Durga Charan Rautray vs State Of Orissa & Anr

"REPORTABLE"

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1735 OF 2006

Durga Charan Rautray .... Appellant

Versus

State of Orissa & Anr. .... Respondents

J U D G M E N T

JAGDISH SINGH KHEHAR, J.

1. The appellant was entrusted with the construction of balance work of

earth dam in connection with the Kharkhai Irrigation Project upto RL

316.50 on 31.12.1975. The estimated cost of the said balance work was

Rs.13,78,810/-. As per the contract agreement, the work was to

commence on 1.1.1976 and was to be completed on or before 31.7.1976.

For some reasons including change in design, the work could not be

completed within the prescribed time. The appellant eventually completed

the assigned work in July, 1978. This delay in completion of work,

according to the appellant, resulted in financial loss to the appellant. In

addition to the aforesaid, the appellant had some other grievances as well.

Illustratively, the appellant sought payment towards some additional work

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executed by him, and also, refund of royalty deducted on account of the

supply of "morum". All these disputes were raised by the appellant, with

the concerned respondent(s). The respondent(s) chose not to entertain

the claims raised by the appellant. In fact, all communications addressed

by the appellant to the respondents remained unanswered. The appellant

then sought reference of his claims for adjudication before an arbitrator.

This request of the appellant was also not heeded to. The appellant

thereafter obtained a Court order dated 15.5.1981, whereby the disputes

raised by the appellant were referred to an arbitral tribunal. The arbitral

tribunal examined nine items of claim raised by the appellant.

2. The award rendered by the arbitral tribunal dated 15.9.1998,

adjudicated claim item nos. 4, 5, 6 and 9, in favour of the appellant. In so

far as claim item no.4 is concerned, the appellant had demanded an

additional amount of Rs.2 lakhs on account of price escalation. This claim

was based on the fact, that after the work was assigned to him, the State

Government had revised minimum wages of labour, and increased the

same by 16%. The appellant, accordingly, claimed extra payment of 16%

over the gross amount paid in the final bill. The arbitral tribunal held the

appellant entitled to Rs.24,380/- towards price escalation. In claim item

no.5, the appellant claimed Rs.5,51,173/- towards cost of "morum"

supplied, but for which no payment had been released. In this behalf, the

appellant claimed carriage of 47,106 cubic meters with 15 kilometers lead,

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at the rate of Rs.21.35 per cubic meter. While adjudicating the instant

claim, the arbitral tribunal found the appellant entitled to the difference

between the cost of supply of "morum", as against the cost of supply of

"earth". In respect of claim item no.5, the appellant was held entitled to a

sum of Rs.78,667/-. In claim item no.6, the appellant demanded a refund

of Rs.20,727/- deducted towards royalty from his bills. The aforesaid

royalty was allegedly charged on the "morum" supplied by the appellant.

The appellant was held entitled to refund of the entire sum of Rs.20,727/-

deducted from his bills towards royalty. In so far as claim item no.9 is

concerned, the appellant claimed interest at the rate of 18% per annum on

the principal claim amount, from the due date till the date of final payment.

The arbitral tribunal held the appellant entitled to interest at the rate of 10%

per annum on the principal awarded amount of Rs.1,23,724/-, with effect

from 19.8.1981 (i.e., the date with effect from which the Interest Act, 1978

came into force) till 5.4.1992. Calculated in the aforesaid terms, the

arbitral tribunal awarded interest of Rs.1,31,544/- to the appellant.

3. Notice to make the arbitral award dated 15.9.1998 "rule of the court"

was issued on 22.2.1999. In March, 1999, the respondents were served

with the said notice. On 21.12.1999, the Government Pleader entered

appearance on behalf of the respondents, and sought time to file

objections. Objections on behalf of the respondents were filed before the

Civil Judge, Senior Division, Bhubaneswar on 6.3.2000. To contest the

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arbitral award dated 15.9.1998, the respondents filed objections under

sections 30 and 33 of the Arbitration Act, 1940 by filing a "Miscellaneous

Case". It would be relevant to mention that section 30 aforesaid,

postulates the grounds for setting aside an award, whereas, section 33

lays down the course to be adopted for challenging, inter alia, the validity

of an arbitral award.

4. The "Miscellaneous Case", filed by the respondents was contested

by the appellant inter alia by raising a preliminary objection. It was sought

to be asserted, that the "Miscellaneous Case" was barred by limitation.

The "Miscellaneous Case" filed by the respondents was rejected by the

Civil Judge, Senior Division, Bhubaneshwar by accepting the plea of

limitation raised by the appellant. The suit filed by the appellant was

decreed on 30.4.2002. The award of the arbitral tribunal dated 15.9.1998

was made "rule of the court". The respondents were directed to pay the

awarded amount to the appellant, failing which, the appellant was granted

liberty to recover the same through Court.

5. Dissatisfied with the order passed by the Civil Judge, Senior

Division, Bhubaneshwar, the respondents preferred an appeal before the

High Court of Orissa under section 39 of the Arbitration Act, 1940. In the

said appeal, the respondents raised two contentions. Firstly it was sought

to be asserted, that the objections filed by the respondents through the

"Miscellaneous Case" filed under sections 30 and 33 of the Arbitration Act,

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1940, were wrongly rejected by the Civil Judge, Senior Division,

Bhubaneshwar, on the ground of limitation. Secondly it was asserted, that

the controversy raised by the appellant could not have been referred for

adjudication by way of arbitration, after the appellant had received the final

bill without raising any objection.

6. The determination by the Civil Judge, Senior Division,

Bhubaneshwar, on the issue of limitation was upheld by the High Court.

Yet the contention advanced at the hands of the respondents, that it was

not open to the appellant to have sought adjudication of his claims, by way

of arbitration, after the appellant had received payments on the preparation

of the final bill without raising any objections, was accepted. In sum and

substance, therefore, by its order dated 22.12.2003 it was concluded by

the High Court, that the appellant could not reap the benefits of the award

rendered by the arbitral tribunal in his favour on 15.9.1998.

7. Dissatisfied with the judgment rendered by the High Court dated

22.12.2003, the appellant filed a petition for special leave to appeal

bearing no.12183 of 2004. Leave was granted on 20.3.2006.

Consequently, the matter came to be renumbered as civil appeal no.1735

of 2006.

8. Since the plea of limitation had been decided in favour of the

appellant and against the respondents, the only question to be adjudicated

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upon, in the present appeal filed by the appellant, is, whether the

disputes/claims raised by the appellant could have been referred for

arbitration, after the appellant had received payment after the preparation

of the final bill, without raising any objections. The answer to the instant

query must necessarily flow from the relevant clause of the agreement

which entitled the appellant to seek redressal of disputes through

arbitration, as it is the arbitration clause alone which defines the

parameters of the disputes which rival parties can raise for adjudication

before an arbitrator (or arbitral tribunal). In so far as the instant aspect of

the matter is concerned, clause 23 of the agreement dated 31.12.1975 is

relevant. The same is being extracted hereinbelow:

"Clause 23 - Except where otherwise provided in the contract

all questions and disputes relating to the meaning of the

specifications, designs, drawings and instructions

hereinbefore mentioned and as to the quality of workmanship

of materials used on the work, or as to any other questions,

claim, right matter, or thing whatsoever, if any way arising out

of, or relating to the contract, designs, drawings,

specifications, estimates instructions, orders or these

conditions, or otherwise concerning the work or the execution,

or failure to execute the same, whether arising during the

progress of the work, or after the completion or abandonment

thereof shall be referred to the sole arbitration of a

Superintending Engineer of the State Public Works

Department unconnected with the work at any stage

nominated by the concerned Chief Engineer. If there be no

such Superintending Engineer, it should be referred to the

sole arbitration of the Chief Engineer concerned. It will be no

objection to any such appointment that the arbitrator so

appointed is a Government Servant. The award of the

Arbitrator so appointed shall be final, conclusive and binding

on all parties to these contract."

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A perusal of clause 23 of the contractual agreement extracted above,

leaves no room for any doubt that the appellant could claim arbitration on

account of disputes arising from the contract "except where otherwise

provided". It is not the case of the respondents, that the appellant was

precluded by any clause in the contractual agreement from seeking

settlement of claims raised by the appellant (which have been allowed in

favour of the appellant by the arbitral tribunal). Clause 23 includes within

the purview of arbitration, disputes whether arising during the progress of

the work or after the completion or abandonment thereof. There is no

restraint whatsoever expressed in clause 23, which would deprive the

appellant from seeking redressal by way of arbitration, merely because he

had received payments after the preparation of the final bill, without raising

any objections. Accordingly, we are of the view, that even after the receipt

of payment on the preparation of the final bill, it was open to the appellant

to seek redressal of his disputes by way of arbitration, even though he had

not raised any objections. Secondly, in so far as the instant aspect of the

matter is concerned, the issue in hand stands concluded by this Court in

Bharat Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154

wherein it has been held as under:

"Only because the respondent has accepted the final bill, the

same would not mean that it was not entitled to raise any

claim. It is not the case of the appellant that while accepting

the final bill, the respondent had unequivocally stated that he

would not raise any further claim. In absence of such a

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declaration, the respondent cannot be held to be estopped or

precluded from raising any claim...".

In the instant case also the appellant, while accepting payment on the

preparation of the final bill, did not undertake that he would not raise any

further claims. As such, we are satisfied that the judgment rendered in

Bharat Coking Coal Ltd., case (supra) leads to the irresistible

conclusion, that despite receipt of payment on the preparation of the final

bill, it was still open to the appellant to raise his unsatisfied claims before

an arbitrator, under the contract agreement. Thirdly, it was no longer open

to the respondents to contest the claim of the appellant on the instant issue

after the appellant had obtained the court order dated 15.5.1981 which

referred the disputes raised by the appellant to an arbitral tribunal. The

Court order dated 15.5.1981 referring the disputes raised by the appellant

to arbitration, attained finality inasmuch as the same remained

uncontested at the hands of the respondents. The respondents were,

thereafter precluded from asserting that the claims raised by the appellant

could not be adjudicated upon by way of arbitration. Once the disputes

raised by the appellant were referred for arbitration and the rival parties

submitted to the arbitration proceedings without any objection, it is no

longer open to either of them to contend that arbitral proceedings were not

maintainable. And fourthly, the order passed by the High Court is

contradictory in terms. Once the High Court had concluded, that the

Miscellaneous Case filed by the respondents raising objections was barred

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by limitation, it was not open to the High Court to consider one of the

objections raised by the respondents and to uphold the same, so as to

disentitle the appellant from reaping the fruits of the arbitral award. In

other words, once the plea of limitation had been upheld, the objection(s)

filed by the respondents, irrespective of the merit(s) thereof were liable to

be rejected.

9. For the reasons recorded hereinabove, we are of the view that the

High Court erred in concluding that the appellant having received payment

after preparation of the final bill, without having raised any objection, could

not have initiated arbitral proceedings. The judgment rendered by the High

Court dated 22.12.2003 is, accordingly, set aside. The order passed by

the Civil Judge, Senior Division, Bhubaneshwar dated 30.4.2002 is upheld.

The instant appeal is accordingly allowed. The respondents are directed to

pay the appellant the awarded amount, failing which, the appellant shall be

at liberty to recover the same through Court.

10. There will be no order as to costs.

..................................J.

(R.M. Lodha)

..................................J.

(Jagdish Singh Khehar)

New Delhi;

November 1, 2011.

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