- (1.) The Government of India invited tenders for ''reinforced concrete work relating to the foundation and super-structure of the Fertilizer Factory building at Sindri'' in the State of Bihar. The tender submitted by the appellant Company was accepted on November 22, 1947 and a formal contract in that behalf was executed on November 26, 1948. By cl. 12 of the contract, insofar as it is relevant, it was provided: ''The Engineer-in-charge shall have power to make any alterations in, omissions from, additions to, or substitutions for, the original specifications, drawings, designs and instructions, xxx, and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him xxx; and any altered, additional or substituted work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respects on which he agreed to do the main work, and at the same rates as are specified in that tender for the main work, xxx And if the altered, additional or substituted work includes any class of work, for which no rate is specified in this contract, then such class of work shall be carried out at the rates entered in the current schedule of rates of the Hazaribagh P.W.D. district which was in force at the time of the acceptance of the contract minus/plus the percentage which the total tendered amount bears to the estimated cost of the entire work put to tender, and if the altered, additional or substituted work is not entered in the said schedule of rates, then the contractor shall within seven days of the date of his receipt of the order to carry out the work inform the Engineer-in-charge of the rate which it is his intention to charge for such class of work, and if the Engineer-in-charge does not agree to this rate he shall, by notice in writing, be at liberty to cancel his order to carry out such class of work, xxx provided xx that if the contractor shall commence work or incur any expenditure in regard thereto before the rates shall have been determined xxx then xx he shall only be entitled to be paid in respect of the work carried out or expenditure incurred xxx according to such rates as shall be fixed by the Engineer-in-charge. In the event of a dispute, the decision of the Superintending Engineer of the Circle shall be final.'' Clause 25 of the agreement provided, insofar as it is relevant: ''Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings, and instructions, hereinbefore mentioned and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of, or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works, or the execution, or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to a Superintending Engineer x x x to be nominated by the Chief Engineer for arbitration in the manner provided by law relating to arbitration x x x x''.
(2.) The Sindri Factory Buildings were to be constructed under the advice and guidance of M/s. Chemical Construction Corporation of New York. That Firm made delay in supplying the drawings and specifications which involved work of a complicated nature not included in the original contract. Time for completion of the work was on that account extended till February 26, 1950.
(3.) On September 20, 1950 the appellant Company made a demand for payment at an enhanced rate of 42 1/2 per cent over the basic rates stipulated under the original contract. This claim was made on five grounds: 1. That there was a ''substantial deviation'' in the nature of work of which the detailed work drawings were supplied to the appellant Company after the date of the contract. The work involved was of a complex nature requiring highly skilled labour, and that additional labour and materials not covered by the contract rates were required; 2. That there was "great increase in the price of materials and labour on account of undue prolongation of the period of work"; 3. That there was increase in the cost of transportation on account of rise in the price of the petrol and increase in railway freight; 4. That the Government of India entered into other contracts incidental to the construction of the Sindri Factory at substantially higher rates which directly affected the cost of labour and materials of the appellant Company who had to compete with the other contractors; 5. That additional work ordered to be done involved in many instances quantity of work several times the work set out in the contract.;