- (1.) This is an application filed under section 34 of the 1996 Act, for setting aside the award and the corrected dated 30th September, 2004 passed by the Arbitral Tribunal.
(2.) Petitioner's Case 2.1 The case of the petitioner is that the agreement between the parties contemplated widening of Panagarh Mourigram Road. The said work was divided into four sections and the works in respect of the said agreement related to the Rampurhat and Mourigram section and was numbered as S-II. Such works was to be completed within 42 months but in fact, was' completed in 83 months after grant of five extensions. No claims were made during the subsistence of the agreement instead claims have been made after the works have been completed. The claims made are contrary to Clause 53 of the Conditions of Contract, which lays down the procedure for making claims. Under Clause 53.1, notice of claim for additional payment ought to have been made within 28 days from the event which gives rise to such claim. Notice should have been given to the engineer and employer. Similarly there has been noncompliance with Clause 53.4 of the conditions of contract which postulates verification of contemporary records. As no claim has been made within the specified time, the same is voidable under section 55 of the Contract Act. The claim being contrary to the procedure laid down could not have been entertained and was liable to be rejected as has been held in - i) G M, NORTHERN RAILWAYS V. SARVESH CHOPRA, 2002 AIR(SC) 1272 ii)STATE OF ANDHRA PRADESH V. M/S ASSOCIATED ENGINEERING ENTERPRISES, HYDERABAD, 1990 AIR(AP) 294 iii) OIL AND NATURAL GAS CORPORATION LIMITED V. SAW PIPES LIMITED, 2003 AIR(SC) 2629 iv) CONTINENTAL CONSTRUCTION CO LTD V. STATE OF MADHYA PRADESH, 1988 AIR(SC) 1166 and v) MCDERMOTT INTERNATIONAL INC v. BURN STANDARD CO LTD, 2006 11 SCC 181 2.2 In paragraph 7.14 of the award the arbitrators have set out the claimant's arguments in respect of Clause 53. The respondent's argument is reflected in paragraph 8.5 of the award. As the claims have been made after completion of the work no dispute arose during execution of the work and the same should not have been entertained. Delay, if any, was due to the claimant's inability to complete the work including deployment of equipments. The findings of the arbitrator and rejection of the counter claim are based on the finding that no liquidated damages were levied. Time was the essence of the contract and section 55(iii) of the Contract Act, 1872 was inapplicable as no notice was given and liquidated damages were released to meet the financial crunch. 2.3 Clause 53 contemplated issuance of an auditor's certificate and not statement of accounts. The rebate was granted only on the condition that all four contract packages be awarded to the respondent herein. No contemporaneous records under Clause 53.4 has been produced. The respondent-contractor was liable for the six months' delay in view of the hold order issued. The award was amended on 16th October, 2004. 2.4 In respect of Claim No. 1 amounts have been awarded towards additional claims for the extended period. Clause 53 lays down procedure for making claims. Clause 53.4 postulates verification from contemporary records. The arbitrators were entitled to verify such record. The arbitrators not having done so have acted contrary to section 28(3) of the 1996 Act by not taking into account the usages of the trade applicable to the transaction as will appear from paragraph 6.2 of the award (pgs.286). 2.5 The failure in Clause 53.4 can only be related to Clause 53.2 and Clause 53.3. Notices given are only in respect of POL and labour costs and for no other heads of claim has any notice been given. According to the findings of the arbitrators no notice under Clause 53.1 need be given, but notices have been given. Therefore, this is a contrary finding which bars the petitioner from relying on section 55 of the Contract Act, 1872 and is contrary to law and to public policy. For the said proposition reliance is placed on : G M, NORTHERN RAILWAYS V. SARVESH CHOPRA, 2002 AIR(SC) 1272 and STATE OF ANDHRA PRADESH V. M/S ASSOCIATED ENGINEERING ENTERPRISES, HYDERABAD, 1990 AIR(AP) 294. Time was the essence of the contract as the agreement contemplated completion of works within a certain period of time. The findings of the arbitrator that time was not the essence of the contract between the parties is contrary to the terms of the agreement and for such reason the award is contrary to the public policy and liable to be set aside. For the said proposition reliance is placed on OIL AND NATURAL GAS CORPORATION LIMITED V. SAW PIPES LIMITED, 2003 AIR(SC) 2629CONTINENTAL CONSTRUCTION CO LTD V. STATE OF MADHYA PRADESH, 1988 AIR(SC) 1166 2.6 There is also no reason for non-application of Clause 53.1 in the award. The claim in respect of overhead expense has been based on Rs. 35 crores. In fact, the amount reflected in the bill dated 29th October, 1998 is Rs. 22 crores and the same should have formed the basis for calculating the overhead expense. The only reason for basing the calculation at 15% is the auditor's report and no other reason. The basis for levy at 15% of overhead is baseless. The survey of the auditor cannot be relied on for imposing a 15% levy as by placing reliance on the said survey the arbitrator has substituted the terms of contract and overlooked Clause 53. For all the said reasons the findings of the arbitrator in respect of the above-mentioned claim be set aside as the same is contrary to usage of trade and public policy. 2.7 Claim No. 2 is on account of equipment charges incurred during the extended period of completion. The chart of equipment charges was placed before the arbitrators and the addition of depreciation renders the award bad as the said element of depreciation cannot be separated from the charges incurred. Therefore the findings in respect of Claim No. 2 is bad and liable to be set aside. 2.8 Claim No.3 is not disputed as notices have been given for the same. 2.9 Claim No.4 relates to interests given on the costs of overhead and profit. Grant of interest at 76.06% of the overhead charge is contrary to public policy. There is no evidence of bridging finance availed by the claimant from the export import bank and the findings of the arbitrator in respect thereto evidences private negotiation between the claimant and the arbitrators. For the said reason the claim is liable to be set aside. 2.10 In respect of Claim No. 5 as delay is attributable to the claimant, the petitioner cannot be held responsible for the same and this disentitles the claimant to any sum on account of loss of profit. Regular pace was maintained in the extended period and levy of 15% for loss of profit is unjustified. The basis for such levy can be nothing but the auditor's report. The delay, if any, was on account of the respondent's inability to bring the equipments to site. Upon receipt of the first mobilization advance equipments needed for the last stage, were purchased. In fact, neither the notice inviting tender, nor the tender documents or the brochure of Ministry of Survey and Transport and Indian Roads Congress Standard Specification was considered. ISI Code relied on by the arbitrators was not contemplated and nowhere either by amendment or otherwise was the ISI Code incorporated. Therefore the findings in respect of Claim No. 5 is bad and liable to be set aside.
(3.) Respondent's/claimant's case 3.1 The agreement between the parties contained an arbitration clause. Subsequently the clause was modified by Special Conditions of Contract and three arbitrators were appointed as per Clause 2.2. The constitution of such Arbitral Tribunal is approved by the decision reported in AIR 1997 SC 2316 (paragraphs 4 & 5). The main contention of the petitioner is with regard to not following the procedure for claims. The arguments of the parties have been recorded in paragraphs 6.2, 7.14 and 8.5 of the award. 3.2 The arguments of the petitioner have been quoted by the arbitrators from its notes. Clause 12.2 of the conditions of contract postulates adverse physical obstruction or condition. The findings of the arbitrator, in this regard, will appear from paragraphs 9 and 10 of the award. As held in : AIR 1999 SC 217 (paragraph 17) and by Mustill & Boyd in the Chapter on "Active Remedies" arbitral awards made by commercial men must be given a benevolent interpretation. The grounds on which an award can be set aside are contained in section 34 of the 1996 Act. The said section has been dealt with in OIL AND NATURAL GAS CORPORATION LIMITED V. SAW PIPES LIMITED, 2003 AIR(SC) 2629, Section 34(3)(d) contemplates setting aside of an award if it is held to be patently illegal or contrary to the laws of India. S-10 and S-11 were to be treated as a combined package and the approved set of machines would be used for both. Time was not the essence of the contract and therefore sections 55(1) and 55(3) are not applicable and no notice postulated thereunder need be given. The cases relied on are distinguishable on facts. In fact, based on the decision reported in : AIR 1989 SC 1034/1037 the arbitrators were entitled to grant escalation of 15%. There is no error of law or misconstruction of clauses of the contract or misinterpretation of section 55 of the contract, in fact, the Arbitral Tribunal has given its reason and it is not the case of the petitioner that its contention was not considered. Therefore, the award ought to be upheld as it is an award by men who are technical experts in their field.;