K. Marappan (Dead) Through Sole Lr. Balasubramanian vs The Superintending Engineer T.B.P.H.L.C. Circle Anantapur

SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN ...APPELLANT(S)

VERSUS

THE SUPERINTENDING ENGINEER T.B.P.H.L.C.

CIRCLE ANANTAPUR ...RESPONDENT(S)

JUDGMENT

K.M. JOSEPH, J.

1. These appeals are directed against the

judgment rendered by the High court in Civil

Miscellaneous Appeal Nos.479, 93, 94, 480, 481 and 95 Signature Not Verified

of 1990 and Civil Revision Petitions Nos.303, 304, Digitally signed by SANJAY KUMAR Date: 2019.03.27 16:19:40 IST Reason:

305, 1039, 1040 and 1041 of 1990. The appeals arise

1 out of arbitration proceedings conducted under the

Arbitration Act, 1940 hereinafter referred to as `the

Act’. By the impugned judgment, the High Court set

aside the orders passed by the Sub-Court granting the

decree in terms of the Arbitration Award though in a

modified way in respect of certain claims raised by

the appellant. The Court also rejected the petitions

filed by the appellant challenging the decision of

the sub-Court refusing to make the Award decree of

the Court in regard to certain claim. In short, by

the impugned judgment the High court found that the

arbitration awards were totally unsustainable in view

of Clause 59 of the Agreement.

2. A tender was invited on 18.9.1978 by the

respondent- State for carrying out irrigation works.

The appellant having quoted the lowest rates which

ranged between about 10-12% less than the standards

specified rate, appellant entered into Agreement

No.10/78-79 on 10/03/1979. Equally, the appellant 2 entered into Agreement No. 11/78-79 on 10/03/1979.

He also entered into Agreement No.14/79-80 on

28/06/1979. The work was to be completed within 18

months from the date of handing over the possession.

It would appear that the site was handed over to the

appellant in regard to Agreement No.10/78-79 on

16.11.1979. As far as the Agreement No.11/78-79 is

concerned, the site was handed over on 21.4.1979.

The site was handed over to the appellant in regard

to Agreement No.14/78-79 on 28.06.1979. Under the

agreements, raising various claims, the appellant

originally filed claim on 28.11.1983 before a panel

of three arbitrators. The panel rendered its awards.

The awards came to be challenged by the appellant and

the awards were set aside. An arbitrator came to be

appointed on petition filed by the appellant. He

entered upon reference on 26.4.1988 and passed three

awards on 19.8.1988. The appellant had, in fact,

raised 9 claims. The arbitrator rejected claim Nos.6

and 8 whereas he awarded various sums in regard to

3 the other claims. Claim No.9, no doubt, related to

interest. The respondent-State filed the applications

for setting aside the award under Section 30 and 33

of the Act. The appellant moved suits for making the

award decree of the Court under the Act. Certain

claims which were awarded by the Arbitrator, however,

did not meet with approval of the learned sub-Judge

and he agreed with the respondent-State. It is this

judgment which generated the appeals and revision

petitions before the High Court which stand decided

by the High Court by completely agreeing with the

contentions of the respondent-State and holding

mainly that the awards are in the teeth of clause 59

of the Contract.

3. We heard Mr. Ramamoorthy, the learned senior

counsel for the appellant and we also heard Ms.

Prerna Singh, learned counsel for the respondent.

4

4. Though various claims have been raised in

the appeals, the appellant has finally chosen to

press before us only the contentions in regard to

Claim Nos.1,3,4,7 and 9. The awards relate to 3

different agreements entered into by the appellant

with the respondents but the claims are all identical

in their content in regard to all the three

agreements though different amounts have been awarded

under the same. Therefore, we may set out the claims

with which we are to deal with.

Claim No.1 - towards extra lead of 4 kms/6 kms- stone and metal.

Claim No.3 – Non-supply of food grains as per the conditions of the agreement.

Claim No.4 – Reimbursement of short supply of cement.

Claim No.7 – Claim on account of stock of materials accumulated by the contractor for work in the project.

Claim No.9 – Interest of 18% per annum under the Interest Act.

5

5. Learned senior counsel for the appellant

would contend that the appellant is certainly

entitled to the amounts as awarded by the Arbitrator

under these claims. He would submit that the award

of the arbitrator is immune from judicial

interference unless it be that the arbitrator has

misconducted himself or it be that an error apparent

on the face of the record is betrayed by the award.

It is for the arbitrator to construe the contract and

sift the materials before him. His finding on facts

cannot be rendered vulnerable in proceedings under

Sections 30 and 33 of the Act. As far as Clause 59

is concerned it is his contention that the said

Clause would not stand in the way of the claims as

awarded and which are pressed before us being

countenanced in law.

6. Per contra learned counsel for the

respondent would support the judgment of the High

Court and would contend that Clause 59 of the

6 agreement would bar the claims canvassed by the

appellant. Before we deal with Clause 59 it is

appropriate to appreciate what happened before the

arbitrator, the sub-Court and finally in the High

Court.

PROCEEDING BEFORE THE ARBITRATOR

Claim No.I-Extra lead

7. The case of the appellant was that the

appellant was to quarry and take stones and metal

from a specified quarry which was located at a

shorter distance than from where the appellant

contractor had to actually quarry the stones and

metal and thereafter transport the materials to the

work site. This resulted in extra rate and therefore

extra expenditure. The claim of the appellant was

Rs. 15 per cubic meter. The arbitrator rejected the

arguments of the respondent that the appellant on his

own went ahead and carried out quarrying from the

quarry located further away. The arbitrator also

7 found that the claim was tenable under Section 70 of

the Contract Act. It is accordingly that the

arbitrator awarded compensation at the rate of Rs.15

cubic meter for the amounts as claimed.

Claim No.III

8. Claim No.3 related to default on the part of

department in making supply of food grains. In

short, under the food for work programme of the

Central Government, food grains were to be made

available by the respondent and part of the wages of

the works was to be supplied by the appellant in food

grains as part of the contractual obligation and it

is the case of the appellant that the food grains

were not supplied though it was available.

Consequently, the appellant had to supply food grains

to his workers by procuring the food grains at higher

prices from the open market. The arbitrator noted

the argument of the State to be that the relevant

clause only contemplated making available food

grains, if it was available. The arbitrator relied 8 on the correspondence to arrive at the conclusion

that though food grains were available it was still

not supplied to the appellate. The arbitrator

proceeded to award various sums under the three

contracts on the basis that the appellant was

constrained to expend money for supplying his workers

by purchasing food grains from the open market.

Claim No.IV

9. As far as claim No.4 is concerned, it

related to short supply of cement. Under the

contract the arbitrator noted that the department was

to supply cement to the contractor. The value of the

cement was fixed at Rs.416/- per tonne. It was the

case of the appellant-contractor that in breach of

its contractual obligation, the department however

did not make sufficient supply of cement. In order

to achieve progress in the works it is the case of

the appellant that he procured cement from outside.

He also appears to have pointed out recoveries were

made as though supply of cement was effected by the 9 department when it was not the case. The department

contended that cement was in fact supplied as per the

contract and the contractor was not authorized to

purchase cement from outside. Department further

contended that contractor did not produce any

vouchers. Department further relied on Clause 10 of

the contract. Clause 10 provided that no claim for

compensation for non-supply of cement would lie. The

arbitrator, however, rejected all the contentions of

the department and relied on Section 70 of the

Contract Act. The non-production of the cement issue

register and unstamped receipt by the department led

the arbitrator to raise an adverse inference against

the department. The arbitrator proceeded to award

varying sums under the three contracts.

Claim No.VII

10. Claim No.7 which is pressed before us

related to a claim on account of material accumulated

by the appellant for the work in the project was

particularly awarded by the arbitrator. The claim of 10 the appellant was that he had purchased various

materials and stocked at the work site for carrying

out the work but the department prevented appellant

from carrying out the work and, therefore, the

appellant was entitled to the value of the materials

which he had collected at his expense. The arbitrator

after excluding sand awarded certain sums under the 3

contracts.

Claim No.IX

11. Finally, under Claim No.9 which related to

interest at 18% under the Interest Act, the interest

was awarded at the rate of 12% per annum on all

claims from the date of the claim petition namely

23.11.1983.

Proceedings before Court under Sections 30/33 and 17 of the Act.

12. The sub-Court held inter alia as follows:

11

As far as Claim No.I is concerned, namely, extra

lead, the sub-Court proceeded to agree with the

arbitrator that the appellant is entitled to extra

lead. As far as the quantum of extra lead is

concerned, the court found that the arbitrator was

not correct in fixing the extra lead at Rs.15 per

cubic meter. The reasoning in this regard was that

there was no material in support of the same. On the

other hand, the Court reasoned that there was a

procedure for settling such claims for extra items.

As per correspondence, the court found that the

difference would only be Rs.3.23 whereas it was found

that the arbitrator has awarded at the rate of Rs.15

which would amount to giving Rs.24 for extra lead of

6 kilometers. This was found to be an error apparent

and having regard to the fact that the matter was

pending for a long time and the present proceedings

constituted the second round of litigation, the court

proceeded to modify the amount and direct that the

12 extra lead would be calculated as per the procedure

extant.

13. As far as Claim No.III is concerned namely,

the breach found by the arbitrator in the matter of

supply of food grains, the court proceeded to set

aside the award of the arbitrator. It was found that

the misconstruing the contract, the arbitrator had

awarded a sum of Rs.93 lakhs in all the three

contracts put together which is without any

justification as the arbitrator has exceeded his

jurisdiction. Contrary to the finding recorded by

the arbitrator the court found that there was no

evidence to show that the food grains were available.

The Court reappraised A-22 and A-25 and took the view

that it did not support the finding by the arbitrator

that the food grains were actually available. It was

further found that there is no evidence to show that

the appellant had given extra wages for non-supply of

food grains by the department. There is no evidence 13 according to the court to show that the appellant had

purchased food grains at the open market rates as the

appellant had not produced the register to show that

he had procured and supplied food grains from

outside. The appellant was bound to pay fair wages.

14. As far as the claim No.IV is concerned,

which related to short supply of cement to the

appellant, the Court set aside the award passed by

the arbitrator.

15. It was found inter alia by the Court that

the appellant did not mention the source through

which he had obtained the cement. There was no

evidence before the arbitrator to show that the

appellant was permitted to bring his own cement and

use it in his work. As per the terms of the

agreement the appellant was not allowed to use the

cement other than the cement supplied by the

14 Government. There is no evidence before the

arbitrator to show any check/measurement taken at the

time of alleged use by the Contractor. The tabular

statement produced before the arbitrator by the

appellant was found to be only theoretical

requirement of the quantity of cement for such work.

16. The contractual provisions were ignored by

the arbitrator. In none of the letters written by the

officers referred to by the arbitrator in the awards,

the Engineers admitted about the alleged use of

cement brought from outside by the appellant.

17. There was no clause in the contract

permitting the contractor to use his own cement and

claim reimbursement. The arbitrator exceeded his

jurisdiction.

15

18. As regards Claim No.VII is concerned,

which related to claim for value of the material

stored by the appellant at his site, the court

proceeded to set aside the award. The case of the

appellant appears to have been that he collected the

materials on the basis of the assurance of the

department that further construction work will be

entrusted to him but no letter of assurance was

produced. The provisions of the agreement were only

for finished work. The Additional Advocate General’s

argument that the Government had no objection in the

contractor selling away material after paying royalty

charges etc. to the Government was noted. Under

Section 70 of the Contract Act, the Government has

got option either to pay compensation or restore the

material to the contractor.

19. As far as the claim for interest is

concerned, the court relying on the judgment of this

Court in Gujarat Water Supply & Sewerage Board vs.

16 Unique Erectors (Gujarat) (P) Ltd. & Anr. reported in

AIR 1989 SC 973 and taking the date on which the

arbitrator entered upon the reference as 26.4.1988

and the date of the awards as 23.8.1988, it was found

that for the said period, the arbitrator did not have

the power to grant interest on the amount found due.

Therefore, the Court set aside the award of interest

for the period 26.4.1988 till 23.8.1988 in regard to

the rest the award of interest was sustained by the

Court. The net result was the Court, partially,

allowed the suits and passed modified awards in

favour of the appellant whereas it also allowed the

petitions filed by the respondent for setting aside

the awards in the manner which we have indicated

above.

The findings of the High Court

20. In the impugned order, the Court has

proceeded to allow the appeals filed by the

17 respondent-State and dismiss the revisions filed by

the appellant.

21. As far as Claim No.III is concerned which

related to non-supply of food grains, it was found as

follows:

“Apart from the fact that there is no such total liability on the part of the Government to supply the food grains without which he could have proceeded with. The very clause which has been relied upon by the contractor for supply of the food grains reduced to the effect that clearly such supply would be made only if available, and therefore, it is not the case of the Contractor that though food grains were available it is not supplied by Government. There is no mention or any evidence in this regard let in on behalf of the contractor. Therefore, it is again the compensation which comes within the bar of Clause 59.“

22. In regard to Claim No.IV, the following is

the finding by the High court:

“In the Claim No.4 the reimbursement of non- supply of cement is again is similar such obligation as the one stated to be in the earlier claim and even on this account, nothing has been pointed out on behalf of the contractor on facts or in details as to how it can be taken out from the claim for compensation as barred under Clause 59.”

18

23. As regards Claim No.I relating to extra

lead, the High Court proceeded to hold as follows:

“The Claim No.1 relates to extra lead of 4 K.m for stone and metal is again attributable to the alleged delays, laches and breach on the department as complained by the contractor and therefore, such claim once again amounts to a compensation within the parameters of the bar as provided under Clause 59. Since we have found that the claims under item 2,5,3,4 and 1 exfacie squarely come under the bar of Clause 59 in view of the very maintainability which go to the very root itself, these claims are squarely barred under Clause 59 as held in the aforesaid decision of the Supreme Court in the case of Ramnath International Construction Pvt. Limited (2 Supra).”

24. It is found that claim No.2,5,3,4,1 is ex-

facie case under the bar of Clause 59 and finally it

was held as follows:

“Having regard to the reasons as given, especially, the authoritative pronouncement by the Apex Court on the very question, we hold that the claims of the contractor are not sustainable and accordingly both the awards of Arbitrator dated 19-06-1985 and 19-06-1968 and the judgement and decree in O.P. No.118 of 1988 dated 07-10-1988 to the extent of awarding claims in respect of the Claims Nos.1,2,3,4,5,7 are set aside and consequently we hold since the very claim being held to be

19 not entitled, question of awarding any interest does not arise.”

Decisions and Findings

25. Since the impugned decision is based on

Clause 59, it is now necessary to refer to the same.

It reads as follows:

“59. Delays and extension of time: No claim for compensation on account of delays or hindrances to the work from any cause whatever shall lie, except, as hereinafter defined. Reasonable extension of time will be allowed by the executive Engineer or by the officer competent to sanction the extension for unavoidable delays, such as may result from causes, which, in the Opinion of the Executive Engineer, are undoubtedly beyond the control of the contractor. The Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty five per cent in excess of the actual working period so lost.

In the event of the Executive Engineer failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the superintending Engineer of the Circle whose decision will be final and binding. The contractor shall lodge in writing with the Executive Engineer a statement of claim for any delay or hindrance referred to above, within fourteen days from its commencement, otherwise, no extension of time will be allowed.

Whenever authorized alterations or additions made during the progress of the 20 work are of such a nature in the opinion of the Executive Engineer as to justify an extension of time in consequence thereof, such extension will be granted in writing by the Executive Engineer or other competent authority when ordering such alterations or additions.”

26. It is our view that it will not be open to a

contractor to claim compensation which arises on

account of the fact that the work is delayed or

hindrance caused to the work from any cause

whatsoever. To demystify this further, it means that

should the work be delayed on account of reasons

which are attributable either partially or entirely

to the employer namely the respondent herein, the

claim for compensation is barred. Equally, the

clause interdicts raising claim for compensation by

the contractor if the employer poses hindrance to the

work. If work gets delayed on account of the

contractor himself, it is axiomatic that he cannot

claim compensation as it would amount to a person

taking advantage of his own wrong. Delay from any

21 cause cannot found a claim for compensation. It may

also happen that the work may get delayed not due to

the fault of the employer. There may be natural

causes such as natural calamities which may cause

delay in carrying out the work. Even in such cases,

in our view, Clause 59 would cast an embargo against

a claim by the contractor. This interpretation gives

full play to the words ‘delays from any cause

whatsoever’. Equally, if there is hindrance to the

work from any cause whatever, a claim for

compensation would not lie.

27. The heading of Clause 59 is ‘delays and

extension of time’. While compensation on account of

delay and hindrance is impermissible, what Clause 59

provides however, is that reasonable extension of

time be allowed. Request for extension of time must

arise from causes beyond the control of the

contractor. It is further provided in clause 59 that

if delay or hindrance is caused by any written

instruction by the Executive Engineer then the period

22 of the delay or hindrance is to be assessed at 25% in

excess of the actual working period so lost. It is

further provided that if delay and hindrance is

caused to the contractor as a result of the Executive

Engineer failing to issue necessary instructions, the

contractor will have the right to claim and

assessment of the delay by the Superintending

Engineer of the Circle. The contractor is to lodge a

statement of claim for any delay or hindrance within

14 days from its commencement, failing which no

extension for time will be allowed. Still further

Clause 59 declares that whenever authorised

alterations or additions which are made during the

progress of the work are of such a nature which

justify an extension of time, extension can be

granted in writing by the Executive Engineer or other

competent authority when ordering such alterations or

additions. In short, under clause 59 while extension

of time on account of delay or hindrance can be

23 granted. Claim for compensation on account of delay

or hindrance on account of any cause will not lie.

28. Now that we have elucidated the true scope

of Clause 59, we must ponder whether the High Court

was right in placing Clause 59 side by side with

Claim No.I and find that claim is in the teeth of

Clause 59.

29. Claim No.I as we have already noted relates

to claim for extra lead for carrying out the work of

quarrying stone and metal from a quarry located at a

greater distance from the work site. As far as the

said claim is concerned, we would think that it

cannot be associated with a delay to the work for any

cause whatever within the meaning of Clause 59. What

is involved in the claim is the right to claim

compensation by reason of the fact that the

appellant-contractor though had to quarry from the

24 specified quarry under the contract which was located

nearer to the work site was compelled to carry out

the work of quarrying, both stone and metal, from a

quarry located at a greater distance and to transport

the same to the work site. The claim is based on the

expenditure which the appellant had purported to

incur on this score. Though case of delay within the

meaning of Clause 59 is sought to be set up, there is

no support sought to be drawn from the second limb of

Clause 59 which deals with hindrance to the work from

any cause whatsoever. Therefore, we can safely

confine our focus on the question whether the claim

stands barred by virtue of Clause 59 on account of it

arising out of delay. In this case, we must further

notice that, in fact, before the arbitrator

apparently Clause 59 was not as such pressed or at

any rate seriously pressed. Before the civil court,

in the counter affidavit filed, the State did not lay

store by the said contention. It is in the

additional counter affidavit filed that the

25 contention based on Clause 59 was apparently raised

by the State. Be that as it may, since the

arbitrator is the creature of the contract, and

therefore, he is bound by the contract, though late

in the day, it may be, that the objection was raised,

we cannot rule out the said contention as it is a

matter that goes to the root of the matter. In fact,

we would approve of the view taken by the High Court

in regard to effect of Clause 59 qua Claim Nos.2 and

5. The appellant has, also, not pressed these claims

before us. The only aspect which remains is the

contention which is urged on behalf of the respondent

that Clause 59 would be infringed as escalated

amounts are given beyond original period are

canvassed by the appellant.

30. We would think that while it is true that

the case under Claim No.I extends to the period

beyond the original period of the contract (namely 18

months from the date of handing over of site), the 26 claim cannot be one which is on account of delay from

any cause whatsoever. The claim, on the other hand

is, on account of the appellant carrying out work of

quarrying from a site which was located further away

than the site which was specified under the contract.

Be it for the original period of the contract or for

the period beyond the contract, the appellant has had

to quarry from the site located further away.

Necessarily in regard to expenses, he must be paid

for the difference in the rate. The last area of

inquiry would be whether having regard to the fact

that the civil court has agreed with the arbitrator

that appellant is entitled to extra lead at which

rate it should be paid? It is here that we must

remind ourselves of the jurisdiction to interfere

with an award under the Act. In calculating

compensation at the rate of Rs.15/- per cubic meter,

has the arbitrator acted without any material? Has

he overlooked any contractual injunction? Does the

Civil Court have the power to re-appraise the

27 materials in substituting or modifying the award on

merits?

31. In this regard, we must notice the

provisions in the Act relating to the power of the

court when an award is challenged. Section 15 of the

Arbitration Act, 1940 reads as follows:

”15.Power of Court to modify award. The Court may by order modify or correct an award-

(a) where it appears that a part of, the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or

(b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or

(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission.”

32. Section 16 of the Arbitration Act deals with

the power to remit the matter. We may straight away

rule out the question of remitting the award having

regard to the efflux of time and also improbability 28 the arbitrator being available even otherwise for the

purpose of redoing the matter. Coming to Section 15

of the Act, the power available to the Court to

modify the award was available inter alia when a part

of the award is not referred to arbitration and such

part can be separated from the other part and clearly

Clause (a) is applicable as it is not the case of

either party that the matter relating to the amount

to be paid by way of extra lead was not a matter

which was referred to arbitration.

33. Under Clause (c), an award can be modified

if it contains a clerical mistake or there is an

error which arises from an accidental slip or

omission. There cannot be any doubt that this is not

a case where there is clerical mistake or an error

arises from an accidental slip or omission. Lastly,

the power of the court to modify extend to a case

where the award is imperfect in form. Certainly, it

is not the situation in the facts of the case. Of 29 course, where the award contains an obvious error

which can be amended without affecting such decision.

Court has power to modify. When the Sub court

modified the sale at which the amount is to be

calculated would affect the ‘decision’ of the

‘arbitrator’. It is not the sale of Rs. 15/ C.M., not

an essential part of the ‘decision’ of the

arbitrator.

34. In the light of the above discussion and

proceeding on the basis that there is no power to

modify the award we would consider the legality and

correctness of the civil court decreeing the claim in

regard to Claim No.1 by modifying the award of the

arbitrator.

35. In the award, it is the case of the

appellant that the Executive Engineer has clearly

given the rates and arbitrator has found as follows:

30

“2.4 the claimant has claimed Rs.15/ cu.m.

The Ld. Arbitrator at vol.2 page 283 has noted:

“In fact the Department itself recommended to the Government vide 87 letter of C.E. to Government for sanctioning enhanced rates because of escalation of costs. The Department had not disputed correctness of extra rate claimed by contractor. On the other hand by its representation and conduct it has accepted the rate as workable rate. The claim is also tenable and legally tenable and legally grantable, applying the principles of Sec.70 of the Contract Act. Hence I find the claim of the contractor for higher rates at Rs.15/ C.M. is just reasonable and legal..”

For Agreement No.10, Rs.7,68,825/- is awarded.

For Agreement No.11, Rs.12,38,250 is awarded and

For Agreement No.14, Rs.9,59,325 is award.

The total is Rs.29,66,400/-“

36. The further case of the appellant is that

the standard rate for the period stated by the

Executive Engineer is Rs.13.75 cu.m. and the

contractor has claimed Rs.15/-cu.m. which is accepted

by the Department. It is contended by the appellant

that as per the finding of the arbitrator the sub-

31 Court, the extra lead would relate to beyond the

agreement period.

37. He had claimed at the rate of Rs.15/- cu.m.

which was accepted by the department as is clear from

letter dated 23/11/1982 written by the Executive

Engineer to the Superintending Engineer.

38. Appellant drew support from letter dated

23.11.1982 written by the Executive Engineer to the

Superintendent Engineer. We may also notice the

following statement however in the said letter.

“After gaining practical experience it has been found possible to utilize this quarry only for major quantities of two contracts of Sri DV. Krishna Reddy & Co., against the total No. of seven works for which the stone from that quarry is proposed to be utilized. The quarry from which the stone is being obtained by Sri K. Marappan is at a distance 3.45 KM MR + 1.447 KM CT. He is obtaining the entire metal and stone totally from this quarry.”

39. The sub Court, on the other hand, has found

that the assumption made by the arbitrator about

Rs.15/- cu.m. over and above the quoted rates is 32 without any basis. The sub-Court relied on the

provisions in the agreement relating to the manner in

which the rates were to be derived. The sub Court

proceeded to make reference to the clause in the

agreement.

The Clause reads as follows:

“VII. a) Procedure for working out rates for supplemental items:

The contractor is bound to execute all supplemental items that are found essential, incidental and inevitable during execution of main works at the rates to be worked out as detailed below:-

i) Supplemental items directly deducible from similar items in the original agreement:-

The rates shall be derived by adding to or subtracting from the agreement rate of such similar items, the cost of difference in quantity of materials or labour between the new item and the similar item in the agreement worked out with reference to the schedule of rates adopted in the sanctioned estimate with which the tenders were compared plus or minus overall tender percentage.

ii) New items (a) similar items, the rates of which cannot be directly deduced from the original agreement.

b) Purely new items which do not correspond to any item in the agreement.

33 The rates shall be estimate rate plus or minus overall tender percentage.

NOTE: The term estimate rate used in (i) and (ii) and (a) & (II) (b) above means the rate of sanctioned estimate with which the tenders were compares, or if no such rate is available in the estimate the rate derived with reference to the scheduled of rates adopted in the sanctioned estimate with which tenders are compared.

Whether the need for execution of excess quantity beyond the quantities stipulated in the agreement is noticed, the contractor should give notice in writing to the Exe. Engineer, who will in turn shall obtain orders of the competent authority before commencing execution of the excess quantity of work.

For all items of work in excess of the quantities shown in Schedule ‘A’ of the tender the rate payable for such item shall be either tender rate or SS rates for the items plus or minus overall tender excess accepted by the competent authority whichever is less. The SS rates means the rates with which estimate is prepared for comparing the tender.

40. Thereafter, the sub court referred to the

actual calculation made in Exhibit B.3 the letter

dated 23.11.1982 written by the Executive Engineer to

the Superintending Engineer which is in fact relied

upon by the appellant himself. The sub Court

34 proceeded to find that the difference in rates for 2

kms and 6 kms works out to 3.23 per cu.m. and that

the cost of conveyance of material of all kinds RR

stones and spass as provided in the estimate is

Rs.9.81 per cu.m. which was in accordance with the

standard schedule rate for 2 km. lead. The rate

fixed for 6 kms lead was Rs.15/- over and above the

quoted rates of Rs.8.80 which is arrived apparently

after deducting actual rate by which the appellant

had quoted his rates which was nearly 10-12% less

than the estimated rates. The result was that the

arbitrator gave Rs.24/- per cu.m. as against Rs.13.75

which is without deduction. In the written

submission before us, the appellant has not

questioned the applicability of the clause relating

to supplemental item in regard to the extra lead.

Therefore, we need not be detained by the question

whether the provision as such is applicable in

respect of claim based on extra lead. If that be so,

the question would be whether it is a case whether

35 arbitrator has awarded Rs.15/- in place of Rs.13.75

in which case we would be inclined to agree with the

appellant that the award in this regard should be

sustained in its entirety. But the question is

whether the arbitrator has actually awarded Rs.15/-

cu.m. over and above the amount which the appellant

already received on the basis of the actual lead in

the contract.

41. The arbitrator, in fact, found that the

claim of the appellant for higher rates at Rs.15/-

per cu.m. is reasonable and legal and on the basis of

the tabular statement which was prepared by the

appellant and awarded different sums under the three

different contracts. It would appear that the claim

for Rs.15/- per cu.m. is based on abnormal increase

in transport charges due to increase in cost of fuel,

automobile spare parts etc. If escalated rates are

claimed, then it may attract the wrath of Clause

59. We would think that the claim of extra lead

36 cannot be denied. The claim of Rs.15/- per cu.m., if

it is over and above the amount which is already

received will be in the teeth of the contractual

provision which is relied on by the sub Court for

which he has not taken any exception to in which case

we would think that the amount as ordered by the sub

Court is to be awarded to him under this claim. This

means the amount is to be worked out as provided in

the letter dated 13.11.1982. In other words, the

amount must be awarded on the basis of the cost of

conveyance being calculated at the rate of Rs.13.75

and the amount must be calculated and paid. Mindful

though we are of the limitation under Section 15 (b)

of the Act to modify, we would in the facts of the

case, rely on Article 142 to sustain the decision of

the Sub Court under this claim.

CLAIM NO.III

42. Coming to Claim No.III, namely, on account

of non-supply of food grain, we have already found

that while the arbitrator has awarded the amount of 37 compensation, the sub Court has set aside the award.

The main contention of the State which found favour

with the sub Court is that the clause actually

provided for supply of food grain provided it is

available. The arbitrator found that food grains

were not supplied despite the fact that they were

available and this finding by the arbitrator was

found to be perverse. The claim of the appellant was

that under the agreement, the appellant was to supply

the labourers a certain quantity of foodgrains as

part of the wages. The labourers were also making

such demand as it would be beneficial to them also.

The appellant therefore had to supply food grains

from the market at the market value which led him to

incur extra expenditure. The labourers according to

appellant were not willing to work otherwise. It is

necessary to advert to the actual contractual

provisions in relation to supply of food grain. The

clause in one of the contract relating to food grains

reads as follows:

38

“FOOD GRAINS:

1.The cost of the work is estimated to be Rs.1,16,15,713/- approximately. Against this estimate 17,500 quintals of wheat at Rs.115/- per quintal, if available, will be supplied to the contractor for being issued as wages to labourers employed on the work.

2.The tenderer shall bear the transport and other incidental charges for the transportation of wheat from nearest F.C.I. Wheat godown to the site of the work. He shall be responsible for the safe custody and storage of wheat at his own cost and ensure issue to the labourers of the quantity of wheat calculated at a price not exceeding Rs.1-25 per K.G. in lieu of the amount of wages payable to them.

3.The contractor shall be responsible to produce the Accounts of receipts, distribution etc., of what to the labourers as and when required by the Engineer incharge of the work.

4.The supply of wheat to the contractor for issue to the labourers will be regulated from time to time according to the assessment of the Engineer in-charge of the work.

5.The department is not liable for any compensation on account of any fluctuation of market price of wheat or deterioration in quality of the wheat. The contractor is bound to accept the agreed quantity of wheat at the stipulated rate, if offered.

Similarly, he shall have no claim for the supply of extra quantity of wheat on the ground of excess or enlarged scope of work and where the Department declines to supply extra wheat, no claim for compensation on this account shall be entertained by the Department.

39

6. The tender will be deemed to have satisfied himself about the availability of wheat and the rates quoted by him in the tender should take into account that aspect for completing the work according to the specifications and conditions incorporated in the agreement.”

43. It was further provided that the labourers

were to be supplied wheat at a rate not exceeding

Rs.125 per quintal but the quantity to be supplied to

the labourers and rates are subject to the approval

of the Executive Engineer.

44. The appellant relied particularly on the

contents under the heading ‘Negotiation’. It reads

as under:

“NEGOTIATIONS.

During further investigation I do hereby agree for the supply of rice in place of wheat. I also agree to receive either wheat or rice or both to the quantity of 17,500 quintals. I also agree for a rate of Rs.115/- per quintal of coarsed rice and Rs.130/- per quintal for fine rice. I also agree to supply coarsed rice at a rate not exceeding Rs.125/- and fine rice not exceeding Rs.140/- per quintal to the labourers. The other conditions and clauses covered by the tender relating to the supply of food grains remain unchanged.

40 In case of short supply of either wheat or rice compared to the quantity of 17,500 quintals, I shall have claim for compensation on this account.”

45. The first thing we have to deal with is

whether the High court was wrong in rejecting the

said claim. The reason for rejecting the claim by

the High Court are as follows:

1. There is no such total liability on the part

of the Government to supply the food grains

without which he (apparently the appellant)

could proceeded with.

2. The very clause which has been relied upon

by the contractor for supply of food grains

reduced to the fact that such supply would be

made only if available and therefore it is not

the case of the contractor that though

foodgrains were available it is not supplied by

the Government.

41 3. There is no mention of any evidence in this

regard let in on behalf of the contractor. It is

thereafter that the High Court holds that

therefore it is again the compensation which

comes within the bar of Clause 59.

46. At first blush, the claim relating to food

grain even as understood by the High court does not

appear to have anything to do with compensation for

delay. The case based on hindrance also does not

appear to be made. We shall, however, consider the

matter in some detail.

47. The High Court has not adverted to the

clause in the contract under the heading

‘negotiation’ which we have referred to. Instead the

High court has proceeded on the clause which

undoubtedly contemplated supply of food grain only

subject to availability. The clause after the

42 negotiation was carried out however brought about the

following changes:

In place of wheat, the appellant agrees to

take either wheat or rice and the price at which

it was to be supplied to the workers was also

stipulated. The other conditions in the contract

relating to the food grain remained unchanged.

This means that it could be said that it was

subject to availability and we have also referred

to clause which provides that appellant is bound

to accept the quantity at the stipulated rate, if

offered. However, a significant change which was

brought about was that in case of short supply of

either wheat or rice compared to a specific

quantity of 17,500 quintals, the appellant was

given the right to claim for compensation.

Therefore, this clause, in our view, brings about

the change which has not been considered by the

High court. Since the sub Court has given other

43 reasons, it may be necessary to consider what sub

Court has held.

48. The sub Court takes note of the provisions

under the heading ‘negotiation’ which we have

referred to except the condition that in case of

short supply the appellant will have the right to

claim compensation on this account. The sub Court

proceeds to hold the conditions are incorporated with

a view to cast a duty to receive a particular

quantity of food grain in lieu of cash and to supply

them to labourers at a stipulated rate and it is for

the benefit of the State as the State would receive

the food grains under the food for work programmes

under the Government of India scheme free of cost.

Further, it is for the benefit of the labourers. The

sub Court proceeded to further hold that the purpose

of the food for work programme was to create

employment and the contractor is not to get any

benefit out of this condition. The contractor is

bound to make record of the food grains received from

44 the Government and supplied to the labourers at the

specified rate. He cannot sell the food grains at

the market rate. He is the happiest person and need

not discharge the burden cast under the condition

relating to food grains if food grains are not

supplied. The appellant was trying to take advantage

of this. There is no promise to supply a particular

quantity of food grain. The appellant has no

obligation to supply food grains to the labourers if

the Government did not provide him food grains. The

Sub Court also did not find favour with the

contention of the appellant that taking the

attractive clause of supply at subsidized rate, he

quoted lesser rate and, therefore, for non-supply he

is entitled to be compensated. It is found that the

appellant is not entitled to compensation as it is

not an attractive clause. The Court further found

that the arbitrator was carried away by the letters

written by the Engineers wherein they have opined

that the contractor quoted lesser rates on account of

45 this attractive clause. It would become an

attractive clause only if the Engineers concerned

permitted the appellant to misutilise the grain by

selling the food grain by the contractor in the open

market. The appellant is bound to pay fair wages

under the contract (It is true that under the

contract clause the appellant shall not pay less than

the fair wages).

49. It is found that department officers

misunderstood the food for work in their letters.

The arbitrator relied on such letters as if the

Engineers are the master to interpret the term of the

contract. It was further found that there is

absolutely no basis that food grains were in plenty

with the Government. The sub Court further finds

that the reliance placed by the arbitrator at Exhibit

A.22 for availability was not justified. He referred

to Exhibit A.22 with annexure also. The contention

of the appellant was that he promised to the 46 labourers that he would pay a portion of their wages

by way of food grain at specified rate and he had to

supply the food grains at the subsidized rates as

promised by purchasing the food grains at higher

rates. The sub Court finds that there is no evidence

produced before the arbitrator to show that he

purchased food grains from the open market and

supplied those food grains to the labourers at the

subsidized rates. In case of supply of food grains,

the appellant was bound to maintain record of proper

distribution but the appellant has not produced any

such register, it is reasoned by the sub Court. Next

it is found that the appellant even it is true that

he agreed that the workers are to be supplied a

certain portion of the wages in food grains, he

cannot fix wages in such a manner that the contractor

would get any advantage out of it as it is not

contemplated under the scheme. He has to pay the

fair wages and besides fair wages he had to provide

additional facilities by providing food grains at the

47 subsidized rates. The question of supply of food

grains to worker by appellant in the event of non-

supply of the same by the Government did not arise.

It is further found that there is no provision in the

agreement to the effect that in case of failure to

supply food grains the Government is liable to

compensate the loss that may be sustained on account

of failure of the department to supply food grains,

and the arbitrator patently exceeded jurisdiction.

50. The first thing that stands out in the

reasoning of the sub-Court is the absence of any

reference to the clauses specifically under the

heading ‘negotiation’ which specifically confers a

right of compensation in case of short supply of

either wheat or rice compared to the quantity of

17,500 quintals (Agreement NO.11/78-79). This means

that while the parties contemplated that a part of

the wages was to be paid by way of supply of food

grains at the stipulated price, the obligation of the

appellant was to take the food grain supply from the

48 Food Corporation godown and carry it to the work

site. He was to further supply the said food grains

to the workers at a higher specified rate in view of

the fact that he would incur certain expenses. This

undoubtedly was subject to availability. But

introduction of the clause in the contract that in

case of short supply of either wheat or rice in

comparison to the actual quantity which was agreed to

be supplied, the appellant will have a claim for

compensation on the said count has been missed by the

sub Court as also the High Court.

51. The sub-court has proceeded to find that the

case of the contractor appellant that the clause

providing for supply of food grains was an attractive

clause, was not correct. We are inclined to agree

with the said finding. In the claim filed by

appellant what is stated inter alia is as follows:

“(ii)…………The tender documents provided for supply of wheat at the quantities mentioned above. It also provides that the charges on account of the storage, transportation, the cost of the container as fixed by the Government, and sales tax have to be borne

49 by the contractor. The contract condition also further stipulates that the contractor has to supply the wheat to the labourers consistent with their requirement and at the rates not exceeding Rs.125/- per quintal. It is also mentioned in the contract that a particular quantity of wheat at Rs.115/- per quintal, will be supplied to the contractor for being issued as wages to labourers employed on the work. On the representation made by the contractor on this clause there was negotiation and agreement was arrived at between the contractor and the Department to the effect that the contractor will receive the quantity of grains to be supplied either as wheat or as rice or both, further stipulating the rate at which it is to be supplied fixing the rate at Rs.115/- per quintal for coursed rice and at Rs.130/- per quintal for fine rice and also stipulating the rates at which the contractor is to pay to the labourers, retaining the other conditions and clauses covered by the contract relating to the supply of food grains.

(iii) In short the agreement stipulates that the food grains will be supplied by the Department to the contractor at the specific rates, which of course are competitive rates as against the rates of the grains to be acquired from the open market. The contractor took this important and attractive aspect into consideration and submitted his tender at the most competitive rate only on account of the advantage he would derive from the department supplying the food grains at specific rates which he would pass on to the labourers.”

52. A perusal of the aforesaid averments will

reveal that the tender document contemplated supply

50 of wheat of a particular quantity at Rs. 115/- per

quintal and the contractor was to supply at Rs.125/-

per quintal to workers. Thereafter, it is stated

that on a representation made by the contractor there

was negotiation and an agreement was arrived at

between the contractor and the department. The

contractor was to receive the quantity of food grains

either as wheat or rice or both. In other words,

reference is made to the clause coming under

negotiation. It is thereafter stated that in short,

the agreement stipulated that the food grains will be

supplied at specific rate which were competitive

rates as against the rates in the open market. It is

further alleged that the contractor took this

important and attractive aspect into consideration

and submitted his tender at the most competitive rate

only on account of the advantage he would derive from

the department.

51

53. It is to be noted that even according to the

appellant, the tender documents provided for supply

of wheat. The contract was settled by calling

tenders. The appellant submitted his tender which

turned out to be the lowest. At the time of

submitting his tender the condition relating to the

negotiated settlement could not have been there. If

that is so, the original tender conditions

contemplated supply of wheat at Rs.115/- per quintal,

if available. The appellant was to supply the food

grains only if the food grains were made available by

the Government. Therefore, it is totally untenable

for the appellant to set up a case that attracted by

the clause which resulted from the representation and

negotiation, he submitted his tender. May be at the

time of entering into the contract following his

representation and negotiation the clause was

incorporated which provided for supply of rice or

wheat and other terms. In other words, at the time

when appellant submitted his tender which may have

52 been lesser than the estimated rate by about 10 to

12%, the negotiated clause was not there. On this

score, the case sought to be built up around the

clause being attractive cannot be accepted.

54. Secondly, as regards the supply of food

grains, the appellant is not correct in having

contended that the appellant was duty bound to supply

food grain even if the food grains were not supplied

by the department. The sub-Court is correct in

concluding that appellant was duty bound to supply

food grains only if it was supplied to him by the

department. This is because despite the clause

resulting from negotiation, the other conditions

remained intact. A perusal of the clause relating to

supply of food grain would show that food grains

would be supplied, if available. Again, the words

“if offered” is conspicuous. The words in the clause

which provided that the appellant shall supply food

53 grain to the labourers is not to be considered in

isolation.

55. The sub-Court is not correct in coming to

the conclusion that the appellant was bound to pay

the fair wages to the workers and he was also liable

to offer food grains apart from fair wages. A

perusal of the clause makes it clear that what was

contemplated was if the food grains were available

and supplied, the appellant was to make use of the

same supplied it to the workers ‘in lieu of wages’.

56. There are a few aspects which remain.

Firstly, what is urged before us is that the under

the negotiated clause the department agreed to supply

a definite quantity of food grains. In agreement

No.11, it was 17500 quintals. We proceed on the

basis that in other two agreements, different

quantities as claimed by the appellant was mentioned.

We notice that in the claim while the appellant has

54 referred to the negotiated clause relating to supply

of rice and also providing for the quantity, there is

no reference to the clause that appellant will be

entitled to compensation if there is short supply of

food grains. This clause is also not considered

either by the sub court or by the High Court. Very

interestingly this is what the arbitrator has said.

“It is argued for the Department that agreement clause is that contractor is not entitled for compensation even if there is non supply of food grains. I do not agree with this submission because the words used in the agreement are ‘short supply’. The agreement does not state that the contractor has no claim in case of non supply of food grains. The counsel for the contractor submits that his clause was subsequently negotiated because intention of the parties was that contractor cannot insist on wheat alone or rice alone and if there is short supply either of rice or wheat, then for that short supply contractor has no claim for compensation. I am inclined to agree with the submission of the counsel of the contractor that so called clause in the agreement does not apply and it is not a bar to the contractor claiming compensation.”

57. However, in the contractual provision which

we have extracted, we notice that right to claim

compensation is reserved to the contractor in case of 55 short supply. But then, the case of the appellant is

not of short supply but of non-supply. The appellant

in his written submission also in paragraph 3 stated

as follows:

“The Agreement at Vol.3, Pg.71, 72 refers to this head. At Pg.72 after the head ‘Negotiations’ the clause reads as under:

“….In case of short supply of either wheat or rice compared to the quantity of 17,500 quintals, I shall have claim for compensation on this account.”

58. Further, it is relevant for us to notice the

discussion by the arbitrator regarding the quantum of

compensation. The arbitrator relies upon the

Statement No.3 appended to claim No.III wherein he

has shown the prevailing rate of rice in the open

market during the period November 1979 to October

1982. The amount which he has paid for the labourers

for purchase of food grain on the basis of rates in

the open market, the price of food grain payable to

labourers for purchase of food grain as per the

56 agreement condition and the extra amount involved due

to non supply of food grain by the department. The

arbitrator found that the statement shows that the

extra amount paid varies between Rs.162/- and

Rs.211/- per quintal in the said period. On striking

an average, it came roughly to about Rs.185/- per

quintal which the appellant paid to the workers for

non supply, finds the arbitrator. Further the

arbitrator found that the labourers cannot purchase

rice from the fair price shops because they were not

rice card holders. The arbitrator referred to the

communication to the Executive Engineer dated

23.7.1987 wherein he has stated that 1000 to 1200

workers work daily in each works and the rates for

the food grain in the open market are increasing day

by day, therefore he has no hesitation in awarding

price increase by restricting it to 180% though the

contractor’s statement shows 185%. Thereafter, the

arbitrator awarded as follows:

“The quantity agreed to be supplied by the Department namely rice to the contractor 57 under agreement No.10 is 13,200 quintals, under agreement No.11, it is 17,500 quintals and under agreement No.14, it is 20,000 quintals. In the tabular statement contractor claimed difference of rates for 15,521 quintals under agreement No.10 and 20,804 quintals under agreement No.11 and 22,195 quintal under agreement No.14. Thus he claimed higher rates for 58,520 quintals where as the Department agreed to supply him a total quantity of 50,700 quintals is multiplied by Rs.180.00 being the difference in price he has incurred an additional expenditure of Rs.91,26,0000.00. Accordingly he is entitled to compensation for Rs.23,70,000.00 under agreement No.10/1978- 79 and Rs.31,50,000.00 under agreement No.11/1978-79 and Rs.26,00,000.00 under agreement No.14/1979-80.”

59. The arbitrator refers to Exhibit P.1 to P.4

letters. Arbitrator also refers to Exhibit B.3 to

B.7 letters wherein it is stated that contractor was

suffering as he has incurred expenditure on this

account as there was a condition in the agreement to

give food grains as part of the wages and his

aspirations and objectives were not fulfilled because

he has quoted less rates. The arbitrator make

reference to the negotiations where rice took the

place of wheat and thereafter the arbitrator enters

the finding that the rice was available. He relies 58 on Ex.A-27 where the Executive Engineer speaks about

1000 to 1200 workers working daily at each work and

the rates for food grains in the local market was

increasing day by day. According to the arbitrator,

there is correspondence that abundant quantity of

food grains was available but no adequate

arrangements were made to supply the food grains to

the contractor. In the letter written by the Chief

Engineer to the State Secretary, he notes the case of

the appellant that the appellant has quoted lesser

rates relating to supply of food grain at stipulated

issue rates. The quantum in the three contracts is

noted as also the rate and the amount, the value in

rupees is noted. The Superintending Engineer has

agreed that the food grain could not be supplied

since allotment was not received even though there is

stipulation in the agreement to supply food grain if

available. The aspirations of the appellant could

not be fulfilled, it is stated. It is noted that the

price structure of various materials is increased

59 from the date of tender i.e. 10.11.1978. In relation

to wheat it is shown an increase of 147%. There is

an increase in the case of rice to the extent of

178%. This letter is written on 30.11.1982 Exhibit

B-7.

60. First letter written by appellant is dated

30/06/1979. In the said letter this is what he says:

“I had requested on several times for the supply of food grains but so far no food grains were supplied to me. I request to make arrangement for the early supply of food grains. In this connection, I wish to state that I had engaged labours on the term that food grains will be supplied to them as a part of their wages and I am supplying food grains to them by purchasing in the local market. Hence, urgent action may be taken for the supply of food grains early otherwise, I have to invest extra finance…”

61. Therefore, the case set up by him is that he

has purchased food grains from local market and

supplied. In the letter dated 27/08/1980 he states

inter alia that he had engaged labourers on terms

60 that rice or wheat will be supplied to them as a part

of their wages. He complains that no food grains was

supplied. Then he says on the terms agreed to by him

he had paid the price of the quality of rice that was

cheapest in the market. As can be seen in the second

letter the case appears to be that he was paying the

labourers the price of rice and he is departing from

the case that he was supplying the food grains.

62. In the next letter dated 16/07/1981 he

states that he had to go in for additional finance on

account of non-supply of food grains. He repeats the

same complaint about huge financial outlay on account

of non-supply at the specific rate of Rs.115/- per

quintal which was actually available, in the last

letter dated 07/10/1982.

63. We are of the view that the sub Court is

right in holding that the correspondence referred to

by the arbitrator did not show that the food grains

were actually available with the department and

61 department was only trying to get the food grains

from the administration with which the food grains

was available. As long as there is some material

which substantiated appellants claim before the

Arbitrator, the Court hearing the petition under

Article 30 and 32 would not reappraise the material

to come to the conclusion that the arbitrator went

wrong in arriving at a finding of fact. At the same

time, if virtually there were no material then it

becomes a case of no evidence. No doubt the

contractual provision which provides that the

appellant is to keep accounts and produce accounts

relating to receipts and distribution may assume

relevance when appellant receives food grains from

the department and distributes. But at the same time

the appellant is putting up the claim for

compensation and that too a claim which runs into a

fairly large sum. There would certainly be material

to evidence the actual purchase and further actual

supply to the workers or payment as alleged. Even

62 assuming everything that the appellant says is

correct about the fact of the negotiated settlement,

there is virtually no material except the appellants

statement that the appellant paid for the price of

food grains to the workers. Further, the claim

involves payment of price of rice at escalated rates

for period beyond the contract also and it invites

the wrath of Clause 59. We would therefore think

that the award of the claim by the arbitrator cannot

be sustained.

CLAIM NO.IV

64. As regards, claim No. 4 is concerned, it

arises from alleged short supply of cement. First of

all, we have to find as to whether it is hit by the

embargo contained in Clause 59 and also advert to the

finding of the High Court. In this regard, the High

Court holds that the obligation is similar in nature

to the earlier claim, namely, claim no. 3 and nothing

is pointed out on behalf of the appellant on facts or

in details as to how it can be taken out of Clause

63

59. We have to ascertain what exactly is the claim

raised by the contractor.

65. The claim in brief is as follows:

Cement is one of the items to be supplied by the

Department at specific issue rates. The appellant,

accordingly, perceiving the same as attractive quoted

10 to 12% lesser than the estimate rate. Cement was

to be supplied at the issue rate of Rs.416/- per

metric tonne. Right from the beginning, there was

short supply. The appellant had no other option but

to get cement from other sources. Large quantities

were so brought from other sources. The Department

being aware agreed specifically and by conduct that

they will recoup the cement. The appellant had no

intention to give cement free to the Department. The

quantity of cement used by the contractor for the

project had been quantified and noted in the

measurement book and the USR (Unstamped Receipt). The

quantity of cement supplied by the Department is

64 correctly noted in the cement issue register

maintained by the Department. Recoveries had been

effected without the actual issue of such quantity by

the Department as evidenced by the document like USR

and other entries. The appellant appended a tabular

statement of quantity of cement used for the work,

the quantity which was issued by the Department and

the balance quantity which constituted the basis of

the claim.

66. The arbitrator in regard to the said claim

finds inter alia that in the letter dated 17.08.1980,

the Engineer had stated that there is short supply

and he was bringing cement from other sources and

action may be taken to return the extra quantity of

cement. He notes that in the counter of the

Department, there is no denial about the quantity of

work done by the appellant and also the quantity of

cement used by him by bringing from other sources. He

further finds that it is stated that the exact short

65 supply of cement can be shown only after taking all

measurements. The details in the claim statement

which also include, apparently, the tabular details

was not denied in the counter. Though, the cement

issue register and the USR were called for by the

appellant, they were not produced. Adverse inference

was drawn. The arbitrator further noted that in the

bill the quantity of cement used has been recovered,

though the quantity has not been issued and in the

last bill, more quantity was given representing part

reimbursement. The letters of the Department were

also found to support the case of the appellant.

Referring to the objection in the counter that no

vouchers were produced by the appellant, it was

brushed aside as immaterial as it is found that it is

proved that he was bringing cement from other sources

to complete the work except a small quantity under

Agreement No.14. Reliance is placed on Section 70 of

the Contract Act. The argument without a plea in the

counter by the Government pleader that the appellant

66 was saving cement out of the quantity supplied by the

Department was found untenable on the basis that

engineers would not have permitted it. As far as,

clause 10 of the Agreement prohibiting any claim for

compensation for non-supply or delayed supply, the

arbitrator found that appellant is only asking for

return of cement brought by him and used in the

construction on the assurance of the Department that

it will be reimbursed. In total 3790 metric tonnes of

cement were found to be brought by the appellant.

Rejecting the claim of the appellant for market rate

and applying the departmental issue rate of Rs.416/-

per tonne different amounts were awarded under the

three different contracts.

67. We would think that this claim cannot be

said to be hit by clause 59 as appellant is not

claiming compensation for any delay. On the other

hand, his case is that, contrary to the agreement

that he would be supplied the cement it was not

supplied and he had to use cement by spending money

67 from his pocket and he only wanted that cement

actually used which is in excess of the cement issued

to be given to him. More importantly, the amount

awarded is at the rate fixed in the original contract

and no escalation is given.

68. The Sub-Court, however, set aside the award.

The Sub-Court finds as follows: -

Cement is a controlled commodity and it could

not be purchased from outside, without valid permit.

It was found that the appellant did not produce any

document to show that cement was actually purchased

from outside. The source was not mentioned. The

appellant did not produce any permission from the

Department for purchasing cement from outside. Even

if purchased, it was to be checked by check measure

but there was no check measurement. The tabular

statement shown by the appellant, only represents the

theoretical requirement in the quantity of cement. He

referred to the contractual provisions in this regard

68 which we will refer to. In the letters of the

Officers, there is no reference about the use of

cement by the appellant which was brought from

outside. The letters written by the appellant also

complained only of inadequacy of supply of cement and

there is no mention of use of cement which he brought

from outside. More importantly, he referred to the

contractual provision to find that the Government is

entitled to recover the cost of theoretical quantity

which is not used and use of any lesser amount in

comparison to theoretical amount would only enure to

the Department.

69. We must refer to the contractual provision

which has not been referred to by the Arbitrator.

The contract provides that cement will be supplied at

cost by the Department inter alia and the cost of

cement issued will be recovered from the contractor’s

bill at the rate specified. The contract also

contains the theoretical requirement of important

69 materials which include cement which are set out. The

rate of recovery is shown as Rs.416/- per metric

tonne. However, the important aspects which weighed

with the Sub-Court are contained in the following

provisions relating to the scarce materials like

cement. It reads as follows:-

“The contractor is expected to use the scarce materials like cement and steel as per the theoretical requirements shown above.

A schedule of quantities of important materials like steel cement etc., required for execution in accordance with the requisite specifications is appended hereto for which recovery will be affected. If these materials drawn according to a schedule are short used, the excess quantity so drawn should be returned to the Department in good condition and no payment will be made to the contractor therefore. If they are not so returned to the department, their cost will be recovered at the market rate prevailing at the time of supply or the issue rate whichever is greater plus storage charges plus sales tax if leviable.

If materials are drawn in excess of theoretical requirements indicated in the appended schedule, the excess quantity should be returned to the Department in good condition. If they are not so returned to the Department their cost will be recovered at issue rate plus 100% surcharge or market rate whichever is higher plus storage and sales tax if leviable.

If materials are either short drawn or short used (though drawn according to schedule) (1) the savings due to short drawal/ use should be secured to Government by recovering the cost

70 thereof at issue rate from the Contractor. In the case of materials short used, though drawn according to schedule this recovery will be in addition to the recovery to be made for the cost of materials not returned as stipulated above.

The Executive Engineer will decide the approximate requirements of explosives. If they are drawn in excess of the same, the excess quantity should be returned in the Department in good condition. If they are not so returned to the Department their cost will be recovered at issue rate plus 100% surcharge over from the contracting bill.

The Contractor should maintain separate ledgers for each of the items which are either supplied by the Department or required to be procured by the Contractor and permit the Exec. Engineer or his authorized subordinate or scrutinize the Registers any time and note in account of the materials on hand.“ (Emphasis supplied)

70. Let us see what the contract has really

provided for. We are doing this for the reason that

the Sub-Court set aside the award in regard to this

claim. The appellant filed revisions against the

judgment of the Sub-Court. We have noticed that

essentially, the High Court proceeded based on the

Bar under Clause 59. The matter has not been dealt

with as such by the High Court. Here also after

finding that Clause 59 will not come in the way of

71 the claim, we could have remitted back the matter to

the High Court for consideration of the matter.

Having regard to the long efflux of time, we are

undertaking the task of considering the matter.

71. A perusal of the contractual provisions

which we have referred to yields the following

inevitable result. Cement is a scarce material to be

supplied by the Department. The appellant was to

maintain separate ledger for the item for which

cement was supplied by the Department. The issue

price was Rs.416/- per metric tonne. The cost of

cement at the said rate was to be recovered from the

appellant’s bill at the issue rate. Thus, if the

value of the work is Rs.100/- and the value of the

cement is Rs.5/-, the appellant would get only

Rs.95/-.

72

72. The next question is the effect of the other

provisions which we have quoted. We have already

noted that there are theoretical requirements in

regard to the use of cement. It is not unnatural for

the Department to prescribe for the theoretical

requirement. This is to ensure that it is used

exactly as per the theoretical requirement so that

the structure on the one hand is built in a safe

manner and at the same time nothing in excess is used

so as to avoid wastage of scarce material. There are

three situations which are contemplated. In the first

situation, it is provided that if materials are drawn

according to the schedule and are short used then the

excess quantity is to be returned to the Department

in good condition and for the same the contractor

will not get any payment. Furthermore, if the short-

used material is not returned to the Department,

their cost will be recovered at the market rate or at

the issue rate which is greater plus wastage charges

and sales tax. An example which we may take, would be

73 if the requisite specifications is that 10 metric

tonnes of cement is to be drawn and he draws 10

metric tonnes but he actually used only 8 metric

tonnes there will be a short use of 2 metric tonnes

which he would have to return to the Department.

73. The second situation is where the materials

are drawn in excess of theoretical requirements. The

contract contemplates that in such a situation, the

excess drawn quantity must be returned to the

Department in good condition and otherwise there will

be recovery at the issue rate plus 100% surcharge or

market rate whichever is higher plus storage and

taxes.

74. The third situation contemplated is that if

the materials are short drawn or short used it is

specifically provided that in such a situation, the

saving due to short drawal/ use should be secured to

74 the Government by recovering the cost thereto at

issue rate from the contractor. Thus, in the example,

we have taken if 10 metric tonnes is actual quantity

as per the specifications which can be drawn but if

only 8 metric tonne is drawn by the contractor while

he was to use 10 metric tonnes, the saving due to

short drawal was secured to the Government by

recovering the cost thereto at the issue rate from

the contractor. This means that instead of 10 metric

tonnes, if 8 metric tonnes is drawn, the contractor

would still be liable for recovery from his bill for

the entire 10 metric tonnes, though, he has actually

drawn only 8 metric tonnes. In respect of short used

material, though, properly drawn the recovery would

be in addition to the recovery for the cost of

materials which is returned as we have noted above.

Further, the contract contemplates that if materials

are required to be procured by the contractor, he

must maintain separate ledger for each of the item

75 which are so required to be procured by the

contractor.

75. This would mean that if the appellant had

indeed secured cement from outside, the appellant was

obliged under the Contract to maintain a separate

ledger. Further the Contract contemplates that

there could be recovery from the bill of the

Contractor for the cost of cement which is actually

not supplied to the contractor and it will be based

on the theoretical requirement as we have already

referred to above. Thus, the mere

fact that there has been excess recovery meaning

thereby that without issuing the cement to the

appellant the amounts have been recovered would not

mean that the appellant would be able to substantiate

his claim that there was inadequate supply of cement.

That is a matter which must be substantiated with

reference to other material.

76

76. But there are two situations which can

arise. Cement may be available with the Department

and the Contractor draws only lesser quantity than

provided in the specifications which is based on

technical requirements. In such a case, undoubtedly

the Clauses which we have adverted to would apply.

What however would be the position if cement is not

available and consequently the Contractor is not

supplied and he is not in a position to draw cement.

In such a scenario also, will it be a case of drawal

of cement by the Contractor which is less than the

specified quantum? It would be so, but it may have

different implications.

77. At this juncture, we may look at the

correspondence which may throw light. In the letter

dated 30.06.1979 written by the appellant to the

Executive Engineer, we find there is no mention even

about the inadequate supply of cement. Next letter

77 is dated 26.07.1980. This is a letter where

reference is made to all the three contracts. There

is a reference in this letter no doubt about the

purchase of cement from other sources. He seeks

return of the cement so that extra quantity of cement

may be reimbursed. There is no reference to any

particular quantity and there is no reference to

which the other sources are.

78. The next letter is dated 16.07.1981. Here

the reference is made to Agreement No.10/78-79. In

this letter there is no complaint about the cement.

Finally, there is letter dated 07.10.1982 which is

addressed by the appellant to the Superintending

Engineer. Here the reference is made to the

Agreement No.11/78-79. No doubt in the body of the

letter he also adverts to the other contracts.

Substantially, the letter is one where he makes

various complaints and finally, he makes a claim for

enhancement. Here he says in this letter that there

is inadequate and irregular supply of cement which

78 affected his steady progress of work during 1979,

1980 and 1981. He says inadequate supply caused him

substantial loss to the work done. A look at the

correspondence by the departmental officers at this

juncture may be not out of place. Letter dated

13.11.1982 written by the Executive Engineer to the

Superintending Engineer inter alia reads as follows:

“It is a fact that there was difficulty in obtaining and procuring cement for the project. The enclosed table indicates the available cement in the division. The total cement is used on this project alone for the works of Sri K. Marappan. It can also be seen from the statement the maximum percentage of cement available was spared to the works of Sri K. Marappan. Extreme efforts have been made for additional allotment of cement with great difficulty some additional allotment have been obtained as clarified in the statement. On the face of the over all shortage of cement and the possibilities of securing the full requirement of cement being bleak, the contractor could not be forced to increase the rate of progress which he was capable of managing, since most of the work carried out upto March, 81 being at lower levels of the dam. This shortage of cement was felt continuously. Reference is invited to the letter of Superintending Engineer No. 1230 CE dt. 13.6.81 and 831 CE dt. 27.4.79 wherein request for additional quantity of cement was made to Chief Engineer.

79 79. In letter dated 18.11.1982 written by the

Superintending Engineer to the Chief Engineer within

5 days of letter dated 13.11.1982 Superintending

Engineer recommended completion through the same

contractor with enhancement. In letter dated

30.11.1982 written by Chief Engineer to the Special

Secretary to Government, Irrigation Department, it is

inter alia stated:

“It is a fact that there was a difficulty in procuring the cement for this project. Overall shortage of cement and the possibilities of securing the full requirement of cement being bleak, the contractor could not be forced to increase the rate of progress which he was capable of managing. The shortage of cement was felt continuously from the starting of the work till to-day.”

80. From the correspondence, it would appear

that the officers proceeded on the basis that there

is a shortage of cement. Therefore, this appears to

be a case where sufficient cement may not have been

supplied to the appellant. However, it is to be

remembered under Clause 10 of the agreement no right

80 to compensation lies for short supply of cement.

Here the case of the contractor appellant which is

accepted by the arbitrator is that this is not a case

where compensation for short supply of cement is made

by the appellant. All that the appellant is seeking

is to be given, is the quantity of cement, which he

brought from other sources or the monetary

equivalent.

81. We proceed on the basis that the claim for

return of the cement does not involve infraction of

Clause 10 which forbids compensation on account of

short supply of cement. The question, however,

arises whether the arbitrator has misconducted

himself in arriving at the amount of cement

supposedly brought from other sources by the

appellant to carry out the work. As far as the

monetary equivalent is concerned as we have already

noted it is at the issue price fixed under the

contract itself and it is not an escalated amount so

81 the measure of the amount of reimbursement may not

attract Clause 59. The only point, therefore, which

remains is whether there was any basis for the

arbitrator to have found that the appellant had

indeed brought the quantity of cement from other

sources and used it for the works in question.

82. The arbitrator has proceeded on the basis of

the admitted correspondence between the officers to

find that there is shortage of cement. The sub-court

on the other hand finds that none of the

correspondence by the officers indicate that the

appellant was given permission to buy cement from

outside. There is no indication in any of the

letters written by the appellant which the other

sources were from which he was procuring cement. The

most important obstacle for the appellant is the

clause in the contract which has been referred to by

us and which is referred to by the sub-Court, namely,

for procuring cement by the contractor, he must

82 maintain ledger and which may be open to scrutiny by

the officer as and when demanded. In this case, the

appellant has not produced any ledger showing

purchase of cement from other sources. There is no

written permission produced to purchase cement from

other sources. No voucher has been produced by the

appellant to establish purchase of cement from

outside.

83. The arbitrator, however, has found that even

non-production of vouchers is not material as it is

proved that appellant has purchased cement from

outside. There are two things which apparently the

arbitrator has taken note of. The arbitrator finds

that there is no denial about the quantity of the

work done by the contractor and also about the

quantity of cement used for bringing from other

sources. It is stated in the counter affidavit that

exact short supply of cement can be shown only after

taking over of measurement. It is further found that

measurement was already taken. The second aspect is

83 arbitrator finds that as the unstamped receipt and

the cement issue register though called for by the

appellant was not produced, adverse inference must be

drawn. If the matter as alleged is not denied or is

admitted then it may not be necessary to adduce

evidence to prove the same. This principle is

equally applicable before the arbitrator as it is

before the court of law. Perhaps it is all the more

applicable in the case of proceedings before an

arbitrator.

84. We are in one sense handicapped by the fact

that the appellant has not produced the counter

affidavit filed by the State before the arbitrator.

It is true that if the case pleaded by the State

amounts to admission that the cement was brought from

outside by the appellant and the matter was only

regarding the measurement to be carried out that may

give the impression that the arbitrator particularly

having regard to the non-production of the unstamped

receipt and cement issue register despite being

84 called for had some justification for coming to the

conclusion that the appellant had procured cement

from outside. Then the further question would be the

only quantity of cement which was purported to be

bought from outside by the appellant.

85. State definitely has a case, however, that

there is no evidence by the appellant having procured

cement from outside sources as he has not produced

vouchers as that is seen dealt with by the

arbitrator. The exact quantity of cement purchased

from outside is not pleaded. Instead what the

appellant contended for and what was accepted by the

arbitrator was that the quantum of cement which was

used could be found out from the quantum of work

done. This is clear from the statement even on the

basis that when a particular quantum of work is done,

as per the theoretical requirement for cement

involved in such work, the quantity of cement

actually used by the appellant has been arrived at

and after deducting the quantum of cement which was

85 actually issued, the balance amount of cement which

the appellant has used for the work from outside

source has been arrived at. We have referred to the

contractual provision and it would be hazardous to

arrive at the amount of cement, used from other

sources based on quantum of work done.

86. But arbitrator overlooks the fact that under

the contract the appellant was supposed to make

entries in the ledger. A party is supposed to

produce the best evidence or rather the evidence

which under the contract is contemplated. The

failure on the part of the appellant to produce the

ledger has fatal consequences. The matter becomes

further aggravated by the failure on the part of the

appellant to even produce vouchers or bills in

support of the claim to purchase the cement from

outside sources. This is even if we are to ignore

the fact that there is no written permission for

purchase of cement from outside. We proceed on the

basis that a contractor may without written

86 permission but for the purpose of the work purchased

cement from outside. But certainly, the fact that

there are neither vouchers nor any ledger entries nor

bills produced which persuades us to hold that the

matter may warrant interference with the award under

Section 30. We are not inclined to accept the claim.

CLAIM NO.VII

87. As regards this claim, the claim appears to

be that appellant collected materials and it was

lying at the site. Admittedly, the appellant has not

used this material for the purpose of doing the work.

Only the case set up by the appellant is that he was

given an assurance that he will be permitted to carry

out the work and therefore, since he has spent money

for the same, he must get the amount which is claimed

for having spent on the material. We are of the view

that insofar as the appellant has not used any of the

materials to carry out the work and sets up the claim

only on the basis of assurance which has not been

admitted, the action of the appellant in purchasing

87 the materials cannot result in establishing his claim

for compensation. It is to be noticed that the

appellant raised a claim for enhanced compensation.

He alleged that there was delay on the part of the

respondent on various grounds. This is apart from

alleging other factors like breakout of malaria,

unfavourable weather and delay in taking decision by

the departmental officers, which contributed to

escalation in cost. Correspondence was exchanged

with the Executive Engineer and the Superintending

Engineer, the Superintending Engineer and the Chief

Engineer and finally between the Chief Engineer and

the Government. It appears that at that stage

appellant invoked the arbitration clause and a panel

of arbitrators gave their award. In fact, the work

itself was stopped. Clause 59 prevents the Court

from awarding compensation on account of any factor

relating to the delay which may be due to any cause

whatsoever. In such circumstances, we are of the

88 view that the appellant has also not made out any

cause for compensation in regard to this claim.

CLAIM NO.IX

88. As far as the question relating to interest

is concerned, the arbitrator has awarded interest at

12% from the date of the claim but excluded interest

from commencement of proceeding till date of award.

The question relating to interest is no longer res

integra as we find that the issue has been dealt with

in a recent judgment of this Court in Assam State

Electricity Board & Ors. v. Buildworth (P) Ltd.

reported in 2017 (8) SCC 146 to which one of us was a

party. As long as the agreement between the parties

does not prohibit grant of interest and the matter is

referred to the arbitrator, arbitrator would have

power to grant interest pendente lite. The Court

inter alia held as follows:

“21. The next aspect of the matter relates to the award of interest for the period from 7-3-1986 to 31-12-1997. The arbitrator awarded a lump sum of Rs.20 lakhs for a period of 11 years. The High Court set aside the award of interest on the ground that Section 29 of the Arbitration Act, 89 1940 contemplates the award of interest only from the date of the decree. The issue as to whether interest could be awarded for the pre-reference period and pendente lite under the Act of 1940 is not res integra. In Irrigation Deptt., State of Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508, a Constitution Bench of this Court held that: (SCC pp.533-34, para 44)

“44….. Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount of independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes – or refer the dispute as to interest as such – to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.”

89. The sub Court set aside the award of

interest for the period from 26.4.1988 till the date

of the award namely 19.8.1988 which is the pendente

lite interest. This is on the basis that arbitrator

has no power to award interest on amounts found due.

90 This is purportedly followed in the judgment of this

Court in Smt. Aruna Kumari vs Government Of Andhra

Pradesh And Anr. reported in AIR 1988 SC 873. This

Court took the view that entering upon reference is

to be taken as the date of commencement of

arbitration proceedings for calculation of interest.

And this Court took the view therein that there is no

power to grant interest from the date of commencement

of arbitration. However, in view of the decision in

Jugal Kishore Prabhatilal Sharma vs. Vijayendra

Prabhatilal Sharma 1992 (1) SCC 508 as followed in

The National Highways Authority vs. Afcons-Apil

Joint Venture 2017 (8) SCC 146, the sub Court was

not justified in setting aside interest and the

interest as awarded by the arbitrator is restored.

90. Accordingly, we partly allow the appeals.

The award in so far as it relates to Claim No.I, as

accepted by the sub-Court is restored along with

interest on the same as awarded by the arbitrator.

The amount shall be calculated and paid within two

91 months of production of certified copy of this

judgment.

..…………………………….CJI.

(Ranjan Gogoi)

...…………………………….J. (Sanjay Kishan Kaul)

……………………………J. (K.M. Joseph) New Delhi;

March 27, 2019

92