbitrator is not sustainable as the Arbitrator had misconducted himself by awarding the amounts which were not payable as per the contract and the learned Arbitrator had not indicated reasons for the decision. The learned Sub-Judge through the judgment and decree dated 21.10.1995 accepted the objections to the extent of rejection of Claim No.1 and reduction of interest to 12% per annum and in other respects the Award was made the Rule of Court5. The opposite party however continued to remain aggrieved insofar as the non-interference with regard to other claims and, therefore, filed an appeal before the District Judge, Ropar in Civil Appeal No.9/3110 of 2006. The claimant preferred the cross appeal insofar as the rejection of Claim No.1 by the learned Sub-Judge and reduction of interest. The learned District Judge through judgment dated 06.11.2007 rejected the cross appeal filed by the claimant and allowed the appeal filed by the opposite party (State of Punjab) and set aside the amount awarded under Claim Nos.2, 3, 8, 12 and 16. The claimant, therefore, contending to be aggrieved preferred the Revision Petitions before the High Court. It is in the said proceedings the High Court has rejected the remaining claim except Claim No.1 as indicated above. It is in that circumstance the claimant is before this Court in this appeal.

Court's reasoning:
8. In the light of the above, a perusal of the appeal papers would indicate that there is no serious dispute between the parties with regard to the contract entered into for construction, the work performed and certain additional work having been carried out by the claimant10. The said conclusion on Claim No.2 without appropriate consideration is the basis of reckoning the premium at 93.12% in respect of the Claims No.3 and 12 as well12. In the background of contentions put forth and from the legal position enunciated in the decisions relied upon, the position is clear that in the instant facts the agreement between the parties required the learned Arbitrator to pass the Award in a particular manner whereunder the reasons were required to be assigned since that was the explicit requirement under the contract. If in that background the Award impugned in the instant proceedings is taken note the learned Arbitrator has not assigned any reasons for the conclusion reached on Claim No.2 which was also relevant for considering the Claim Nos.3 and 12 as well. If that be the position the only explanation that is sought to be put forth by the learned senior advocate for the claimant that the basis for such conclusion is the difference of the value between the estimated amount at Rs.31 lakhs and the contract amount at Rs.59,86,732/- to work out the premium would not be justified. The quantum of the contract amount as against the estimated cost by itself could not have formed the basis to conclude the claim as made by the claimant towards premium of extra items, extra items for supply and laying of self- draining materials and towards re-handling of earth work13. The said provision would indicate that the rate as prescribed under the Punjab Common Schedule of Rates would be applicable. In that light it is noticed that the letter dated 05.01.1987 relied upon by the learned advocate for the opposite party which was addressed to the claimant indicates that the premium as agreed under the schedule is at 35.02%. The said contention had been urged by the opposite party in their pleadings. In fact, as pointed out by the learned advocate for the opposite party, the First Appellate Court has taken note of this aspect and has arrived at its conclusion to disapprove the Award of premium at 93.12% for extra work14. In the above backdrop, we fully concur with the manner in which the consideration was made by the First Appellate Court as also the High Court to arrive at the conclusion that the claim as put forth by the claimant in respect of Claims No.2, 3 and 12 at the premium of 93.12% worked out only on the basis of difference of the amount between the estimated cost and the contract amount is not justified. However, in that circumstance when the learned Arbitrator has not assigned any reasons but had unilaterally in a cryptic fashion awarded the claim at the premium of 93.12% and when the same was disapproved as not sustainable, the appropriate course in the normal circumstance ought to have been to set aside the Award and remit the matter to the learned Arbitrator to make a fresh consideration to determine the percentage of premium at which the claim for the extra items would be sustainable, more particularly in a circumstance where the additional work carried out was not in serious dispute but the premium for rate of payment was to be determined15. The said course would be open even at this stage, but in the instant case we however take note that the claim was under the Act, 1940 in respect of an agreement dated 05.12.1985 and the claim before the Arbitrator itself was of the year 1994. In that background a perusal of the consideration as made by the First Appellate Court would indicate that it does not refer to the claim that was admissible after working out the percentage of premium that is applicable. It has only arrived at the conclusion that the working out of the premium at 93.12% in respect of the extra items on Claim Nos.2, 3 and 12 are set aside. The learned First Appellate Judge ought to have arrived at the conclusion of the admissible claim and in that regard a conclusion ought to have been reached instead of rejecting the claim outright since the course to remand the matter to the Arbitrator was not adopted16. In that background since we have referred to the communication dated 05.01.1987 which is produced at Annexure R3 with the additional documents and also on taking note of the contention urged by the opposite party regarding the premium rates to be worked out at 35.02%, we are of the opinion that instead of rejecting the entire claim as made by the claimants, premium for the extra items is to be determined at 35.02% and the claim based on the same is required to be awarded. To that extent, the calculation is to be made by the opposite party and the amount be paid to the claimant. The said calculation with the premium at 35.02% shall be made in respect of the extra items indicated under Claim Nos.2, 3 and 1217. Insofar as the Claim No.8, it relates to the work carried out on DALDAL land wherein the soil was marshy and extra construction material was required to complete the work. The learned Arbitrator through the impugned Award had taken note of the same and awarded the sum of Rs.19,15,143/- after indicting the amount for the said work on the same basis and deducting the agreed rate. Though the learned Sub-Judge had accepted the same for making it the Rule of Court, the learned First Appellate Judge on taking note of the claim had arrived at the conclusion that the learned Arbitrator was not justified in granting the claim. In that regard, the First Appellate Court had taken note of Clause 39 of the Contract Agreement wherein a provision was made for extra items. The second paragraph therein which provides for the manner in which the contractor is required to submit the returns of the work claimed for extra items was referred to. The said requirement indicated that the contractor shall deliver in the office of the Executive Engineer on or before the 10 th day of every month during continuance of the work, the return showing details of any work claimed for extra, and such return shall also contain the value of such work as claimed by the contractor. If the details are not indicated, the Clause indicates that it shall be deemed that the contractor has waived all claims not included in such returns and will have no right to enforce any such claim not so included. In that light since the claim was ultimately found as not included in the monthly statement, the First Appellate Court was of the opinion that the requirement of the conditions of the contract was not adhered to and, therefore, set aside the Award of the said amount by the learned Arbitrator and the same claim being made Rule of Court by the learned Sub- Judge was also set aside. The High Court while adverting to this aspect of the matter has held that insofar as the amount sought under Claim No.8 the question is not whether the petitioner undertook this work but whether the petitioner raised any claim for this extra amount in terms with the contract. The High Court has also taken note of Clause 39 of the contract and has declined the claim18. In that background having taken note of Clause 39 of the Contract Agreement, it cannot be considered as a statutory limitation or bar for the claim in all circumstances. The said Clause no doubt prescribes a method by which the claim is to be put forth in the statement every month. The said requirement will have to be construed as being put in the agreement so as to ensure that the additional work has actually been done, the claim is put forth along with details so that baseless claim is not made at a distant point in time when it will not be possible to determine. Though the Clause also indicates that if such claim is not made, it would amount to waiver, in a circumstance where the claim is ultimately put forth in the forum where an adjudication is made and based on the material if the adjudicating authority is satisfied that the actual work had been done and the contractor being entitled to the extra amount spent by him to carry out the work in an appropriate manner, it would not be just and proper to deny such claim only on the ground that it had not been indicated strictly in the manner as provided in the contract specially keeping in view the nature of work undertaken. To that limited extent a perusal of the Award passed by the learned Arbitrator would indicate that the learned Arbitrator had taken into consideration the letter dated 14.11.1986 wherein the identification of soil which was agreed to. The letter dated 09.03.1987 submitting the test results identifying the strata encountered as DALDAL is referred therein. The work having been completed during the March, 1988 was also taken note. In that circumstance when the fact remains that the DALDAL land was situated in the area, work was carried out and extra material was used, the claim in our opinion cannot be rejected outright adopting a technical view of the matter. However, the claim for the extra item in that regard for the work of 1,33,181.00/- Cum will have to be calculated with premium at the same rate of 35.02% over and above the agreed rate and not at 93.12% as has been taken into consideration by the learned Arbitrator for awarding the amount. The appropriate calculation in that regard shall however be worked out in such manner so as to award the amount under the said Claim No.819. Insofar as Claim No.16 we see no reason to interfere with the orders passed by the High Court or by the First Appellate Court. Further with regard to the interest sought under Claim No.18 we are of the opinion that in the absence of agreement with regard to the rate of interest, the interest as awarded by the learned Arbitrator was on the higher side and the First Appellate Court was justified in reducing the same to 12% per annum and the High Court was also justified in not interfering with the same20. As already indicated above the unreasoned award on being set aside by the First Appellate Court, the matter in a normal circumstance ought to have been remitted to the learned Arbitrator to redo the proceedings afresh in accordance with law. Such course ought to have been adopted by us as well. We had proceeded to examine the matter with regard to the validity of the claim keeping in view the time lapse and since the validity of the claim was to be taken note at the appropriate premium if not at the percentage of premium at 93.12% as determined by the learned Arbitrator. In view of our conclusion relating to the claim being sustainable to the extent as indicated by us above at the premium of 35.02%, under Claim Nos.2, 3, and 12 the calculation based on the extent and measurement of the extra items is an exercise which cannot be undertaken herein and as such the opposite party keeping in view the directions herein shall work out the actual amount payable in respect of the extent, measurement, quantity and price based on which the claim is made. In that regard we hold that the claimant is entitled to the claim for extra items as put forth under Claim Nos. 2, 3, 8 and 12 by working out the difference of cost on the tender premium at 35.02%. On arriving at the quantum of the amount, the same shall be payable with interest at 12% per annum in the manner as ordered by the First Appellate Court. The claim No.1 ordered by the High Court is sustained. The said exercise for calculating and paying the amount to the claimants on claim Nos.1, 2, 3, 8 and 12 shall be completed by the opposite party within the period of six weeks from this date. In the event of there being delay in payment beyond the said period, the same shall carry interest at the rate of 18% per annum till the date of payment.