Paragon Construction vs D.K. Sharma and Another

Shiv Narayan Dhingra, J.—The subject matter of these objections is an award passed by the learned Arbitrator on 6th January 1997 awarding a sum of Rs. 10,13,185/- to the claimant with 12% interest per annum on the amount awarded from the date of award till actual realization/ payment. Though the award passed by learned Arbitrator is a lumpsum award in which no reasons have been given by the Arbitrator but a perusal of record would show that the Arbitrator had first prepared a draft in which he had discussed all the claims and counter claims giving reasons and then passed a lumpsum award. Thus, the reasons can be deciphered from the record itself.

The award is objected to by the respondent National Projects Construction Corporation Limited on the grounds that the appointment of the Arbitrator itself was illegal since the claimant had accepted the final bill without any demur and once the final bill was accepted, no further claim of the petitioner could be raised before the Arbitrator. The other ground is that the Arbitrator gave a non-speaking award and overlooked and ignored the evidence placed before him which had vital bearing on the matter in controversy and he did not deal with the claims made by the objector in answering to the claims of the petitioner. The other objection is that the award was contrary to the terms of contract. Most of the claims made by the claimant were beyond the terms of the contract. The respondent had provided to the learned Arbitrator a copy of measurement book (MB) duly endorsed by the claimant. The claimant had accepted the correctness of the measurements recorded therein and it was not open to the claimant to make any claim against respondent in relation to the work order in question beyond MB. It is further submitted that once the final bill had been accepted by the petitioner, nothing remained due to the petitioner from respondent and thus the arbitrator should have dismissed the claims. It is further submitted that the claims of the claimant were barred by time as per the terms of contract and the award was, therefore, without jurisdiction and had an error apparent on the face of it.

The claimant had made following claims before the Arbitrator:

Claim No. 1: Refund of Hire charges of Rs. 21,685/- said to have been hired out to claimants.

Claim No. 2: Refund of Rs. 90,000/- recovered towards compensation payable to accident victim who died during an accident which was cowped by truch engaged at site by the claimant.

Claim No. 3: Refund of Rs. 1,89,000/- withheld for alleged slow progress of work.

Claim No. 4: Release of payment of Rs. 3,02,500/- towards extra lead charges for earth work.

Claim No. 5: Payment of Rs. 9,79,690/- towards idling charges of machinery, labour & overheads.

Claim No. 6: Payment of pre-suit interest of Rs. 15,60,086/.

Claim No. 7: Payment of Pendente-lite future interest @ 20% p.a.

Claim No. 8: Payment of Rs. 50,000/- towards cost of arbitration.

Respondent also made following counter claims:

Counter claim No. 1: Payment of damages of Rs. 9,50,000/- for slow progress. Counter claim No. 2: Payment of Rs. 15 lac as overheads charges as extra expenses incurred during extended period of 3 months, which was necessitated due to slow progress of claimants. Counter Claim No. 3: Payment of Rs. 1,58,550/- for providing technical staff for one year for giving lines & layout.

It is an undisputed fact that the claimant had accepted the final bill on 28th May, 1989 with following endorsement:

Final bill accepted except that any amount paid to NPCL by NHPC against our work will be passed on to M/s Paragon Construction (India) Pvt. Ltd.

Sd/-

Subash (Director)

The claimant had asked for additional payment on the ground of additional lead in earth excavations. The respondent who had given this contract on behalf of NHPC had also raised claims with NHPC for additional amount on account of additional lead. The claimants endorsement is in respect of this claim which the objector had promised to pass on to claimant.

After acceptance of final bill, the claimant was to be paid the balance security amount. The correspondence between the parties shows that at the time of making the payment for balance security amount, the respondent withheld an amount of Rs. 90,000/- against accident case of M/s Complete Experts and had also deducted hire charges of Rs. 21,685/-. Claims No. 1 and 2 pertained to these two amounts. The claim No. 3 is in respect of deductions on account of slow progress and claim No. 4 is in respect of extra lead for which endorsement was made by the director of the claimant company at the time of accepting final bill.

Learned Arbitrator came to conclusion that the deductions of hiring charges of Rs. 21,685/- was without any basis and without any evidence and this amount should be refunded. Similarly, in respect of claim No. 2, he observed that this amount was rightly withheld initially but since respondent had not paid any amount to the victim and the claim of victim was settled by insurance company, this amount cannot be kept by respondent and, therefore, should be refunded back to the claimant. He observed that even otherwise the claim of victim must have become barred by time in view of Clause 166(3) of Motor Vehicles Act. Thus, above two claims in fact arise after final bill was finalized because of deductions made from the security amount. The letter of respondent dated 13th June 1991 gave the details of deductions. Thus, these two claims in fact arose after payment of final bill. However, other claims are of the period when the contract was in progress and before finalization of the final bill. Clause 48 of the contract which is in respect of payment of final bill reads as under:

CLAUSE 48: PAYMENT OF FINAL BILL.

The final bill shall be submitted by the sub contactor within one month of the date fixed for completion of the work or of the date the certificate of completion furnished by the Engineer-in-charge. No further claim in this regard unless as specified herein under shall be entertained. Payment shall be made within three months if the amount of the contract plus that of the additional items is Upto Rs. 2 lac and in 6 months, if the same exceeds Rs. 2 lac of the submission of such bill. If there shall be any dispute about any item or items of the work, then the undisputed item or items only shall be paid within the said period of three months of six months, as the case may be. The contractor shall submit a list of the disputed item within thirty days from the disallowance thereof and if he fails to do so, his claim shall be deemed to have been fully waived and absolutely extinguished

A perusal of this clause would show that after finalization of work and submission of final bill, in case there was any disputed item disallowed in the final bill, the contractor had to submit a list of disputed items within 30 days from the disallowance thereof and if he failed to do so, his claim shall deemed to have been waived and shall stand extinguished. In view of this clause in the contract, the claimant could not have raised disputes after 28th June 1989 i.e. after 30 days of the finalization of the bill and acceptance of it by respondent. Therefore, the claims made by claimant under Claim No. 3 and 5 could not have been raised by the claimant in view of this clause of the contract after 28th June 1989. However, claim No. 4 was in respect of extra lead and the director of claimant had made endorsement that in case an amount was received by respondent, it shall be passed over to the claimant. It is apparent that the claimant was not paid for extra lead with the assurance that the respondent has also made a claim for extra lead with NHPC and whenever received, it will be passed over to the claimant. It seems that the respondent did not receive payment against extra lead from NHPC. Consequently, it did not pass over any payment to claimant and the claimant was forced to re-agitate this point before the Arbitrator.

There is no clause in the contract in respect of payment on account of idling charges which is claim No. 5 neither this claim was received within 30 days of the acceptance of final bill. Similarly, claim No. 3 was not made within 30 days. The learned Arbitrator failed to consider the Clause 48 of the contract while passing award in respect of different claims of claimant.

It is settled law that the arbitrator is the prisoner of contract. He cannot adjudicate the claims between the parties of his own whims and fancies and he has to adjudicate the claims on the basis of the contract. He cannot adjudicate those claims which are in the nature of tortuous liabilities. He can adjudicate only those claims which arise directly out of the contract. While adjudicating claims, he cannot travel beyond the contract, nor can write a new contract for the parties.

Although the award is a lumpsum award but the draft of the award gives a split up of the claims allowed by the arbitrator as under:

Claim No.1 : Rs. 21,685/- Claim No.2 : Rs. 90,000/- ClaimNo.3 : Rs. 1,89,000/- Claim No.4 : Rs. 3,02,500/- Claim No.5 : Rs. 4,10,000/- ---------------- Total : Rs. 10,13,185/- ------------------

Claims No. 3 and 5 could not have been entertained by the learned Arbitrator in view of Clause 48 of the contract, however, claims No. 1, 2 and 4 were within the purview of the arbitrator since these claims arose after signing of final bill and because of the fact that respondent did not receive any amount from NHPC against extra lead. I, therefore, consider that the award passed by learned Arbitrator only to the extent of claims No. 1, 2 and 4 can be allowed amounting to Rs. 4,14,185/- and award against claims No. 3 and 5 are beyond the terms of the contract and could not have been raised by the claimant in view of Clause 48 of the contract. The objections of the objector in respect of claim No. 3 & 5 are allowed.

I, therefore, partly allow this award to the tune of Rs. 4,14,185/-. The amount awarded is modified accordingly. Claimant shall be entitled to 12% interest per annum over this amount from the date of award till actual realization as allowed by the learned arbitrator. The objections are allowed partly in above terms. The modified award be made rule of court in above terms. The petition stands disposed of.