Full Judgment Text
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CASE NO.:
Appeal (civil) 5489-5490 of 1995
PETITIONER:
Bharat Coking Coal Ltd.
RESPONDENT:
L.K. Ahuja
DATE OF JUDGMENT: 12/04/2004
BENCH:
S. RAJENDRA BABU & BHAN.
JUDGMENT:
JUDGMENT
RAJENDRA BABU, J. :
In respect of certain contracts of work assigned
by the appellant certain disputes having been arisen,
the matter was referred to arbitration. Two awards
were made and the same were filed in the court of the
Civil Judge in two Title (Arbitration) Suits Nos. 37/86
and 40/86. By a common order, the trial court made
the awards rule of court in entirety and decrees were
drawn in terms thereof. An appeal was filed against
the said common order before the High Court. The
High Court having dismissed the said appeal, the
matter was carried to this Court.
On February 21, 2001 by an order made by this
Court, the awards were set aside after quashing the
orders made by the High Court and the trial court and
the matter was remanded to the arbitration for a fresh
consideration of all points by appointing a new
arbitrator Shri Justice Uday Sinha, former Judge, High
Court of Patna. He made an award and on
25.01.2002 sent the copies of the award and on
12.02.2002 minutes of the proceedings before the him
to the Court. Report in this regard was placed before
this Court on 18.02.2002, copies of which were served
upon the concerned advocates. Objections to the
award and application to set aside the award have
been filed on 11.04.2002. Now, an objection is raised
on behalf of the respondents that the application filed
for setting aside the award in terms of Article 119(b)
of the Limitation Act should have been filed within a
period of 30 days from the date of filing of the award
into the Court; that inasmuch as the office report had
been served upon all the parties, it must be deemed
that the said office report gives sufficient notice of
filing of the award in the Court; that the period of
limitation of counting 30 days commenced on
18.02.2002; that, therefore, the objections filed on
11.04.2002 are hopelessly barred by limitation. It is
further submitted that the Court itself may order a
notice of filing of the award or even the Registry can
take steps to issue such a notice and reliance is placed
on certain decisions of this Court as to how in
situations of this nature 30 days limitation period is to
be computed in Indian Rayon Corporation Ltd.
vs. Raunaq and Company Pvt. Ltd., 1988 (4) SCC
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31; Food Corporation of India & Ors. vs. E.
Kuttappan, 1993 (3) SCC 445, and State of Bihar
vs. Hanuman Mal Jain, 1997 (11) SCC 40. In our
view, none of these decisions can have any
application to the situation arising in the present case.
The office report was prepared on 18.02.2002
and the matter was listed before this Court on
11.03.2002 when this Court ordered that "call after
four weeks". On 02.04.2002 the learned counsel for
the respondents filed a separate application in both
the appeals under Section 17 of the Arbitration Act,
while on 11.04.2002 the appellant filed an application
under Section 15 read with Section 30 of the
Arbitration Act raising objections to the passing of
decree in terms of the award.
Article 119(b) of the Limitation Act has been
enacted to fix a definite time limit within which the
validity of the award can be challenged after the
award is filed in the court. The said provision
prescribes a period of limitation of 30 days for making
an application after the required notice regarding filing
of the award in the court is given to the parties. If
there is no material to show that a notice of filing of
the award has ever been given to the parties, any
period of limitation as prescribed in Article 119(b)
loses its significance. The law is clearly to the effect
that mere knowledge of passing of an award is not
enough. The period of limitation will commence as
provided in Article 119(b) of the Limitation Act only
upon notice as to filing of the award in the court has
been given to the parties concerned.
In the present case the situation has arisen in
very special features. This Court made an order
appointing a new arbitrator who was directed to file an
award in the Court and he submitted the award in the
Court after publishing the same to the parties. Though
on 18.02.2002 the Registry notified the submission of
the award in the Court by way of an office report, but
the same cannot be treated to be in the nature of a
notice. The noting made by the Registry in the office
report merely brought to the notice of the Court as to
what had transpired and as the matter was being
listed before the Court, a copy was served upon the
parties concerned. It is only thereafter it can be said
that the Court directed issue of notice to the parties
regarding filing of the award which has been sent by
the Registry. The Registry on its own could not have
issued a notice without a direction from the Court in
this regard. In that view of the matter, we do not
think, there is any notice of filing of the award in the
Court to the parties as contemplated in Article 119(b)
of the Limitation Act. Further, on 11.03.2002 when
the matter was listed before the Court, the parties
concerned took notice of the same and thereafter,
objections have been filed by the parties. In these
circumstances, we think that the first contention
urged on behalf of the respondents that the objections
raised by the appellant are barred by limitation is
incorrect and the same stands rejected.
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In the view we have taken, it is unnecessary to
refer to the various decisions relied upon by the
learned counsel for the respondent.
Further, it may be useful to refer to one decision
of this Court, which was not cited by either party, in
which the effect of non-service of notice was
considered by this Court. In Dewan Singh vs.
Champat Singh & Ors., AIR 1970 SC 967, it is
observed by this Court "that if a party files an
objection before the service of notice, the question of
limitation does not arise at all. But also in the
absence of clear proof to the effect that notice of the
filing of the award had ever been given to the
applicant, application filed by him cannot be rejected
on the ground of limitation."
Originally, though the respondent had made
large claims totalling to a sum of Rs. 78,41,350.00,
the same got slashed to Rs. 32,03,755.10p. Now, the
subsisting claims are :-
"Claim No. Rs.
1. Payment of final bill 2,18,862.42
2. Payment of P.O.L. escalation 18,417.31
3. Compensation for making late
Payment of running account bill 3,75,500.00
4. Payment of labour escalation 2,66,321.55
5. Refund of sales tax 35.050.95
6. Payment of extra items 8,77,115.82
7. Payment of material escalation 4,12,487.46
8. Keep back account N I L
9. Payment of compensation to loss
arising out of turn over due to
prolongation of work 10,00,000.00
-------------------
Total 32,03,755.10
-------------------"
The arbitrator took notice of the fact that the
difference in the original claim and the subsequent
claim is to the order of Rs. 45,62,376/- which casts
serious doubt as to the nature of the claim and the
veracity of quantum of the claim.
Out of the claims mentioned above, Shri Mukul
Rohtagi, learned Additional Solicitor General who
appears for the appellant, did not contest the award
made by the arbitrator in respect of claim Nos. 2 and
3. However, serious contest has been raised in regard
to interest awarded by the arbitrator.
There are limitations upon the scope of
interference in awards passed by an arbitrator. When
the arbitrator has applied his mind to the pleadings,
the evidence adduced before him and the terms of the
contract, there is no scope for the court to reappraise
the matter as if this were an appeal and even if two
views are possible, the view taken by the arbitrator
would prevail. So long as an award made by an
arbitrator can be said to be one by a reasonable
person no interference is called for. However, in
cases where an arbitrator exceeds the terms of the
agreement or passes an award in the absence of any
evidence, which is apparent on the face of the award,
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the same could be set aside.
The learned Additional Solicitor General
submitted that in the present case the arbitrator found
that there was delay in execution of the contract of
work for which both the parties were liable and
apportioned the same between them without clearly
examining whether there was any material for that
claim at all. His contention is that there is absolutely
no evidence to sustain any of the claims and in the
absence of the same, it is not permissible for the
arbitrator to have made the award.
Shri V.A.Mohta, learned Senior Advocate
appearing for the respondent, submitted that the
material on record clearly indicated that there were
certain joint statements before the arbitrator and they
were all based on the measurement books or other
material and if that piece of material is treated as
evidence, there cannot be serious doubt that the view
taken by the arbitrator is justified and no interference
would be call for.
On the first claim regarding non-payment of the
final bill, reliance was placed by the parties before the
arbitrator on a joint statement and the entries made
in the measurement book. On the question whether
reliance could be placed on the joint statement, the
arbitrator held that he cannot attach any
conclusiveness to the joint statement. However, he
would examine the claims on their intrinsic merit.
One of the contentions raised was that the final bill
had been fully paid inasmuch as 13th and 14th running
account bills having been passed, the arbitrator relied
upon a letter sent on 14.3.1986 by Sri Srinathan,
Deputy Chief Engineer [Civil] that the final bill had not
been paid and that clinched the matter in favour of
the claimant. Thereafter having held that the final bill
is yet to be paid, he proceeded to examine the
quantum of the same. The final bill disclosed that as
per the agreement, the value of the work is
Rs.86,43,730/- as against this amount, the actual cost
of the work was Rs.90,46,842.14, out of which a sum
of Rs.89,97,311.12 had been paid. Thus a balance of
Rs.49,531/- had not been paid. Therefore, he held
that this part of the claim is allowed.
In addition to this, he also stated that certain
work had been done by him by way of extra works
and made a claim of Rs.91,013.72. There is a
separate claim made by the claimant under claim No.6
as claim for extra work done. Claim made therein is
to the extent of Rs.1,02,350/-. On this aspect of the
matter, the contention advanced on behalf of the
appellant is that separate claim for extra works of
items under claim No.6 includes the claim of
Rs.91,013.72 and the claim for extra items of work
can be made only on the written order of the
Engineer-in-Charge in terms of clause 11 of the
agreement and, therefore, the contractor will not be
entitled to make any claim unless he has received
such an order for substituted or altered work in terms
of clause 11 of the agreement. On this aspect while
dealing with the claim for extra works under claim
No.6, the arbitrator adverted to the decision of this
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Court in State of Bihar & Ors. vs. Hanuman Mal
Jain, 1997(11) SCC 40, wherein this Court interpreted
a similar clause as laying down the procedure as to
how a claim could be lodged and not to oust the
jurisdiction of the arbitrator in deciding the dispute on
merits. It is not clear from the pleadings raised on
behalf of the appellant before the arbitrator whether
the claim covered by the final bill as extra items to the
tune of Rs.91,013.72 is included in the extra item of
works which had been rejected by the arbitrator. The
arbitrator adverted to this aspect of the matter while
deciding claim No. 6 and held that out of the claim of
Rs.1,02,517/-, Rs.11,503/- had been paid leaving a
balance of claim of Rs.91,013/- which has been clearly
allowed by him while consider claim No.1 regarding
non-payment of final bill and having claimed
Rs.91,013.72 which had been allowed by him the
contractor could not once again claim the same
amount under another head and the arbitrator
rejected this claim on two grounds, namely, that there
is no order in writing by the Engineer-in-Chief and
secondly even if it had been executed, it had been
paid for. The contention put forth on behalf of the
appellant that there is absolutely no material to make
a claim by the contractor in this regard cannot be
accepted because these extra items have been
mentioned in the measurement book and which
clearly indicated that the work had been executed and
he treated that the entry in the measurement book
will itself amount to order in writing in terms of clause
11 of the agreement and, therefore, allowed the
claim. In these circumstances, it cannot be said that
the item claimed for extra works referred to in the
final bill is the same as the claim under claim No.6 for
extra works wherever such a situation has arisen the
arbitrator has examined the same, say for example, in
regard to petrol, oil and lubricant, he has separately,
treated the same. If appropriate pleadings had been
raised, the arbitrator would have certainly considered
this aspect and in the absence of the same we think
that the view taken by the arbitrator in this regard
cannot be interfered. Only two items which had been
allowed by the arbitrator which have been adverted to
by us as a sum of Rs.49,513.02 which was still to be
paid and a sum of Rs.91,013.72 as extra items of
works which was disclosed in the measurement book.
Therefore, we find no infirmity on this aspect of the
claim.
Claim Nos. 2 and 3 not having been disputed
before us, we now proceed to consider claim NO.4.
The arbitrator considered various aspects made under
this head for claim for payment of labour escalation.
The arbitrator took the view that the appellant alone
was not responsible for prolongation of the works and
there were lapses on the part of the contractor as well
and both were responsible for the delay. The
arbitrator, after into consideration that there was
definitely a escalation between April 1983 and April
1984 in regard to wage bill of the claimant, took the
view that as against a claim of Rs.2,66,343/- awarded
a sum of Rs.1,30,000/-. When on the basis of the
pleadings and overall view of the situation arising as
to the rise in the cost of wages, having awarded a
lumpsum amount under this head, we do not think it
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is necessary to interfere with the award on this aspect
of the matter.
The claim for refund of sales tax in a sum of
Rs.35,050/- has been upheld by the arbitrator on the
basis that in terms of a notification issued by the
Government which lays down that if the works had
been handed over prior to 1.4.1984, sales tax was not
leviable but the works having been executed on
31.5.1984, it cannot be said that the terms of the
notification had been complied with and, therefore, no
claim could have been made by the claimant and,
therefore, an award of Rs.35,050/- based on the
notification dated 19.2.1985 would not be correct and,
thus, this amount of award in a sum of Rs.35,050/-
stands allowed. There is a clear error apparent on the
face of the award in having allowed this claim by the
arbitrator.
Claim No. 6 consists of four items. So far as the
first item regarding extra work is concerned, the claim
has been rejected by the arbitrator which we have
adverted to while considering claim no. 1 under final
bill. The second item under this claim relates to watch
and ward expenses. The arbitrator, after examining
various aspects of the matter, took the view that the
expenditure over watch and ward staff could not be
more than Rs.10,000/- per month for 14 months and
the bill on that account would come down to
Rs.1,40,000/-. However, taking all the factors in
respect of this claim, the expenditure under this head
would not come to more than Rs.84,000/- for the
whole period and taking a lenient view of the matter,
the arbitrator awarded a sum of Rs.1,25,000/- under
this head.
The arbitrator considered the fact that the
appellant took possession of the quarters for two days
on 30.4.1984 and 1.5.1984 to accommodate
delegation for the All-India Labour Union Congress but
it was not in dispute that the same was handed over
after a couple of days. Thereafter the quarters were
allotted to employees in stages and actual delivery of
possession was made on 10.3.1986. While the
arbitrator considered that the claim on account of
watch and ward to the tune of Rs.7,09,000/- is
fantastically high and in the written submissions it had
been claimed that the building had to be maintained
at a cost of Rs.5,500/- per month, he doubts as to
whether the claimant had retained any watch and
ward staff to the extent of 18 members, he held that
three watch and ward staff would have been enough
and the period for which the same had been
maintained comes down to 18 months and with
reference to the pleadings raised in this Court on
earlier occasion took note of the fact that possession
had not been given since April 1984. Therefore, he
reduced the period to 14 months. He rejected the
claim that for the whole period from April 1986 it had
retained the services of plumber, electrician,
carpenters, supervisory, etc. and watch and ward staff
and he held that the flats were not in such a condition
that the appellant could have taken possession and,
therefore, the entire claim cannot be justified. Having
taken into consideration the fact that the watch and
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ward staff could be three, he awarded a sum @
Rs.10,000/- per month for 14 months.
The learned Additional Solicitor General
submitted that there is absolutely no basis for
awarding this item as no material had been placed
before the arbitrator. We cannot say that in assessing
such a situation, the arbitrator has exceeded his
jurisdiction or that there was no material at all before
him in assessing the situation that there was some
delay in handing over the flats and watch and ward
had to be maintained, he has awarded for a reduced
period of 14 months @ Rs.10,000/- per month.
Therefore, we cannot hold this conclusion as suffering
from an error apparent on the face of the award.
Next two items regarding rolling margin and
refund of security deposit had been rejected by the
arbitrator and, therefore, do not require any
consideration.
On the question of material escalation, the
arbitrator considered the claim made in a sum of
Rs.4,12,487.46 under this head. The arbitrator took
note of the situation that it was not the contention of
the appellant that the material referred under this
head had not been used for the completion of the
project but having secured a sum of Rs.17,70,085/-
by way of advance, the escalation would get off-set by
the advance paid and further running accounts
payments had been made from month to month which
must have taken into consideration the rise in prices.
He held that there was no evidence on record as to
the nature of the purchases made by the claimant
during the extended period although some purchases
had been made attracting escalation in the prices.
Secured advance was only made to the extent of 60 to
75%. Therefore, he held that 25% of the escalation
has to be compensated on that basis and allowed half
of the claim of the contractor. When there was no
dispute as to the fact that materials had been used for
the purpose of the project and the value thereof, the
claim made by the appellant having been duly
examined by the arbitrator and after giving due
allowance to the advances that have been made the
award made by the arbitrator cannot be stated to be
as one suffering from any error apparent on the face
of the award. Therefore, this conclusion also cannot
be interfered with.
Claim No. 8 has been rejected by the arbitrator.
Now we proceed to consider claim No. 9 for loss
arising out of turnover due to prolongation of work.
The claim made under this head is in a sum of Rs.10
lakhs. The arbitrator rightly held that on account of
escalation in wage and prices of materials
compensation was obtained and, therefore, there is
not much justification in asking compensation for loss
of profits on account of prolongation of works.
However, he came to the conclusion that a sum of
Rs.6,00,000/- would be appropriate compensation in a
matter of this nature being 15% of the total profit
over the amount that has been agreed to be paid.
While a sum of Rs.12,00,000/- would be the
appropriate entitlement, he held that a sum of
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Rs.6,00,000/- would be appropriate. He also awarded
interest on the amounts payable at 15% per annum.
Here when claim for escalation of wages bills and
price for materials compensation has been paid and
compensation for delay in the payment of the amount
payable under the contract or for other extra works is
to be paid with interest thereon, it is rather difficult for
us to accept the proposition that in addition 15% of
the total profit should be computed under the heading
’Loss of Profit’. It is not unusual for the contractors to
claim loss of profit arising out of diminution in turn
over on account of delay in the matter of completion
of the work. What he should establish in such a
situation is that had he received the amount due
under the contract, he could have utilised the same
for some other business in which he could have
earned profit. Unless such a plea is raised and
established, claim for loss of profits could not have
been granted. In this case, no such material is
available on record. In the absence of any evidence,
the arbitrator could not have awarded the same. This
aspect was very well settled in Sunleyn (B) & Co.
Ltd. vs. Cunard White Star Ltd., [1940] 1 K.B. 740,
by the Court of Appeal in England. Therefore, we
have no hesitation in deleting a sum of Rs. 6,00,000/-
awarded to the claimant.
So far as interest that is payable is concerned,
the arbitrator has appropriately considered the same
and no real objection can be raised in this regard. As
regards arbitration costs also there cannot be any
serious dispute. Therefore, except for the sums
coming under the heading No. 5, that is, Refund of
Sales Tax and claim for payment of losses arising out
of turn over due to prolongation of work, other part of
the award having been upheld by us, the award made
by the arbitrator shall stand modified accordingly.
In similar terms in respect of second contract,
for the very reasons stated in this part of the order,
we disallow the claim for refund of sales tax and
compensation for losses arising out of on account of
prolongation of work. In other respects, we maintain
the award made by the arbitrator.
The civil appeals stand disposed of in the
aforesaid terms.