# SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN v. THE SUPERINTENDING ENGINEER T.B.P.H.L.C. CIRCLE ANANTAPUR

- **Citation:** [2019] 5 S.C.R. 152
- **Court:** Supreme Court of India
- **Decided:** 2019-03-27
- **Case number:** Civil Appeal Nos.159-170 of 2010
- **Bench:** Ranjan Gogoi, Sanjay Kishan Kaul, K.M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sri-k-marappan-dead-through-sole-lr-balasubramanian-v-the-superintending-33789
- **Pages:** 50

## Headnote

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 - RespondentState 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 o

## Text

_Characters 0–39,993 of 119,831. This is a partial read: ask again with offset=39993 for what follows._

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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 - RespondentState 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.159170 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 subCourt 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 respondentState. 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 subCourt 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.