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Judgment
S. Rajeswaran, J.—This Original petition has been filed u/s 34 of the Arbitration and Conciliation Act, 1996, hereinafter called ''the Act'', to
set aside the award dated 18.3.2004 of respondents 2 to 4 insofar as claim Nos. 2, 3, 4, 5, 6, 8, 10, 11 and 13 of the 1st respondent and claim
Nos. 1 & 2 of the petitioner are concerned and declare them as null and void and for costs.
The brief facts are as under:
The petitioner-corporation envisaged a project to construct a new bus stand at Veinthankulam and the same was taken up with financial assistance
of Government of Tamil Nadu. The work of constructing the new bus stand was awarded to 1st respondent on 30.8.2000 and the value of the
contract price is Rs. 5,31,90,725/-. The completion time for the work was 18 months. Disputes arose between the petitioner and 1st respondent
and the same was referred to arbitral tribunal consisting of respondents 2 to 4 herein. 1st respondent in his statement of claim made 13 claims
initially and thereafter added 3 more claims, which are as under:
l) Clearance of Julio Flora Jungle includes uprooting.
2) Extra lead for conveyance of earth
3) Extra lift for building works
4) Box cutting for road works
5) Supplying, laying and consolidating sand gravel mix.
6) Pre-cast slab 50 mm thick using 20 mm HBG metal and 10 to 12 mm chips
7) Extra lead for sand for cement related works
8) Idle mobilization of labour
9) Idle mobilization of machinery
10) Idle mobilization of site office and head office
11) Excavation
12) Loss on locked up deposits
13) Interest
Further he filed 3 more additional claims.
14) Payment for the work of construction of entrance arch.
15) Reimbursement of expenses incurred for bank guarantee extension
16) For painting the walls with cement paint, after conveyance a rate for the same and making payment as per the approved rate and now
proposed to be altered.
The petitioner also made two counter claims namely,
1) Usage charges of bus stand by the claimant
2) Loss suffered due to delayed completion of work.
The tribunal disallowed claim Nos. 1, 7, 9, 12, 14, 15 and 16 of 1st respondent and both the counter claims of the petitioner. The tribunal
allowed the claims of 1st respondent in respect of claim Nos. 2, 3, 4, 5, 6, 9, 10, 11 and 13 and by the majority award the petitioner was directed
to pay a sum of Rs. 77,80,705/- to 1st respondent with future interest at 12% per annum. Aggrieved by the award dated 18.3.2004, the above
O.P., has been filed u/s 34 of the Act, 1996.
Heard Mr. R. Muthukumarasami, learned Senior Counsel for the petitioner and the learned Counsel for 1st respondent. I have also perused the
documents filed and the judgments referred to by them in support of their submissions.
Even though all the claims awarded by the tribunal were challenged in the petition, the learned Senior Counsel restricted the challenge to claim
Nos. 2, 5, 8 and 13. Therefore it is made very clear that with regard to other claims there was no challenge by the petitioner-corporation.
Now let me consider the challenge made to claim Nos. 2, 5, 8 and 13.
Claim No. 2: It relates to loss due to extra lead for filling of earth and 1st respondent claimed a sum of Rs. 44,96,480/- under this claim.
According to 1st respondent collection and supply of earth worth 2 km lead to site including all labour charges extra complete as per standard
specification of MOST and IRC was mentioned in item No. 32 of the contract, but the only earth quarry available within 2 kms lead is Periakulam
tank. As the availability of earth from Periakulam tank was limited, he requested for permission to get earth from quarries other than Periakulam
and gave an early warning to the petitioner. 1st respondent was asked to identify a nearby quarry as a second source of earth of filling at
Watcharkulam and the lead from Watcharkulam to the site is 4 km. The grievance of 1st respondent is that the petitioner allowed a rate of Rs.
55.35/cum for 4 km lead as against Rs. 112/- per cum as claimed by 1st respondent. Therefore he had to be compensated for the loss suffered by
him. This was resisted by the petitioner by contending that the responsibility of identifying source and arranging earth was the contractual obligation
of 1st respondent and the rate of variation had been fixed as per agreement condition and the agreement did not provide for escalation.
The tribunal after going through the evidence held as follows:
III. Reasoning of the award
I. After analyzing the relevant facts placed before this tribunal in detail that it is proved beyond doubt that the claimant is eligible to get relief under
the Clause 40.2 of the agreement.
Though the respondent had identified another earth quarry at Watcharkulam (4 km lead) as early as on 20.2.2001 in page 29 of the C. Volume II,
he gave the work order for conveying earth from this quarry only on 8.6.2001. In his work order he also gave 4 km., lead, only after taking levels
by the respondent to quantify the earthwork done already from 2 km., lead. By this it is indicated that the respondent was not even ready to allow
the claimant to commence the earth filling by completing the level measurements to quantify the earth already conveyed. That too this order was
given only after 67 days of the intended date of completion that is on 31.3.2001 for this item of filling work, in the agreement. Since the timing of
similar work (item No. 32 of BOQ) is different from the actual date of conveyance of earth from Watcharkulam quarry, the rate shall be in the
form of new quotation from the contractor as per Clause 40.2 of the agreement.
Normally the schedule of rates come into force from first of April, which is the beginning of the financial year. In this particular case the schedule of
rates for the year is to be effective from 1-8-01. But prices of various commodities would be affected from 1.4.01. Thus it is evident that the timing
of the work also varies. So the respondent''s contention that he derived the rate from the similar type of work in the agreement is not tenable as per
this agreement. Item 32 of BOQ stipulates ''collection and supply of earth with all cost and conveyance with 2 km lead from site including all labour
charges etc; complete as per Standard specifications of MOST and IRC'' and for which the rate of Rs. 42.00 by the claimant has been accepted
by the respondent.
So, the agreement is for the conveyance of earth from 2 km., only. But during execution when the quantum of conveyance reached 56%,
impossibility occurred and hence another source with a longer lead of 4 km., was restored to with the approval of the respondent. Consequently
the necessity for fixing rates for the remaining quantity has arisen. To meet with such an event, the contract condition Clause 40.2 provides a
specific procedure that the quotation by the contractor shall be in the form of new rates for any relevant items and Clause 40.2 provides that ""if the
contractor''s quotation is unreasonable, the Engineer may order the variation and make a change to the contractors price which shall be based of
the contractors cost."" Hence the claimant in his letter dated 23.3.01 has demanded an extra rate of Rs. 35/- per cubic meter for every additional
lead of 1 km beyond 2 km lead. This will be Rs. 70/- for the additional lead of 2 km over and above the agreement rate of Rs. 42/- making the
total rate of Rs. 112/- per cum. But the Engineer who is required to have his own forecast on the effects of variation on the contractor''s cost, has
adopted a different procedure of adding rates for 2 km lead. With a deduction of 38.96% for the item of earth work with 2 km lead is contrary to
the Clause 40.3 of the contract agreement and also runs counter to the accepted norms and procedures.
Therefore a rate of Rs. 55.35/- approved by the respondent violates the accepted conditions of this contract. Having put forth and accepted a
particular set of contract conditions and violate the accepted conditions and to substitute a new procedure other than that stipulated by the
accepted agreement cannot be accepted by this tribunal.
Therefore in the view of the above detailed analysis of the facts placed before the tribunal, the item of earth conveyance from 4 km lead is to be
treated as a variation event. This has necessitated for arriving at a new rate for this item of work namely the conveyance of earth from 4 km lead
and not deriving the rate from the existing agreement rate for similar type of work in the item 32 of BOQ as adopted by the respondent.
IV. Computation of the rate by the tribunal:
The claimant has quoted a rate of Rs. 112/m3. Since the claimant had himself relied on 2000-2001 schedule of rates for computing his new rates
the tribunal is inclined to work out this rate under 2000-2001 SR only.
Rate as per 2000-2001 P.W.D., SR for conveyance of 1 M3 of earth fill
i) Earth work excavation- S.S.-20B Rs 14.40
ii) 4km lead charges @ 10.93 per KM Rs 43.72
iii) Incidental charges Rs 31.75
iv) Unloading charges Rs 12.10
Total Rs 101.97/M3
So the claimant''s rate of Rs 112/M3 is not admitted.
Therefore rate admitted by the tribunal is Rs. 101.97/M3
Already paid by the respondent is Rs. 55.35/M3
So, the balance to be paid is Rs. 46.62/M3
Reconciled quantity of earth filling is 79392.88 M3 (given in page 81 of claimant''s volume V).
Award amount = 79392.88 M3 at Rs 46.62/M3 at Rs. 46.62/M3 =Rs. 37,01,296/-
AWARD
Therefore, after studying all documents and case laws furnished, and after hearing their pleadings, the tribunal hereby awards an amount of Rs.
37,01,296/- (Rupees Thirty seven lakhs one thousand two hundred and ninety six only) to the claimant and direct the respondent to pay the same
to the claimant as against the claimant''s claim amount of Rs. 44,96,480/-.
From the above it cannot be said that this claim is not based on the clauses contained in the agreement and in fact the tribunal invoked Clause
40.02 of the contract condition clause to arrive this amount. Therefore I do not find any grounds as set out in Section 34 of the Act, 1996 to
interfere with the same.
Claim No. 5: It relates to loss on supplying and laying sand gravel mix and a sum of Rs. 20,04,008/- was claimed by 1st respondent in this
regard.
Under this claim 1st respondent submitted that the contract does not contain any rate for this extra item of work and therefore 1st respondent
wanted to treat this as a new item under Clause 40.2 and also compensation claim under 44.1(c) It is the contention of 1st respondent that a rate
of Rs. 283 per cum paid by the petitioner for this work was not workable due to abnormal increase in the lead for sand which alone came to Rs.
323.50 per cum. Therefore he claimed a sum of Rs. 470 per cum. This method of rate worked out by 1st respondent was according to the
petitioner was against the agreement conditions. The tribunal after finding that this claim is to be treated as a variation event and 1st respondent is
eligible to get the relief under Clause 40.2 of the agreement. The tribunal also made site inspections and ascertained about the availability of sand at
10 km lead and awarded a sum of Rs. 8,14,463/-. The relevant portion reads as under:
III Reasoning of the Award:
This claim is to be treated as a variation event attracting action under Clause 40.2 of the agreement as already explained in supra. The rate for this
claim was worked out based on 2001-2002 PWD schedule of rates as the execution of this work was related to this period. While working out
the cost of sand the lead adopted is 10 kms and for gravel 6 km lead is adopted.
Lead for sand 10km (as adopted by the respondent) or 1 m3
Cost of sand Rs 35.00
Incidental charges Rs 36.80
Conveyance charges Rs 120.00
Loading and unloading charges Rs 27.00
Stacking charges Rs 1.10
Rs 219.90 / m3
Lead for gravel 6 km (as ascertained at the site)
For 1 m3
Cost of gravel Rs 31.00
Incidental charges Rs 36.80
Conveyance charges Rs 72.00
Loading and unloading Rs 27.00
charges
Stacking charges Rs 2.30
Rs. 169.10 / m3
Rate for sand gravel mix of 1:1
Qty Description Rate Per Amount
0.65 m3 Cost of sand 219.90 M3 142.94
0.85 m3 Cost of gravel 169.10 M3 143.74
1 cum Hire charges for 16.00 M3 16.00
machinery
1 cum Labour charges 56.00 M2 56.00
Total 358.68
For 1 m3 359/-
Arrived rate Rs. 359.00
Rate given by the respondent Rs. 283.00
Difference in rates Rs. 76.00
Total quantity 10716.62 m3
Award amount: 10716.62 m3 x Rs. 76.00/ m3 =
Rs. 8,14,463.12/-
or Rs. 8,14,463.
AWARD:
After studying all documents and case laws submitted by both parties and after hearing all their pleadings, the tribunal hereby awards an amount of
Rs. 8,14,463/- (Rupees eight lakhs fourteen thousand four hundred and sixty three only) and directs the respondent to pay the same to the
claimant as against his claimed amount of Rs. 20,04,008/-.
This claim was also made by the tribunal on the basis of the site inspection undertaken by them, on the basis of Clause 40.2 of the agreement
and also on the basis of PWD schedule of rates for 2001-02 and therefore it cannot be assailed that the arbitral tribunal committed a patent
illegality in awarding the same.
Claim No. 8: It relates to loss due to idle mobilization of machinery. 1st respondent claimed a sum of Rs. 49,91,250/- under this claim.
It is the case of 1st respondent that they mobilised men, material and machinery commensurate with the requirement of the work, but the first
work was clearance of Julio Flora, a jungle. The magnitude of this work was known only after entering into the site as there was no such item of
work in the tender schedule. Because of this reason the construction programme could not be commenced immediately and the mobilisation was
idle for about 10 days between 20.9.2000 to 30.9.2000. 1st respondent also pointed out certain other shortcomings on the part of the petitioner
and invoking Clause 44.2 of the agreement. 1st respondent demanded compensation for the losses suffered by him in this regard. This was resisted
by the petitioner by contending that no where in the agreement compensation for the idling period is mentioned. The tribunal awarded a sum of Rs.
12,72,096/- and following is the reason given by the tribunal for awarding this sum:
III. Reasoning of the award:
To substantiate his claim for this compensation, the claimant cited certain case laws where such claims were upheld.
After alalyzing all the facts placed before the tribunal the tribunal is of he opinion that the claimant is entitled to receive the compensation for the idle
mobilisation from the respondent.
To arrive at the loss per day due to idle mobilisation, the claimant had taken the hire charges of different machineries as a basis.
As per page 35 of vol. III, the claimant quantifies his claim for idle mobilisation in four periods totalling 165 days.
The claimant had said that he had considered weighted mobilisation in the following four periods for machinery
1) 30.10.2000 to 03.01.2001
2) 28.02.2001 to 14.04.2001
3) 10.05.2001 to 24.05.2001
4) 10.09.2001 to 14.10.2001
On 1.11.2000 the claimant wrote to the respondent that he has mobilized all the machineries required for earthwork as per his program chart and
requested the respondent to expedite finalization of earth quarry. On 25.11.2000 the respondent wrote to the claimant that the claimant could start
conveyance of earth from Periakulam quarry. Thus there is a clear period of 25 days 1.11.2000 to 25.11.2000 both days inclusive for idle
earthwork machinery for the conveyance of earth from 2-km lead.
As per details furnished above from 28.02.2001 after completing work in Periakulam quarry the machineries were idle up to 8.6.2001. During this
period tacking into account the claimant''s weighted idle periods 28.2.2001 to 14.4.2001 (45 days) and 10.5.2001 to 24.5.2001 (14 days) a total
of 84 days are taken as idle periods for all earth work machineries. Only earth-moving machineries are considered by the tribunal as they are very
expensive and heavy machineries which cannot be mobilized and demobilized at one''s will and pleasure as short notice. Also these machineries
cannot be utilized for other works. For carting earth excavated by a poclain having a capacity of 125 cum/hour, a minimum of 10 tippers/lorries are
required.
As per idle charges followed by state Highways Department the following are the idle charges for machineries.
For Bulldozer idle charges per day = Rs. 2664
For Vibratory roller = Rs. 2240
For Tippers = Rs. 800
For Poclain, no idle charges have been communicated by the Highways Department. But a poclain may be taken as equivalent for a vibratory
Roller in its capital cost and maintenance. So the idle charges for a vibratory Roller of Rs. 2240 is assumed for the poclain also.
1 no.poclain at Rs. 2664/day for 84 days = Rs. 2,23,776
1 no. Buildozer at Rs. 2240/day for 84 days = Rs. 1,88,160
1 no.vibratory roller @ Rs. 2240/day for 85 = Rs. 1,88,160
days
10nos.tipers for at Rs. 800/day for 85 days = Rs. 6,72,000
Total = Rs. 12,72,096.
There was no consensus between the members of the tribunal on this claim. The award for this claim is published by majority under Rule 31(2) of
the Arbitration and Conciliation Act 1996. The dissenting views of the third arbitrators Shri N. Ramamoorthy follows hereinafter.
AWARD:
After studying all documents and case laws submitted by both parties and after hearing all their pleadings, the tribunal hereby awards an amount of
Rs. 12,72,096/- (Rupees Twelve lakhs seventy two thousand and ninety six only) and direct the respondent to pay the same to the claimant as
against his claimed amount of Rs. 49,91,250/-.
It is true that 3rd respondent herein dissented from the award as granted by the other arbitrators namely, 2nd and 4th respondents, and in his
dissenting observation, he rejected the entire claim. Insofar as the majority award is concerned, I do not find any illegality warranting interference
by this Court u/s 34 of the Act.
Issue No. 13: It relates to the claim of interest by 1st respondent. The tribunal awarded a sum of Rs. 13,35,283/- being the interest calculated
at 12% per annum from the date of cause of action up to date of award. The tribunal granted interest on the basis of Clause 43.2 of the agreement
and the relevant portion is as under:
II Conclusion:
Submission by the respondent:
The claimant''s quotation for variation/substituted item is unreasonable. Hence the respondent made his forecast of the effects of the variation on
the contractor''s cost and worked out rates as per Clause 40.3 of agreement and standard procedure and norms and made payment to the
claimant then and there without delay. As such no payment is due to the claimant for the disputed items. Hence payment of interest will not arise.
Observation by the tribunal:
Some of the claims of the claimant have been admitted and award has been passed. As per Clause 453.2 of the agreement the claimant is entitled
to receive interest on the awards passed. The method of calculation of interest is clearly set forth in the Clause 43.2 of the agreement as detailed
below:
If an amount certified is increased in a later certificate as a result of an award by the Adjudicator or an Arbitrator, the contractor shall be paid
interest upon the delayed payment as set out in this clause. Interest shall be calculated from the date upon which the increased amount would have
been certified in the absence of dispute"" With regard to the rate of interest to be adopted, Clause 43.1 of agreement says as follows:
Payment shall be adjusted for deductions for advance payments, retention, other recoveries in terms of the contract and taxes, at source, as
applicable under law. The employer shall pay the contractor the amounts certified by the Engineer within 28 days of the date of each certificate. If
the employer makes a late payment, the contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from
the date by which the payment should have been made up to the date when the late payment is made at 12% per annum"". So as may be seen
above it is not left to the option of anyone to choose any other method of calculation of interest and also choose the rate of interest, as they are
already well defined in the agreement.
A perusal of the above would clearly show that the tribunal awarded the interest as per the agreement and I do not find any illegality in the
interest calculated and awarded by the tribunal.
In fact I find that the entire attempt on the part of the petitioner is to assail the award under challenge which is a reasoned one that too, persons
technically qualified on merits, as if this Court was an appellate court. The only challenge made by the petitioner is that the provisions contained in
the agreement did not permit the arbitral tribunal to grant some of the claims made by 1st respondent. But a close scrutiny of the award reveals that
some of the claims were granted only on the basis of the clauses contained in the agreement and by interpreting those clauses the tribunal found that
1st respondent is entitled to those claims. As rightly submitted by the learned Counsel for 1st respondent interpretation of the contract is a matter
for the arbitrators on which the court cannot substitute its own decision. In the decision relied on by the learned Counsel for 1st respondent
Sudarsan Trading Co. Vs. Government of Kerala and Another, , the Hon''ble Supreme Court held that court had no jurisdiction to substitute its
own evaluation of the conclusion of law or facts to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties
and purporting to construe the contract, the court could not take upon itself the burden of saying that this was contrary to the contract. The
Supreme Court further went on to observe that the High Court had no jurisdiction to examine the different items awarded clause by clause by the
arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator.
This Supreme Court judgment if applied to the facts of the present case, I find that the entire attempt of the petitioner, is to examine claim No.
2, 5, 8 and 13 clause by clause and to hold that they are not sustainable on the basis of the facts found and interpretation of the clauses made by
the arbitrator. This in my view is not acceptable in a petition filed u/s 34 of the Act, 1996.
Hence I find no merits in this O.P., and the same is dismissed. No costs.