P.C.JAIN,J. - (1.) THE appellants have filed this appeal under Section 39 of the Arbitration Act (for short the Act') read with Section 96 C.P.C. against the judgment and decree dated 17.4.1996 passed by the learned District Judge, Jaisalmer in civil suit no 5/92.
(2.) THE facts relevant for the disposal of this appeal may be stated as follows. The Supdt. Engineer, IGNP, Jaisalmer Circle invited tenders on 2.2.1987 for manufacture and supply of 250 lacs pucca clay tiles of the size 30 cm. x 15 cm x 5 cm. manufactured by hydraulic compression. The estimate cost of the work was Rs. 1.5 crore and the period of completion was 3 years. The earnest money to be deposited was Rs. 3 lacs. The tender of the respondent was approved by the Secretary and conveyed to the respondent through the Addl. Chief Engineer, IGNP, Jaisalmer on 24.8.1987. The work order was given by the Executive Engineer, IGNP, 29th Div., Jaisalmer on 29.10.1987. Agreement No. 21 of 1987 -88 was executed. The stipulated period of commencement was 13.11.1987 and the date of completion was 12.11.1990. Four tenders for manufacture of 250 lacs pucca clay tiles of the size 30 cm. x 15 cm. x 5 cm. by clay extrusion process for kiln nos. 2, 3, 4 and 5 were also invited by the Supdt. Engineer, IGNP, Jaisalmer on 13.10.1987. The estimate cost of each work was Rs. 1.40 crore and completion period provided was three years. Approval was obtained on 24.8.1987. The work orders for kiln nos. 2, 3, 4 and 5 were issued by the Executive Engineer, IGNP, Jaisalmer on 29.10.1987. The stipulated date of commencement was 13.11.1987 and work was to be completed on 12.11.1990. The respondent executed agreement nos. 17, 18, 19 and 20 of 1987 -88. The Govt. of Raj. created one more post of the Chief Engineer at Jaisalmer in connection with the execution of the Indira Gandhi Nahar Pariyojna and the present works directly relate to the office of the Chief Engineer, IGNP, Jaisalmer. At present the officer -in -charge is the Executive Engineer, IGNP, 29th Div., Jaisalmer. It would be proper to refer to the important salient features of the agreement, which have got a material bearing on the disputes raised in this appeal. The agreement, interalia, contained the following clauses: Clause -2. The land required by the Contractor for the site of the bricks kiln, sheds and like purpose connected with the execution of this contract will be provided rent free by the Government but subject always to the following conditions namely: (a) That the Selection, extent and situation of the land to be provided under this clause shall rest absolutely with the Engineer Incharge (Executive Engineer... IGNP., Division...) and that it shall not be open to the Contractor to object any land so supplied or to demand for any purpose any more land what the Engineer -ln -Charge thinks fit to provide. The Contractor may examine the site plans and specifications, if any before tendering. (b) That if at any time, the Contractor required other or more land than what the Engineer -ln -Charge shall have provided, the Contractor shall obtain the same at his own cost and expenditure. (c) Licence for kiln will be arranged by the Department and requisite fee for the same will be recovered/deducted from Contractor's 1st running bill. (d) If the Contractor is licensed to use existing Government kiln for the purpose of this Contract, he shall his own costs bring the kiln into working order and carry out all the necessary repairs to be effected there during the currency of the Contract. (e) Water will be supplied free of cost by the Department at the kiln site but a pucca diggi for storage of water for at least 15 to 21 days will be constructed by the Contractor at his own cost. No kiln apparatus or tools and plants of any sort whatever shall be supplied by the Government to the Contractor who shall make his own arrangement thereof. However, if for any special reasons, Government agree to issue on rent any special item or machinery or tools and plants it will, however, in no way effect the right of the Govt. in enforcing due fulfillment of all the conditions of this Contract ven in the event of such machinery or tools and plant being found unworkable at any time. (f) The land provided by the Government to the Contractor under this clause shall remain the absolute property of the Govt. The Contractor shall use this land and the erection (if any) only as a licence under the Government for manufacturing of bricks and tiles under this contract. He shall in no case be considered to have the right to the sale and an exclusive possession of any Govt. land or promises provided to him under this contract. (g) Over burdens in the moulding area upto 6' thickness will be removed by the Contractor at his own cost and beyond 6' thickness, if any, will be removed by the department at its costs. (h) If there is any typographical or clerical error in the rates shown by the department in the 'G' Schedule, the rates as given in the Basic Schedule of rates of the department for the area shall be taken as correct. (i) The Contractor shall submit all bills on the printed forms to be had on application at the office of the Engineer -In -Charge and the charges in the bills shall always be entered at the rates specified in the tender or in the case of any extra work ordered in pursuance of the conditions, and not mentioned or provided in the tender at the rates hereinafter provided for such work. (j) Where the Contractor is a partnership firm, the prior approval in writing of the Engineer -ln -Charge shall be obtained before any change is made in the Constitution of the firm. Where the contract is an individual or a Hindu undivided family business concern, such approval as aforesaid shall likewise be obtained before the Contractor enters into any partnership agreement where under the partnership would have the right to carry out the work hereby undertaken by the Contractor. If prior approval as aforesaid is not obtained, the Contract shall be deemed to have been assigned to contravention of Clause 19 here of and the same action may be taken, and the same consequences, shall ensures as provided in the said Clause 10. (k) It cannot be guaranteed that the work will be started immediate after the tenders have been received. No claim for increase of rates will be entertained, if the orders for starting work are delayed. Clause 19. (a) If any question, difference or objection whatsoever shall arise in any way in connection with or arising out of this instrument or the meaning of operation of any part thereof or the rights, duties or liabilities of either party than same in so far as the decision of any such matter as herein before provided for and has been so decided every such matter constituting a total claim of Rs. 5,000/ - or above, whether the decision has been otherwise provided for and whether it has been finally decided accordingly or whether the contract should be terminated or has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination shall be referred for adjudication to a Sole Arbitrator to be appointed as hereinafter provided. For the purpose of appointing the Sole Arbitrator referred to above, the Chief Engineer will on receipt of notice and prescribed fee from the contractors send a panel of 3 names not below the rank of Superintending Engineer of the Rajasthan Government and who shall all be presently connected with the contract. The Contractor shall be receipt of the names as aforesaid, select anyone of the persons named, to be appointed as Sole Arbitrator and communicate his name to the Chief Engineer. The Chief Engineer shall in response appoint the said person as the Sole Arbitrator without delay. The Arbitrator shall give reasons for award. However, in the event of the Contractor failing to refer the matter in dispute to the Arbitrator within 180 days from the preparation of the final bill, all his rights and claims under the contrary shall be deemed to have been extinguished and waived. Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modifications or re -enactment thereof and the rules made thereunder for the time being enforce shall apply to the Arbitration proceedings under this clause. (b) The Contractors shall serve due notice to the Department in the case of change in the Constitution of the firm. This will be effective only when this change has been accepted to department. ,
(3.) IN addition to the above terms and conditions, the following special conditions were also provided: (1) Advance against machinery to the maximum extent of 10% of the tendered value will be given on the basis of an acceptable bank guarantee of equal amount as well as production of original bills of the firms from which the machines/equipments will be purchased and brought to the site for work. The amount of the advance, however, will not exceeds 70% of the total cost of the machines/equipments, excluding tax and the transportation charges. The machines against which the advance is given will be hypothecated in the name of Governor of Rajasthan. The hypothecation so mad will continue to remain until the entire amount of the advance is received. Three bank guarantee would also remain valid for the entire period until the entire amount is recovered. The advance paid will be recovered on proportionate basis from each bill in the manner that by the time 75% of the cost of tendered work is completed, the entire amount is recovered. (2) Materials such as C.G.I. Sheets, A.C. Sheets, various sizes of pipes and structural steels for construction of sheds at kiln site will be given free of cost and free of hire charges on returnable basis. The shortage to materials, if any, will be recoverable. The total value of the materials to be supplied by the department will not exceeds Rs. 5 lacs. (3) The calorific value of the coal to be supplied to the Contractor will be got determined and consumption factor derived on the basis of that calorific value. The coal will be supplied free of cost to the extent of consumption factor. In case of excess consumption, recovery will be made at single issue rate upto the extent of 10% and double the rate for the balance quantities. The' consumption factor will be worked out each year, (4) The payment of sales tax @8.8% and royalty charges @4.6O per thousand accepted tiles will be the responsibility of the Contractor. The increase/decrease, if any, in the sales tax and the royalty charges would be paid/recovered from the Bills of the Contractors. Excise duty, leviable will be paid by the Department. All the other taxes other than above (except Income Tax) will also be paid by the Department. (5) The increased/decreased in the rates of the diesel per liter, if any, will be paid extra recovered by the Department on the basis of the following formula: E = 4(P2 - P1) Where E denotes extra payment/recovery for each 1000 tiles in Rupees. P1 denotes prevalent rate of the diesel in Rs. per liter at Jaisalmer as on 2.2.1987. P2 denotes the rate of diesel in Rs. per liter at Jaisalmer on the date of record entry of classified accepted tiles. (6) Power supply is not available in the near vicinity of the kiln site. The Contractor will make his own arrangements for the required powers. (7) These conditions will supercede any condition(s) (given with the tender documents) which is/are contradictory to these special conditions. (8) The tiles/bricks would be manufactured in a semi mechanised kiln by clay extrusion/hydrolic compression process. These would be burnt in a high draught rectangular continuous kiln developed by Central Building Research Institute Roorkee. The factory shall have a production of 30,000 tiles per day. (9) The tiles/bricks would be machine made and dried in shade under specially built sheds to avoid repaid drying. The kiln would be covered by roof to provide shade for labourers working on the kilns and also to keep the kiln functional during rains. (10) All machinery and equipments will be provided by the contractor at his own cost. (11) All building, sheds and other civil structures like the factory and office rooms engine room shed for drying tiles/bricks kiln and its roof, blower room etc. will be built by the Contractor at is own costs. (12) Land will be provided by the Department free for erection of factory and taking earth for manufacturing tiles. The Contractor will hand over the area back to the Department after clearance of site when the work is over and before payment of final bill. (13) Water will be provided free of cost by the Department at the diggi to be built by the Contractor for one month requirement. Further conveyance for water would be done by the Contractor at his own cost. No compensation will be given for any interruption in supply of water by the Department. However, this interruption will be considered according to the merit in extension of time limit. (14) Cement can be issued to the Contractor, if available at prevalent stock issue rate of the division for construction of building and sheds. The cost of cement would be recovered in running bills in 3 equal instalments. (15) All T&P; needed in the manufacture process will be arranged by the Contractor at his own cost. (16) All residential or other accommodation for staff and hutments for labout will be built by the Contractor at his own costs. (17) Contractor will take all measures for safe running of the machinery the kiln at his own costs. He will abide by the all safety regulations in force and as laid down from time to time. (18) The tiles/bricks would by machine molded correct to size 300 x 150x5 cm and 230 x 110x70 mm respectively and have smooth surface. (19) The soils used for the manufacture of tiles shall be thoroughly pulverised and processed so as to completely eliminate any gravel, course and granular lime and kankar particles, vegetable matters etc. (20) The tiles shall be uniformly well burnt and free from irregularities such as hoist bends, cracks and leminations. The tiles shall be uniformed in size, shape and texture. (21) The tiles shall be free from impurities like particles of stone, lime and other foreign materials visible to naked eye on the surface or on the fractured surface of tiles obtained by breaking the samples. (22) The tiles shall be cherry brown in colour and shall give a ringing sound when struck and its fracture when broken shall be clean dense and sharp at the edges. (23) The tiles shall confirm to the Indian Standards specifications for burnt clay tiles for use in tinging irrigation and drainage work, IS: 3367 -1965. (i) Size - 300 x 150 x50cm (ii) Warfage -Shall not exceed 3 mm. (iii) Compressive Strength - Not less than 105 Kg/Cm2 (iv) Transverse Strength -Not less than 15 Kg/Cm2 (v) Water Absorption -Not than 15%. ;