GANNON DUNKERLEY AND CO LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS is an appeal under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as the Act) from the order dated the 6th of January, 1959, of the Subordinate Judge of Dhanbad, modifying the award after setting aside In part.

(2.) MESSRS Garmon Dunkerley and Co. Ltd. the appellant, entered into a contract with the Central Public Works Department of the Union of India, the respondent, in 1948 for the supply of Stone ballast and chips at Sindri for use in the construction of the fertilizer factory. According to the terms of the agreement, the appellant was to complete the supply within 6 months from the aate of its commencement, i.e., 15th of May, 1948. The respondent's case is that it (appellant) failed to supply within the period stipulated in the agreement; there were series of correspondence which would show that, in spite of the respondent's repeated requests, the appellant made no attempt to remove the inconvenience caused to the Government due to the non-supply of the much needed materials and, ultimately, in accordance with Clause 2 of the agreement, the respondent served a notice on the appellant claiming penalty or liquidated damages to the extent of 10 per cent, of the contract amount, which amount of penalty came to Rs. 22367A. The respondent's further case is that it had to undergo extra expenses to the extent of Rs. 2408/12/- in obtaining supply of materials from some other sources on account of the appellant's failure to supply the same. The appellant refuted the claim of the respondent and asserted that it was not liable to pay any penalty under Clause Z of the contract or damages under Clause 3. Various (littering amounts under the two heads had been claimed by the respondent from the appellant and, a dispute having arisen in that regard between the parties, the matter was referred to arbitration as per Clause 14 of the agreement which provided for the reference of, inter alia, such dispute 'to the sole arbitration of the Chief Engineer/Additional Chief Engineer Central Public Works Department, and if the Chief Engineer/Additional Chief Engineer, is unable or unwilling to act to the sole arbitration of some other person appointed by the Chief Engineer/Aaflitional Chief Engineer willing to act as such arbitrator/ By letter dated the 17th of April, 1956 (Ext. 2) the Additional Chief Engineer appointed Mr. N. R. Ramchandan-l, Superintending Engineer, Calcutta Central Circle II, Calcutta, as an arbitrator 'to decide the dispute whether levy of penalty in this case is justified or not under the terms of the agreement and give his award. In the first instance, in this letter of reference, it was stipulated, "The quantum of penalty is not to be decided." But later on the appellant wanted the question of quantum also to be referred to the said arbitrator, and, accordingly, the Additional Chief Engineer issued another letter dated the 23rd of June, 1956 (Ext. 4/h) asking the arbitrator to determine the quantum of compensation also. On such reference being made, the parties filed their written statements before the said arbitrator. As stateabove, the respondent claimed two amounts, namely Rupees 22367/- by way of penalty or liquidated damages to the extent of 10 per cent, under Clause 2 of the agreement and Rs. 2408/12/- as compensation under Clause 3.

(3.) IN the instant case, there are two parts of the award one relating to the liability and quantum of compensation under Clause 2 of the agreement and the other holding that the appellant is not liable to pay any compensation under Clause 3 of the contract. While dealing with the first part of the award, I may make it clear that the decision of the arbitrator that the appellant is liable to pay penalty under Clause 2 of the agreement was not attacked before us by advancing any argument on behalf of the appellant nor was it attacked in the court below by filing any objection to the award. Hence that portion of the first part of the award remains. But the portion fixing the quantum of compensation at 1 per cent, under Clause 2 of the agreement has been rightly set aside by the court below. 1 am, however, of the opinion that the court had no power to modify the award under Section 15 of the Act which provides: 15. The Court may by order modify or correct an award