State Of Tripura And Anr. vs Jahar Lal Paul

This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 from the judgment and order dated 04.02.2011 delivered in case No. Misc.(ARB)12/2008 by the District Judge, West Tripura, Agartala.

Facts are mostly admitted.

The respondent, hereinafter 'the contractor', was awarded the work, namely 'Replacement of bailey bridge at Ch 34.80 km. on Agartala-Simna road by R.C.C. Box Culvert (length 24.00 m.) 8.00 m. Triple Cell Job No.TP/CAU/265/2000-01' under agreement No.T/EE/B&R/AGAR-II/SE-IV/144/2001-2002, for an estimated cost of Rs.26,04,217 whereas the tender value was Rs.35,93,559 with 37.99% above.

After completion of the work, the contractor raised various disputes, including paying him the escalation price. The work was awarded in PWD Form No.7 and the clause 10CC was not included there. Hence, the contractor requested for incorporation of the said clause in the agreement on several occasions as per the guidelines issued by the Secretary, PWD under No.F.4(94)PWD@/89 dated 18.07.1989. After reference of the disputes, the Sole Arbitrator had framed several issues on the claims of the contractor. The Issue No.10 reads as under :

"Whether the claimant is entitled an amount of Rs.1,55,714/- being the Escalation under clause 10 CC?"

In the reply to the statement of fact as submitted by the contractor, the State of Tripura in their counter-statement, has categorically stated in para 13 as under :

"In respect to the paragraph 4(x) of the claim statement, it is submitted that, there is no provision in the agreement for payment of escalation under Clause 10 CC. Hence, he is not entitled to get any payment against this demand."

In para 4(x) of the statement of fact, the contractor raised the claim as under :

"The claimant is entitled payment (sic) to payment of escalation under Clause 10 CC. For the purpose, a bill had been prepared for an amount of Rs.1,55,714/- and the said bill was also submitted to the concerned Executive Engineer vide letter No.JLP/FA-1/MNP/BC/04-05 dated 21.2.2005 but unfortunately the said prayer was denied by the Executive Engineer vide his letter No.F.13(8)/EE-II/1219 dated 19.5.2005."

But it had been also asserted in the statement of claim that the said bill was not finalised giving rise to the dispute in this regard.

On the face of such rival claims, the Sole Arbitrator had framed the Issue No.10 as reproduced above. The Sole Arbitrator has awarded the price escalation on the analogy of reasons as provided in the arbitral award, which is reproduced hereunder :

"The claimant is entitled an amount of Rs.1,55,714 against price escalation under clause-10 CC and the said bill has been prepared and submitted to the Executive Engineer for payment. But the payment was denied by the Executive Engineer as there is no provision in the agreement.

A Memorandum was issued by the Secretary, PWD vide No.4(94)PWD@/89, dated 18.7.89 for incorporation of clause-10 CC in all agreement which was already executed in contract forms PWD 7 and 8 w.e.f. 18.7.89. He also instructed to accept the same in all tenders invited after 18.7.89. In a number of cases, the Deptt. had to agree for incorporation of clause-10CC at a much later stage also. It was instructed in the said Memo that past cases should be dealt with accordingly and should invariably be ensured that the incorporation of clause-10 CC is no longer lost sight of to avoid complication.

The agreement in the instant case was executed in PWD form 7 and the claimant has intimated in writing on several occasions for incorporation of clause-10 CC just after execution of the agreement and even during the execution of the work. The delay in completion of the work was also granted without levy of compensation. Since the delay was not occurred due to any fault attributable to the claimant, the claimant is rightly entitled to get the benefit under clause-10 CC and an amount of Rs.1,55,714 is to be paid to the claimant being price escalation. But before making payment, the Respondent is directed to check the actual amount to be paid to the claimant.

Accordingly, Issue No.10 is decided in favour of the Claimant."

[Emphasis added]

On raising objection against the said award, the State filed an application under Section 34 of the Arbitration and Conciliation Act, 1996. The ground taken on this aspect can be had from the said application, being Misc.(ARB)12/2008, which reads as under :

"That, against the Issue No.10 published in Award for payment of Rs.1,55,714/- being escalation under clause 10 cc, the Ld. Arbitrator committed serious error of law and also failed to consider the facts and circumstances of the case and based its findings on surmise and conjectures. There is no provision in the agreement for payment of escalation under Clause 10 CC and the same categorically submitted in reply to the statement of facts in para 13 and also argued before the Ld. Sole Arbitrator at the time of Arbitral Proceedings but very surprisingly the said Sole Arbitrator awarded Rs.1,55,714/- being escalation under Clause 10 CC for payment in favour of the Respondent Contractor. Moreover in how and which manner the said amount of Rs.1,55,714/- for payment of escalation has been calculated and arrived at by him not in his award. Not only that at the time of deciding this issue he could not consider the proposition laid by the Apex Court regarding the escalation under Clause 10 CC. Therefore the Respondent Contractor is not entitled to get any escalation under Order 10 CC; as such the purported award is not an award according to law and it is liable to be set aside."

[Emphasis added]

No other objection has been raised in this regard.

After hearing the parties, the District Judge, West Tripura, Agartala by the impugned judgment, has dismissed the said application filed under Section 34 of the said Act, holding that the Sole Arbitrator taking into consideration the memorandum dated 18.07.1989 applied clause 10 CC and made the award in favour of the respondent. The District Judge, West Tripura, has observed as under :

"Learned G.P. in course of argument could not satisfy this court that the said memorandum dated 18.07.89 was not in force or that there was no such memo issued. Under such circumstances, I find nothing to interfere with the award made by the Sole Arbitrator in respect of Issue No.10."

The said judgment dated 04.02.2011 has been questioned in this appeal.

In the appeal, the State has raised the following ground of objection in respect of the said Issue No.10 :

"(iv) For that the Ld. Sole Arbitrator awarded claim (Issue No.10) disbelieving the submission of the appellant and the said award has also been accepted by the Ld. Court below wrongly."

From the counter-statement of the fact to the ground of objection as taken in this appeal, it would transpire very clearly that the mainstay of opposition as projected by the State is that in the said agreement there is no clause for price escalation and therefore, the Sole Arbitrator travelled beyond the terms of the agreement and thus his conduct in this regard is bound to come within the ambit of Section 34 of the Arbitration and Conciliation Act, 1996. Section 34 of the said Act, as it is well settled, can only be applied if the conditions set out in sub-section (2) of Section 34 are made out. Apart from the composition of the Arbitral Tribunal or procedure etc. only on two grounds usually the arbitral award can be set aside, which are as under :

(i) the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

The other conditions as laid under Section 34(2) of the Arbitration and Conciliation Act, 1996 do not have any relevance in the present context.

Mr. D.C. Nath, learned counsel appearing for the appellants has fairly submitted that the appeal is structured on appreciation of clause 10 CC for price escalation. According to him, no contract would reap benefit under the clause 10 CC if the stipulated time for completion is not above 12(twelve) months. No compensation for escalation will be allowed for works where the stipulated time for completion is 12(twelve) months or less, even if the work is extended beyond the stipulated date of completion for any reason. For purpose of reference, the relevant part of the clause 10 CC is extracted hereunder:

"CLAUSE 10 CC :- If the prices of material (not being materials supplied or services rendered at fixed prices by the department in accordance with clause 10 & 34 thereof) and/or wages of labour required for execution of work increases, the contractor shall be compensated for such increases, as per provisions detailed below, and the amount of the contract shall accordingly be varied, subject to the condition that compensation for escalation in prices shall be available only for the works done within the stipulated period of completion as per contract and for works done beyond the stipulated period of completion as per contract the compensation for escalation in prices should be restricted to the escalation occurred up to the stipulated date of completion and also the compensation for escalation in prices shall be available for works for which the stipulated period of completion is more than 12(twelve) months. No compensation for escalation will be allowed for works where stipulated time for completion is 12(twelve) months or loss even if the completion of works is extended beyond stipulated date of completion for any reason."

This court has been taken by surprise in as much such plea was never taken either before the Sole Arbitrator or before the District Judge, West Tripura, Agartala, who had adjudicated the application filed under Section 34 of the Arbitration and Conciliation Act, 1996. On the contrary, such objection of the State is entirely in contradiction to their objection taken before the Sole Arbitrator and the District Judge, West Tripura. As this appeal is directed against the judgment which is the final outcome of a proceeding under Section 34 of the Arbitration and Conciliation Act, in the considered opinion of this court, the State cannot be permitted to raise such plea for the first time in the appellate stage. They cannot alter their plea in the appellate stage which was not raised before the Sole Arbitrator. The plea that was raised by the State before the Sole Arbitrator was that, there was no price escalation clause [clause 10 CC] in the agreement. The State will not be permitted to do a somersault in the appellate stage. Moreover, despite our insistence, the State did not produce the said circular dated 18.07.1989 based on which the price escalation has been awarded in favour of the contractor by the Sole Arbitrator.

In view of this, this court is unable to accept the ground of objection as raised by the appellants and accordingly the appeal stands dismissed.

Draw the decree accordingly. Send down the records thereafter.