Full Judgment Text
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CASE NO.:
Appeal (civil) 5489-5490 of 1995
PETITIONER:
BHARAT COKING COAL LTD.
Vs.
RESPONDENT:
M/S L.K.AHUJA & COMPANY
DATE OF JUDGMENT: 21/02/2001
BENCH:
S. Rajendra Babu & S.N. Phukan.
JUDGMENT:
RAJENDRA BABU, J. :
L...I...T.......T.......T.......T.......T.......T.......T..J
Two works were assigned by the appellant for
construction of 108 and 72 units of B Type quarters at
Karmik Nagar, Dhanbad pursuant to a tender notice dated
4/13.7.1981. After certain negotiations between the
parties, two work orders were issued by the appellant to the
respondent on certain terms and conditions mentioned therein
valuing at Rs.86,49,730/- and Rs.57,64,368/- for the said
two works on 14.3.1982 and two separate agreements were
executed by the parties. The schedule dates for completion
of the respective works were fixed as 24.3.1983 and
19.3.1983. The respondent sought for extension of time
which was granted by the appellant. Disputes having arisen
between the parties, the matter was referred to the sole
arbitrator, Shri M.P.Sharma, the then Additional Chief
Engineer. The arbitrator made two awards in respect of the
two contracts on 14.5.1989, which were filed in the court of
the Civil Judge on 12.6.1990 in two Title [Arbitration]
Suits Nos. 37/86 and 40/86. The learned Civil Judge held
that the notice for Title [Arbitration] Suit No.37/86 had
been served upon the appellant on 28.8.1990 and the
objections filed on 14.9.1990 could be examined as they had
been filed in time. So far as Title [Arbitration] Suit
No.40/86 is concerned it appears that the service of notice
on the respondent was made on 13.7.1990 of the filing of the
award and the objections in question were filed on 18.8.1990
and thus apparently there being a delay of five days in
filing the objections beyond the period of limitation
prescribed under Article 119 of the Schedule to the
Limitation Act, 1963 were not considered. On decrees being
passed in terms of awards appeals filed in the High Court
having met with failure, these appeals have been preferred
by special leave.
The parties filed elaborate pleadings before the
arbitrator in respect of both the agreements.@@
JJJJJJJJJJJ
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The claim made in the first agreement is as follows:
1. Claim for payment of the final bill amount
Rs.3,10,000.00
2. Claim for payment of PLO escalation Rs. 20,000.00
3. Claim for compensation for making late
Rs.8,00,000.00 payment of running account bill
4. Claim for payment for labour escalation
Rs.4,12,000.00
5. Claim for refund of sales tax Rs. 60,000.00
6. Claim for payment of extra items Rs.10,31,350.00@@
JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
7. Claim for payment of material escalation
Rs.40,00,000.00
8. Keep Back Amount Rs. 8,000.00
9. Claim for payment of compensation to loss
Rs.10,00,000.00 arising out of turnover due to prolongation
of work
10. Claim for payment on account of loss of
Rs.2,00,000.00 reputation etc.
Rs.78,41,350.00 @@
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
============= 11. With interest @ 18 % per annum from@@
IIIIIIIIIIIIIIIJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
Rs.20,000.00 31.5.84 till date of actual payment of awarded@@
JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
amount or court decree whichever is earlier.
12. Arbitration Cost Rs.20,000.00
Claim made in the dispute arising out of second
agreement is as follows :
1. Claim for payment of the final bill amount Rs.
2,00,000.00
2. Claim for payment of PLO escalation Rs. 15,000.00
3. Claim for compensation for making late Rs.
5,00,000.00 payment of running account bill@@
JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
4. Claim for payment for labour escalation Rs.
3,00,000.00
5. Claim for refund of sales tax Rs. 40,000.00
6. Claim for payment of extra items Rs. 6,54,000.00
7. Payment of material escalation Rs.25,00,000.00@@
JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
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8. Keep Back Amount Rs. 28,000.00
9. Claim for payment of compensation to loss Rs.
7,00,000.00 arising out of turnover due to prolongation of
work
10. Claim for payment on account of loss of Rs.
2,00,000.00 reputation etc.
Rs.51,27,000.00 @@
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
============= 11. With interest @ 18 % per annum from@@
IIIIIIIIIIIIIIIJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
30.4.84 till date of actual payment of awarded amount or
court decree whichever is earlier.
12. Arbitration Cost Rs.20,000.00
He passed two separate awards.
In addition to these pleadings, it appears that the
arbitrator asked both the parties to file certain joint
statements and in this regard stated as follows:
.Before going into the merits of the case the parties
were advised to file joint statement signed by them, showing
the quantities, rates and the payments made for various
items and balance payment due to the claimant under various
heads and other particulars on 26.4.89. The parties
submitted the joint statements duly signed by them
containing details of bricks and cement supply statements,
bill statements with details of delay in payment of R/A
bills alongwith relevant dates of measurements and other
particulars, including payable amounts under various heads
and measurements for extra items, rolling margin etc.
The arbitrator noticed in the course of his award that
the joint statements signed by both the parties is the
backbone of the award. The arbitrator rather strangely made
the two awards after making elaborate reference to the
pleadings on either side but not deciding any one of the
claims except the claim relating to payment of material
escalation in the two claims. On that aspect of the matter,
the arbitrator, after adverting to the pleadings, stated as
follows:
Since the prices of building materials and labour
cost sky rocketting and the value of rupee going down, the
refusal to compensate increase in material cost on some
ground or the other would lead to total financial disaster
to the claimant. The payment of advances like mobilisation
has been made against rebate of 1½% claimed by the O.P. and
was meant for mobilising resources before commencing work.
On the other hand very partly sum is payable against secured
advance without hardly giving any financial assistance. The
planning of procurement of material is linked with progress
at site. Whereas during contract period the work hardly
progressed 50% and the payment for work done was restricted
to 16% how could the planned procurement availing secured
advance could be made in such solution. The payment of
material escalation for the increase in cost during the
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extended period of the contract would give some relief to
disaster already caused financially to the claimant.
On examination of the contract provision I find that the
claimant had undertaken to complete the work at agreed rates
within the stipulated period with the provision for
extension of time to execute at the agreed rates till
completion. This contention shall hold good provided the
extended period is within a reasonable limit. In this case
the original stipulated period is 12 months and actual
completion is 26 months having extension element of 14
months which cannot be termed reasonable by any yardstick.
The grant of extension of time is a poor consolation. It is
not remedy for losses suffered on account of delay in supply
of building materials committed to be supplied by the O.P.
But after setting out the other claims of the respondent
and the rebuttals to them by the appellant, the arbitrator
concluded as follows:
NOW, THEREFORE, I, the said M.P.Sharma, Sole Arbitrator
after hearing the parties at length examining and carefully
considering the evidence adduced the arguments advanced by
them, the discussions made above, scrutinising the joint
statement signed by the parties and written arguments filed
by O.P. DO HEREBY MAKE AND PUBLISH MY AWARD AS FOLLOWS:
1. The Opposite Party M/s Bharat Coking Coal Ltd.,
Dhanbad, shall pay the claimant i.e. L.K.Ahuja & Co. a
lump sum amount of Rs.24,27,686.12 (Rupees Twenty four lacs
twenty seven thousand six hundred eighty six and paise
twelve only).
I am dividing the period in three years for calculation
and payments of interest.
a). The aforesaid amount will carry interest @ 15% per
annum for the following periods:
I. From 1.1.85 to 3.10.88 when the claimant submitted
the claim.
II. From 4.10.88 to 14.5.90 when the award is
published.
III. From 14.5.90 till the date of payment or court
decrees whichever is earlier.
2. A sum of Rs.15,000/- (Rupees fifteen thousand) only
towards the cost of arbitration proceedings along with the
interest @ 15% p.a. w.e.f. 14.6.90 till its date of
payment or the date of court decree whichever is earlier.
It may be made clear that the power to order award of
interest on all above amounts vests in the Honble Court
from the date of decree till the decretal amount is paid to
the claimant as provided under S.29 of the Arbitration Act
which empowers the Honble Court deems reasonable from the
date of decree till payment of decretal amount to the
claimant.
He similarly awarded in respect of second agreement a
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lump sum of Rs. 16,74,197.29 with interest at certain rates
and costs of the arbitration.
We cannot but describe the arbitrators awards as hybrid
which are neither speaking awards nor non-speaking - partly
speaking and partly non-speaking awards. The law is well
settled that if the award made by the arbitrator is a
non-speaking one the difficulty of showing that there is an
error apparent on the face of the award becomes
insurmountable and ordinarily such award cannot be
challenged at all unless it is shown that the arbitrator has
wholly travelled outside the contract which gives him the
jurisdiction. The law is equally well settled that in cases
of speaking awards the court can interfere if there is an
error apparent on the face of the award itself; it could
also be shown that the arbitrator has misconducted himself
in arriving at certain conclusions which are either plainly
contrary to law or to the terms of the contract or ignored
the provisions of contract or the evidence on record and
such other similar matters. When a lumpsum award is made,
it is all the more difficult to find out as to what went
into the mental process of the arbitrator in fixing the same
particularly when a part of the award is a speaking award
and determines the portion of the claim in a particular
manner and in respect of other claims merely refers to the
pleadings but not decided the matter but gives the award.
The position of the appellant before the court is unenviable
and bristles with too many complexities to get over the
awards.
Realising these difficulties, Shri M.L.Verma, learned
senior Advocate and Shri Ajit Kumar Sinha, learned Advocate
for the appellant, very cautiously treaded their path to put
forth before us the difficulties in upholding the award.
Shri S.B.Upadhyay, learned counsel for the respondent, with
equal astuteness and competence contended as to the manner
in which the award made by the arbitrator could be
maintained though it is bristles with many difficulties.
We have adverted in detail to the consideration of the claim
on payment of
material escalation earlier. The terms of the contract in this regard indicate as follows:
Clause 17: The contractor shall supply at his own cost
all materials (except such special materials, if any, as may
be in accordance with the contract be supplied from the
Engineer-in-Chiefs stores), plants, tools, appliances,
implements, ladders, cordage, tackle, scaffolding, and
tempers, works requisite or proper for the proper execution
of the work whether original, altered or substituted and
whether included in the specification or other documents
forming part of the contract or referred to in these
conditions or not or which may be necessary for the purpose
of satisfying or complying with the requirements of the
Engineer-in- Chief as to any matter as to which under these
conditions he is entitled to be satisfied, which he is
entitled to require together with carriage therefore, to and
from the work. The contractor shall also supply without
charge the requisite number of persons with the means and
materials necessary for the purpose of setting out works,
and counting weighing and assisting in the measurement or
examination at any time and from time to time of the work or
materials. Failing his so doing, the same may be provided
by the Engineer-in-Chief at the expense of the contractor
and the expenses may be deducted from any money due to the
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contractor under the contract from his security deposit or
the proceeds of sale thereof, or of a sufficient portion
thereof. The contractor shall also provide all necessary
fencing and lights required to protect the public from
accident, and shall be bound to bear the expenses of defence
of every suit, action or other proceeding at law that may be
brought by any person for injury sustained owing to neglect
of the above precautions, and to pay any damages and costs
which may be awarded in any such suit, action or proceeding
to any such person or which may with the consent of the
contractor be paid to compromise any claim by any such
person.
It is not clear from the pleadings whether the claim
made by the respondent is in respect of escalation in the
costs of material such as plant, tools, appliances,
implements, ladders, cordage, tackle, scaffolding, and
tempers, works, etc. inasmuch as the appellant has the
obligation to supply the most essential building materials
such as cement, steel and such other building material. It
is also not clear either from the pleadings or from the
award as to whether the escalation claim is in respect of
the materials provided by the respondent or in respect of
escalation arising from delay in non-supply of materials
which was due to be supplied by the appellant. So far as
the plant and other equipments are concerned, they had
already been provided for the purpose of the execution of
the work and how the delay in non-supply of building
materials such as cement, steel, etc. caused escalation so
far as the building materials provided by the appellant is
concerned is not clear. The arbitrator has not applied his
mind to this aspect of the matter at all. Having lost sight
of the importance of clause 17 and application of the same
to the circumstances of the case will clearly disclose that
there is an error apparent on the face of the award. The
claim under this head is Rs.40 lacs with reference to the
first agreement and Rs. 25 lacs with reference to the
second agreement which is the major chunk being nearly half
the claim made by the respondent. In what manner this
aspect has gone into in fixing the lumpsum by the arbitrator
is not discernible. Therefore, we have no option but to set
aside the entire award in respect of both the agreements
made by the arbitrator and remit the matter. We propose
that a new arbitrator be appointed in place of the old
arbitrator because the arbitrator has dealt with the matter
himself as an officer who had correspondence with the
contractor at the time when he was an officer of the
appellant. Therefore, it is fair neither to the appellant
nor to the respondent to continue him as an arbitrator in
the proceedings.
In so far as the other appeal is concerned, certain
additional contentions have been addressed by the respondent
and they are based on Article 119 of the Schedule to the
Limitation Act which provides that an application for
setting aside an award or getting an award remitted for
reconsideration, the period of limitation is fixed as 30
days from the date of the service of the notice of the
making of the award. As stated earlier, the award had been
filed in the court and the notice of which had been served
upon the appellant in Title [Arbitration] Suit No.40/86 and
the objection had been filed. Service of notice has been
made on the appellant on 13.7.1990 and the objection in
question had been filed on 18.8.1990, while it should have
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been filed on or before 12th August, 1990. The learned
counsel for the respondent in this regard relied on the
following observations made by this Court in Madan Lal vs.
Sunderlal & Anr., 1967 (3) SCR 147:
It may be conceded that there is no special form
prescribed for making such an application and in an
appropriate case an objection of the type made in this case
may be treated as such an application, if it is filed within
the period of limitation. But if an objection like this has
been filed after the period of limitation it cannot be
treated as an application to set aside the award, for if it
is so treated it will be barred by limitation. [p.151]
It is obvious from these observations that even an
objection setting out the grounds specified in Section 30 of
the Arbitration Act would amount to an application as
contemplated under Article 119 of the Schedule to the
Limitation Act and, therefore, such objection will have to
be filed within the period of limitation. Courts have taken
the view that inasmuch as agreement of reference to
arbitration is an instrument of solemn character, which is
binding on the parties, and so is the award; if, therefore,
a party desires to avoid the effect either of the agreement
or the award, he must strictly comply with the provisions of
the law and an objection to the award must be filed within
the time which cannot be extended. In certain
circumstances, courts have taken the view that by granting
time to file objection the Court had impliedly extended the
time even without a formal application under Section 5 of
the Limitation Act. An application for condonation of delay
is permissible to file objections under Section 30 of the
Arbitration Act by resorting to Section 5 of the Limitation
Act. Section 5 of the Limitation Act, 1963 provides that
any application, other than those contemplated under Order
XXI CPC could be admitted after the prescribed period if the
applicant satisfies the court that he had sufficient cause
for not preferring the appeal or making the application
within such period. It is clear that Section 5 of the
Limitation Act is applicable to all applications other than
those under Order XXI C.P.C. Hence scheme of an enactment
cannot be availed of to defeat such a right conferred under
the statute of limitation in clear terms. In the instant
case, it is set out in the course of the order made by the
Civil Judge that the award was filed in the sealed cover and
presented to the court and unless the same was made
available to the parties, they could not file the
objections. The object of filing the objections is to
question the validity of the award on the grounds mentioned
in Section 30 of the Arbitration Act. If such a course is
not possible for want of copy in respect of award, certainly
the circumstances, as arising in the present case, should be
taken note of. The objections filed on 18.8.1990 are in the
nature of an application under Section 30 of the Arbitration
Act to set aside the award and is an application under
Article 119 of the Schedule to the Limitation Act.
Therefore, Section 5 necessarily would get attracted to such
a situation. In this case, the notice of filing of award
was served upon the appellant on 13.7.1990 and the appellant
filed objections on 18.8.1990 and those objections have been
shut out from the consideration on the ground that the same
have been filed beyond the period of limitation prescribed
under the relevant provisions of the Limitation Act. On the
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totality of the circumstances, we are satisfied that there
was a sufficient cause for delay in making the application
and the time should be extended till 18.8.1990 when the
application was made. We condone the delay in f iling such
objections upto that date. case in neither There is a clear
lapse on the part of the Advocate appearing in the making a
proper application for enlargement of time in the civil
court nor pursuing this aspect of the matter in the High
Court. In this Court too even, at the time of arguments, no
application was forthcoming. However, to meet the ends of
justice, we have adopted this course, but this indulgence
shown by this Court cannot be taken advantage of by the
appellant without paying appropriate costs to the respondent
which we quantify to be a sum of Rs.40,000/- which shall be
paid before the new arbitrator commences the arbitration
proceedings. This cost shall not be the costs in the cause
and are payable by way of penalty.
So far as the main matter is concerned, there is no
difference between the award passed in Title [Arbitration]
Suit No.37/86 and the proceedings in Title [Arbitration]
Suit No.40/86 and the same also deserves to be set aside for
the very reasons stated earlier and shall be governed by the
same terms as to remittal of the award for fresh
consideration by a new arbitrator.
As suggested by the learned counsel on both sides, we
name Shri Justice Uday Sinha, former Judge, High Court of
Patna, as the new arbitrator who is at liberty to fix his
terms as he deems fit and proper to adjudicate the matter in
dispute. The new arbitrator shall consider the pleadings
and evidence on record already placed by the parties and
shall not permit either of the party to raise further or
fresh pleas or evidence. It would be appropriate for the
arbitrator to make an award within a period of four months
from the date of the receipt of this judgment and submit the
same to this Court after publishing the same to the parties.
The Registry of this Court is directed to transmit a
copy of this judgment to Shri Justice Uday Sinha, former
Judge, High Court of Patna, 308, Patliputra Colony, Patna-13
forthwith. The parties are directed to appear before Shri
Justice Uday Sinha for further directions, as may be deemed
fit by him, within one week from the date of this judgment.
In the result, the appeals are disposed of accordingly.
In the circumstances of this case, the appellant is directed
to pay a sum of Rs.40,000/- [Rupees forty thousand only] to
the respondent as costs.
[
S. RAJENDRA BABU ]
S.N. PHUKAN]
FEBRUARY 21, 2001.