Case: M/S. Sathyanarayana Brothers (P) Ltd Vs. Tamil Nadu Water Supply &amp; Drainage Board

3. In view of the acute scarcity of water in the State of Tamil Nadu a project known as Veeranam Project was undertaken by the State Government after its clearance by the Planning Commission for bringing the water from the left bank of the Coleroon at Lower Anicut to the city of Madras covering a distance of 155 miles through the pipelines to be laid for the purpose. The work required to be done was for manufacturing, supplying, delivering 1676 mm. (66") Diameter Prestressed Concrete Pipes and fittings including transporting to site, laying, jointing and testing for raw mater and clear water conveying mains from Veeranam Tank to Madras city.4. The tenders submitted by the appellant M/s. Sathyanarayana Brothers (P) Ltd. for carrying on the job details above was accepted for a lump sum amount of Rs. 16,55,87,300/- subject to clearance of the foreign collaboration arrangement and release of necessary foreign exchange and also subject to other conditions and issued G.O.Ms. No. 1607 Public (TWAD) Department dated 13.7.1970. While submitting the tender the petitioner had also written a letter dated 22.1.1970 to the Chief Engineer (Buildings) and City Water Supply, Veeranam Project, Public Works Department, Chepauk, Madras with a request for foreign exchange requirement for import of equipments from foreign manufacturers. The contractor had requested the government to give all assistance in procurement of foreign exchange and other necessary central government clearances. Articles of agreement was executed between the State of Tamil Nadu and M/s. Sathyanaraya Brothers specifying the terms and conditions of the contract. The work was required to be completed within 36 months from the date of the entrustment of the site which was to be done within 30 days after the date of acceptance of the tender. It also provided that if there was any delay in handing over the site there should be extension of time for completion of the contract. The time for completion was liable to be extended on the request of the contractor for justifiable reasons.5. The contractor required Rs. 1.2 crores of foreign exchange for importing necessary equipments for manufacture of Prestressed Concrete Pipes from Switzerland since the exporters insisted on payment in Doutecha Marks. The contractor was advised to approach the Integral Credit and Investment Corporation of India (ICICI) who insisted that the contractor should be in the form of an incorporated company so as to be able to avail facilities of foreign exchange instead of a partnership firm. The contractor, therefore, converted into a private limited company as per the advise on 24.2.1971. The imported equipment landed in Madras in February, 1972 whereafter a factory at Thirukalikundram and another factory at Panruti were commissioned by June 1972 and January 1973 respectively. There was thus already a delay of one year four months in commencing production of prestressed concrete pipes. The contractor therefore, requested for extension of time up to 31.12.1975. It was, however, extended up to 30.6.1975 by the Chief Engineer. The contractor wrote a letter dated 11.11.1974 refusing to accept the offer and further indicated that he would be prepared to work on the condition that contractor would be paid at the rate to be worked out taking into account the increase in the cost and which may further increase during the course of the work. It was also indicated that necessary time may be given for completion of the work keeping in mind the capacity of equipment and the rate of production. He also wanted to be compensated for the losses resulting from the delay and default on the part of the government. The contractor stopped the work with effect from June, 30, 1975. The Chief Engineer extended time for completion of the work by 31.12.1975 and again upto 31.3.1976 but did not agree to the other conditions as indicated in the letter of the contractor dated 11.11.1974. The dispute thus arose and the work stood stopped with effect from 30.6.1975. The contractor invoked the arbitration clause and appointed one Mr. P.S. Subramaniam, a Chartered Engineer as its Arbitrator. After some litigation at the instance of the Board it also nominated its arbitrator. The arbitrators entered upon the reference on 18.3.1978. The arbitrators disagreed. Mr. P.S. Subramaniam, the arbitrator appointed by the appellant partially awarded the claim to the extent of about Rs. 7.00 crores whereas the arbitrator appointed by the Board only said that he did not agree with the award. Since there was no agreement between the two arbitrators hence the matter was referred to the Umpire - Justice Palaniswamy, a retired Judge of the High Court who started the proceedings on 2.4.1979. The Umpire gave its award on 10.9.1979 and filed it it the court on 26.11.1979. The appellant contractor filed objections for setting aside of the Award given by the Umpire and challenged the conclusions and findings arrived at by him to the effect that it was not obligatory upon the State Government to get foreign exchange cleared from Government of India for the contractor and that the contractor had abandoned the work on June 30, 1975 despite the extension of time up to March, 1976 as well as the finding that non-production of inter-departmental correspondence and documents as requested by the contractor would not vitiate the award. The Board, on the other hand supported the findings of the Umpire and prayed for making the award a rule of the court.6. The matter was considered by the learned single Judge of the High Court. According to the decision of the learned single Judge the State Government was obliged to get foreign exchange clearance for the contractor for import of equipment from Switzerland for the purposes of manufacturing prestressed concrete pipes. Due to delay in clearance for foreign exchange the time should have been extended by the Board as requested by the contractor. The learned single Judge also found that extension of time after stoppage of the work was of no avail, thus there was no breach on the part of the contractor. Non-production of the documents by the Board as requested by the appellant had the effect of vitiating the award given by the Umpire. The award was thus set aside by the learned single Judge.7. In the appeal preferred by the Board, the Division Bench, found that the following points fell for itsWhether there is any obligation on the part of the Government of Tamil Nadu to get foreign exchange clearance from Government of India as per the terms of contract entered into between the Contractor and the State Government?(2) Whether the contractor has not committed breach of contract by abandoning the work with effect from 30.6.1975?(3) Whether the non-production of inter departmental correspondence of confidential nature as required by the contractor will vitiate the Award passed by the Umpire?(4) To whatThe Division Bench held that no such clause in the agreement has been disclosed to indicate that it was the obligation on the part of the State Government to get clearance of Government of India for foreign exchange for the purpose of import of equipment by the contractor from Switzerland. The acceptance of the tender was subject to Government of India clearance of foreign collaboration arrangement and release of necessary foreign exchange. While arriving at this finding the Division Bench quoted an extract from one of the letter of the contractor dated 22.1.1970 Exh. D-557 to the followingunderstand that the Government should give us all assistance in the procurement of foreign exchange and necessary Central GovernmentDivision Bench further observed that the Umpire was right in coming to a conclusion that Government of Tamilnadu had rendered all possible assistance to the contractor for getting the foreign exchange clearance as the Government of Tamilnadu had approached the I.C.I.C.I. for that purpose, whom the contractor had approached on the advise of Government of India. Thus the state shall not be responsible for the delay in getting the foreign exchange. On the other two points the Division Bench held that time cannot be said to be the essence of the contract since the agreement contained a clause for extension of time for justifiable reasons. It has also been found that the contractor could not carry on the work in accorance with its commitment of manufacturing 28 prestressed concrete pipes per day and laying of 72 pipes per day. Whereas according to the contractor the target could not be achieved due to frequent failures of electricity and dropping of voltage. The Division Bench ultimately came to the conclusion that the contractor alone had committed the breach of contract in executing the work of Veeranam project. In so far it related to non-production of the fire containing inter-departmental correspondence including the handing over note by former Chief Engineer, Veeranam project Exh. D-660, it was observed by the learned single Judge that it was a secret document which was not available on the record of the Board. The case of the Board was that the note of the former Chief Engineer while handing over the charge to his successor would not bind the Board in any respect and other inter-departmental correspondence may not be admissible in evidence and it would also not advance the case of the contractor. The Division Bench seems to have agreed with the submissions made on behalf of the Board. The Division Bench, after discussing the case law, came to the conclusion that the Award given by the Umpire cannot be set aside except on the ground that the arbitrator or the umpire had mis-conducted himself or the arbitration proceedings having become invalid or the Award was procured improperly. The Court would not re-appraise the evidence. The Award of the Umpire awarding only a sum of Rs. 2,67,41,079 has been upheld by the Division Bench. Thus it set aside the order passed by the learned single Judge.

Court's reasoning:
repel the contention raised on behalf of the appellant pertaining to the jurisdiction of the arbitrators and the umpire to decide theit is mentioned about the availability of power. Some problem relating to trench excavation by the Board also finds mention in Para 7 onwards. A bare look of some of the parts of the note indicates that it may have some material bearing on the merits relating to the question of delay in execution of the project, and throwing some light on the share of responsibility of the parties to the contract and extent of their responsibility as well.The learned Single Judge had given it as one of the reasons to hold that it vitiated the award. We again find that before the umpire also effort was made to get the document on record for perusal of the same but the request was not accepted. We find that there is no question of secrecy or confidentiality so far the handing over note of the Chief Engineer is concerned. It is a note prepared by the Chief Engineer of the project in official discharge of his duties. It contains relevant facts and information regarding questions involved in the case. The appreciation of the contents of the note and its effect would of course be a matter to be decided by the appropriate authority/arbitrator/ umpire but its perusal or consideration could not be shut out on the meek ground that the department was not bound by it or on the ground of confidentiality in the times when more stress is rather on transparency. In our view, the learned Single Judge was right in inferring that such an infirmity would vitiate the award. That being the position, in our view the order of the Division Bench, reversing the decision of the Single Judge is not sustainable and the matter may be required to be remitted to be considered in the light of the handing over note of the Chief Engineer in respect whereof an application was moved by the appellant before the arbitrator as well as before the Umpire which remained unattended to by the forum and later did not accede to the request.17. Considering the fact that it is an old matter and it being a speaking award the matter having also been considered by the learned single Judge, it would better serve ends of justice to ensure expeditious disposal of the matter, therefore, the Division Bench of the High Court may consider the matter afresh, taking into account the handing over note of the Chief Engineer of the Project and other relevant documents in respect of which request may have been made but