Case: G. Ramachandra Reddy &amp; Co Vs. Union of India &amp; Another

3. For the work of construction of "Married accommodation for MCPOs/CPOs/POs and Junior Sailors at Naval Air Station, Arakkonam" by the Union of India, an advertisement was issued; pursuant whereto appellant submitted its tender on or about 9/17.7.1988 marked as Exhibit C-2. In its forwarding letter, it was statedhave kept ready all the men and material for early commencement of the work. The technical personnel engaged by the firm have the vast experience in the execution of major building projects. The total labour component involved in this work is forty per cent of the scope of the contract. We can deploy the huge skilled and unskilled labour force already on our rolls for all the works along with the machinery for successful completion of the work positively as per targeted time schedules of the Department. The latest ITCC and partnership deed are enclosed aspost script added thereto reads as underour tender opened and Rates Read out, Please Read out over (+) 2.25% under item 1 of the schedule quoted percentage and total value considered accordingly.Respondent, by a letter dated 19.7.1988 (marked as Exhibit C-3) replied thereto, statingscrutiny of your forwarding letter the following comments are made :-(a) The Labour component in the work is 20 as included under Special Condition No.17 on Serial Page 94 of the tender and not 40 as referred to by you.(b) In case of acceptance of your tender mobilization advance of Rs.35.00 lakhs will be paid against BGBs as per conditions of the tender.(c) It is seen that the way the revision has been made in the quoted percentage for Schedule `A Part I does not go well with the status of your firm. However, your tender is being considered with the reduction of minimum 2.25% over quoted percentage for Schedule `A Part I as also read out at the time of opening of tenders wherein your representative was alsoagain on 5.8.1988, appellant in reply thereto, inter alia, statedWe hereby clarify that our rates are worked out and quoted taking total labour component involved in the scope of work as 40%. As such the department may please evaluate our tenders on the same basis and consider accordingly.XXX XXX XXXAfter ascertaining this just before dropping the tender in the tender box, our Managing Partner had to include an extra at 2.25% towards Turnover Sales Tax liability and the vertical line in the sign (+) has been hurriedly put as shown here once again (+).Thus, our quoted rates for item 1 of the schedule is 18.5% i.e. 16.25% quoted by us in the schedule and plus 2.25% quotd in the covering letter along with our tender against item 1 of the schedule. We regret for the misunderstanding led in thisof the appellant was accepted by the respondents in terms of its letter dated 11.8.1988, the relevant portion whereof reads as underyour letter No.Nil dated 9/17.7.1988 forwarding the tender for the above mentioned work.2. On behalf of the President of India, I hereby accept your tender for the work mentioned above for the Lump Sum of Rs.7,54,03,216.00 (Rupees Seven Crores Fifty four lakhs three thousand two hundred and sixteen only).3. This contract is allotted the number "CA No.CEMZ/ARK/4 of 1988-89" which will be quoted by you in all future correspondence in connection with this contract.4. The tender enquiry, your tender, the letter referred to above and this letter shall be the sole repository of thethe said letter, the details of amended Lump-sum was appended which reads as underOF AMENDED LUMP SUMi) Lump sum amount originally Rs. 7,67,22,728.00 quotedii) Deducted for reduction of (-) Rs. 13,91,512.00 2.25% offered on Schedule `A Part I vide your letter No. NIL dated 9/17 July, 88 while forwarding the tender (i.e. 2.25% on Rs.6,18,45,000/-)Note : Consequent on SI (ii) above the Representing percentage on Schedule `A Part I stands amended to "+Lump Sum Rs.7,54,03,216.00 (Rupees Seven crores fifty four lakhs three thousand two hundred and sixteenIndisputably, whereas the main letter dated 11.8.1988 was signed by one L.D. Sharma, Brig. Chief Engineer as accepting officer for and on behalf of the President of India, the appendix was signed by some other person for `Accepting Officer. Indisputably, the representative of the appellant also signed the said letter.The said contract, however was terminated on or about 10.7.19916. Disputes and differences having arisen between the parties, the arbitration agreement which formed part of the general condition of the contract as also special condition of contract was resorted to. Respondent No.2 was appointed as the Arbitrator.Before the learned Arbitrator, appellant put forth eight claims, beingDispute regarding additional payment of 2.25% over the quoted rates under item 1 of Schedule A with an overall effect of 4.5% over what has been paid to the plaintiff.(b) Dispute regarding percentage of labour component in the work with reference to the escalation in labour rates and for consequential in labour rates and for consequential payments to the plaintiff.(c) Dispute regarding escalation with reference to the extra payment of labour involved in construction of high rise building.(d) Dispute regarding legality of the termination of the plaintiffs contract and for consequential damages.(e) Dispute regarding release of the plaintiffs plant and equipment, together with damages for the use of the equipment by the defendant and in default payment of the market value of the plant and equipment as on the date of termination, together with the damages as aforesaid.(f) Dispute regarding balance payment for the work done and material supplied by the plaintiff.(g) Interest at 24% p.a. on all amounts due to plaintiff and awarded by the arbitrator from the date when the cause of action for the claim arose, till the date of payment to the plaintiff.Respondent repudiated the said claims of the appellant. Respondent No.2 made and published an award on 17.9.1996. While claims Nos.1 and 5 were allowed in part, claims No.2 and 4 were allowed in toto. Claim No.3 was allowed for the amount to which the appellant itself had restricted its claim to.Counter claim of the first respondent was rejected.8. First respondent filed an application under Section 30 of the Arbitration Act, 1940 (hereinafter called and referred to for the sake of brevity as `the Act).A learned Single Judge of the High Court rejected the said objection, opining that the award did not warrant any interference. The learned Single Judge noticed that claim Nos. 5 and 6 had not been disputed by the first respondent and counter claim No.4 was not pressed. It was, therefore, directed payment of a sum of Rs.2,78,17,530.01 p. with further interest @ 6% per annum from the date of decree till the date of realization. The counter claim was also dismissed.9. First respondent preferred an intra court appeal thereagainst in terms of clause 15 of the Letters Patent of the High Court read with Section 39 of the Act. The Division Bench of the High Court allowed the said appeal in part in respect of three items of claim. The objection in relation to fourth item was also dismissed.10. Both parties are here before us aggrieved by and dissatisfied with the said judgment.11. The three heads of claim which were allowed by the respondent No.2 in favour of the appellant are as under :(i) Claim of 2.25% over and above the base price as specified in Item No.1 of Schedule A;(ii) claim of escalation towards labour component whether 40% or 21%;And(iii) claim towards higher minimum wages paid to the workmen in terms of a Government of India notification dated 14.10.1986.The fourth claim which was allowed related to loss of profit allegedly suffered by the petitioner for illegal termination of the contract.

Court's reasoning:
21. A contract would warrant construction if the terms thereof are vague and ambiguous. The letter exhibiting the offer of the appellant refers to four different documents including the letter dated 9/17.07.1988 which was marked as ExhibitWhether in the said letter, the appellant had asked for increase of 2.5% over the base value or deducted 2.5% therefrom is a matter of construction.22. The learned Arbitrator, it is not correct to contend, has not taken into consideration the ultimate contract. He did take the same into consideration. He, however, was of the opinion that the aforementioned four letters which were said to be the sole repository of the contract formed part thereof. He, thus, took into consideration the relevant documents for arriving at a finding as to whether they formed part of the contract. Offer of the appellant was accepted.23. The first claim was in relation to disputes regarding additional payment of 2.25% over the quoted rates under item 1 of Schedule A with an overall effect of 4.5% over what had been paid to the plaintiff. The arbitrator came to the conclusion that the letter dated 9/17.7.1988 (Ex.C.2) does not make out whether the contractor intended to quote the price with +2.25% and therefore, he held that a concluded contract has taken place after taking into consideration the sign (+) mentioned in the above letter. The contract will therefore still be enforced even if it is assumed that there was a mistake on the part of the respondent. The High Court held that it was apparent on the face of record that the contractor intended only to reduce 2.25%, which was seen from Ex.C.5, which was final and concluded, claim no 1 fails for that reason. But as the Arbitrator held that the letter of the contractor dated 9/17.7.1988 formed part of the contract, the claim cannot fail and therefore the award of the Learned Arbitrator, in respect of claim No 1 must be sustained.24. In relation to Claim No.2, the respondent relied on the fact that the claimant received payment only at the rate of 21% towards labour escalation in the several R.A.Rs and therefore, it has to be presumed that the claimant is entitled to only 21%. The Arbitrator opined that the receipt of money at 21% cannot absolve the claimant from claiming at 40% as per the contract, particularly, when it is clearly mentioned in Ex C.2 (R1) that 40% will be the labour component which forms part of the contract, Ex C.5. The High Court held that as the Department themselves gave 21% to the contractor, and only 21% of escalation, which was in consonance with the special conditions, which was apparent on the face of the record, the second claim of escalation of 40% was to be set aside. But, keeping the same principle as applied in relation to Claim No.1, the Arbitrator held that as the covering letter (Ex.C.2) is part of the tender bid, and since the tender bid has been accepted without any modification, the Figure of 21% has to be substituted by 40%. Therefore, in respect of claim No.2, the impugned judgment of the High Court cannot be upheld and the award of the Arbitrator is sustained.25. The matter might have been different had the respondents in categorical terms rejected the offer made by the appellant as amended by its letter dated 19.7.1988. It did not do it. Thus, the contract remained open for construction.26. We have not been able to persuade ourselves to agree with the reasonings of the Division Bench of the High Court. The award of the learned Arbitrator in respect of claim No.1, therefore, must be sustained.27. Keeping in view the fact that the same principle would apply in respect of claim No.2 also, the impugned judgment of the High Court cannot be upheld.28. So far as Claim No.3 is concerned, the claim towards higher minimum wages paid to the workmen is not in dispute. A high rise building is a high rise building, it cannot be divided into two parts.What would constitute a high rise building was defined. A portion of the building cannot be high rise and a portion would fall within the purview of the said definition. The learned Arbitrator, in our opinion, had rightly opined that the same workers may have to work for constructions of the entire building as it will be impossible for any contractor to employ any workmen to work exclusively for the high rise building. Furthermore, the same workmen may have to work in different parts of the same building at different times. It would lead to an absurd situation if the workmen at one point of time are not paid the 20% of the excess amount and then paid the same and yet again denied the same benefit. Interpretation of the High Court, therefore, that high rise building mean portion of the building, in our opinion, keeping in view the beneficent nature of the provisions, cannot be accepted.29. The award of the Arbitrator in respect of claim No.4 has been accepted by the Division Bench. Mr. B.B. Singh has drawn our attention to clause 11(c) of the general conditions of contract to contend that in terms thereof, no damages were payable.The question as to whether damages were payable for illegal termination of contract cannot be a subject matter of contract. The learned Arbitrator has categorically held that not only the termination of contract was illegal, the same was mala fide. Furthermore, the contention raised before us by Mr. Singh has not been raised before the High Court.30. In any event, there is a delay of 411 days in filing the SLP of the respondent, for which no sufficient explanation has been given.