The State of M.P. & Another Vs M/s. Sew Constructions Ltd.,M/s. Sew Constructions Ltd. Vs State of M.P. & Another

Chhatisgarh High Court (Single Judge)

ACQA->ACQUITTAL APPEAL [ APPEAL U/S 378 ], 3 / 20 0 0 ,14 / 20 0 0 of 2015, Judgment Date: Feb 19, 2015

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HIGH COURT OF CHHATTISGARH AT BILASPUR
Civil Revision No . 3 / 20 0 0
Petitioners : The State of M.P. & Another
VERSUS
Responden t : M/s. Sew Constructions Ltd.
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Present: Mr. B.Gopakumar with Mr. S.C.Khakharia, Dy. A.G. for
the State/Petitioners.
Mr. V.R.Rao, Senior Advocate with Mr. Ashok Mishra,
Advocate for the Respondent.
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&
Civil Revision No . 14 / 20 0 0
Applicant : M/s. Sew Constructions Ltd.
VERSUS
Non-applicant s : State of M.P. & Another
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Present: Mr. V.R.Rao, Senior Advocate with Mr. Ashok Mishra,
Advocate for the Applicant.
Mr. B.Gopakumar with Mr. S.C.Khakharia, Dy. A.G. for
the State/Non-applicants.
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SB: Hon’ble Shri Goutam Bhaduri, J.
ORDER
(Passed on 19th February, 2015)
1. Both the revisions are being decided together by this common order as
common question of law and facts are involved and arises of a common
award. One revision is by the State Government and another revision is
by the Contractor against the Award dated 23rd Sept. 1999 passed by the
Madhya Pradesh Arbitration Tribunal, Bhopal, in Reference Case
No.208/1991.
2. Undisputed facts of the case are that the contract for construction of
Power Dam Blocks 14 to 17 of Hasdeo Bango Dam was awarded to M/s.
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Sew Constructions Limited under Agreement No.5 DL 80-81. The order of
work was issued on 27.03.1981 and the period of completion was 32
months excluding rainy season and thereby the date of completion was
fixed on 31.03.1985. For the different reasons, the delay caused and the
work was completed on 30.06.1988. On account of prolongation of the
work, the contractor Sew Constructions, attributed it to the State
Government and submitted that because of such extra prolonged work
they had incurred extra expenditure on account of different escalation to
the prices, head office and site office establishment etc., transportation
procuring material at higher cost and pay more interest on the mobilization
and on different heads. Therefore, claim for Rs.69,76,000/- was made by
the contractor. The claim was preferred before the Arbitration Tribunal at
Bhopal. The value of contract was 461.43 Lacs plus escalation of the
prices.
3. The contractor preferred the claim on five heads which are shown as
under :
(i) Removal of sand : Rs.20,000/-.
(ii) Extra cost of construction of masonry at the downstream 30.00M to
50.50M Axis.
(iii) Overheads : Rs.29,76,000/-
(iv) Refund of excess interest recovered on the mobilization and
machinery advance : Rs.7,19,047/-
(v) Extra expenditure during the prolonged period contract – Difference
in actual increase of market rates and to that received by way of
price adjustment clause.
Under head No.(i) a sum of Rs.20,000/- was awarded, under head
No.(ii) a sum of Rs.27,500/- was awarded, under head No.(iii) a sum of
Rs.4,87,446/- was awarded. The claim No.(iv) of Rs.7,19,047 was
rejected and on the claim No.(v) an award of Rs.15,96,073/- was passed.
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Thereby, the total claim of Rs.21,31,091/- was allowed together with the
costs and interest @ 12% per annum from the date of presentation of the
petition. The cost of Rs.10,000/- was also awarded in favour of the
petitioner as counsel's fee.
4. Against such award, the revision is preferred under Section 19 of M.P./
C.G. Madhyastham Adhikaran Adhiniyam, 1983. The State Government in
its revision admitted the claim No.1 to 4 while with respect to the claim
No.5 is under challenge by way of the instant petition. Likewise the
contractor had challenged the award that the Tribunal has not awarded
Rs.52,16,303/- on account of extra lead of stone. It was further stated that
as per the contract, the stone which were to be procured for the Dam, the
petitioner contractor had to bear extra cost for the fault to State
Government on faulty inputs and therefore the award should have
included such amount.
5. Learned counsel for the State would submit that according to the contract
clause 4.3.14 and 4.3.35, the Tribunal could not have granted the amount
for the extended period of work as it will amount re-writing the contract
terms. It was submitted that the delay if any had caused, the State cannot
be held responsible for it. He further submits that the interest is too also
on the higher side which could not have been granted by the Tribunal.
6. Per contra, learned senior counsel appearing for the contractor would
submit that the Tribunal in its judgment has categorically reached to a
finding of facts on the issues which are based on the evidence placed
before it. He would further submit that this Court in exercise of its
revisional jurisdiction may restrain itself to go into such fact finding which
are arrived after due consideration of the evidence by the Tribunal. He
further placed his reliance in AIR 1974 M.P. 179, AIR 2014 DELHI 147 &
1992(1) Arbitration Law Reporter Page 147 and stated that the order
passed by the Tribunal is based on admission and recommendation made
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by the Superintending Engineer as per clause 4.3.29 as the
Superintending Engineer has recommended for escalated price to be paid
which reached its finality according to the terms of contract as no
challenge is made to such recommendation. Therefore, it would be within
the terms of 4.3.29 of the contract that in case any dispute the decision of
the Superintending Engineer would be final. Therefore, he would submit
that in the instant case too, the Superintending Engineer having
recommended, that part of recommendation shall be final and the State
cannot challenge it. He further submits that the Arbitration Tribunal,
however, failed to take into account the extra amount incurred on account
of procurement of stone for completion of the Dam project. Therefore, the
said amount should have been included in the award.
7. I have heard the learned counsel appearing for the parties, perused the
documents, award and contract agreement.
8. It is not in dispute that delay has been caused in completion of the project.
Now the question is as to on whose account the delay was caused.
9. The learned Tribunal has dealt the issue initially at para 11.9 of its award.
As per the record, the petitioner submitted his claim by letter P-27 which
was sent by Superintending Engineer vide Annexure A-25 wherein the
Superintending Engineer had admitted the reasons for delay which are
shown herein below :
“(i) Receipt of construction drawings from CWC in Nov.
'83 i.e., after a lapse of about three years from the date
of work order.
(ii) The agency for adjacent blocks 18 to 22 was fixed
in Sept. '82 i.e., after 1 ½ years of this agreement
delaying starting of masonry in block 17, though
excavation of foundation in block 17 was completed by
the contractor by Apr. '82. The excavation of foundation
for block 18 was completed in Jan '83 only after which
the masonry work in block 17 was possible.
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(iii) One seam was met with in block 13 requiring
special treatment in consultation with CWC as per
advise of the DRP and Geologists. The final seam
treatment in block 13 could not be finalised before Dec.
'84 delaying starting of masonry work in block 14,
though excavation for foundation was completed well
within time.
(iv) Drawing for excavation of power house pit was
received from CWC in Jan '83. The agency for
excavation of the trench for penstock housing was fixed
in Oct. '83 which failed to turn up, hence this work was
also allotted to the petitioner on 17.11.83. For want of
excavation for penstock housing, raising of power
blocks to full width was not possible because it
necessitated safe blasting distance from toe of the
power dam. This was possible only after Jan.'84, thus
delaying masonry work.
(v) Work on power dam blocks, being in flanks, was
ordered by Chief Engineer to be slowed down due to
paucity of funds during working seasons of 1983-84
and 1984-85.
(vi) The tender for penstock liner was finalised in Apr.
'85. The work on the power dam blocks 15 to 17 had to
be stopped at El. 323.5M. He suggested that fixing of
horizontal portion of steel liners may be possible
earliest by March '86 and curved portion of penstock
liners cannot be placed in position before June '86 as
final level of the liners are not yet finalised by CWC.
Hence, further raising of power blocks 15 to 17 beyond
present level is not possible before March '86, which
will further delay the work of concreting.
(vii) Construction drawing for trash racks reinforcement
around penstock and anchor blocks etc., were received
in Jan. '85, but still drawing and details for downstream
anchor block is awaited.”
10. Therefore, the delay was admitted by the State for the reasons stated
therein. Reading of the clause referred by the State counsel i.e. 4.3.14
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and 4.3.34 would go to show that 4.3.14 pertains to no claim to any
payment or compensation for “alteration in or restriction of works”,
whereas, 4.3.34 pertains to no compensation shall be allowed for any
delay caused in starting of the work on account of acquisition of land or in
case of clearance works, on account of any delay in according sanction to
estimates.
11. In light of this admission made by the Superintending Engineer as per
Annexure A-27, it is clear that delay were not attributed for any reasons
shown in the contract as 4.3.14 or 4.3.34 but the reasons were otherwise.
Therefore, the submission made by the State counsel that grant of
compensation by the Tribunal will be over-writing the terms of contract
4.3.14 and 4.3.34 cannot be accepted.
12. The petitioner's contention was that rates were quoted taking into account
the period of contract of 32 months i.e. in March, '85. It was also case of
the contractor that rates of petroleum, oil lubricant and other raw materials
had considerably increased between the period of contract, therefore, as
would appear from the records, the contractor choose to stop the work
after expiry of the stipulated period and sent a claim by Annexure P-27
and increase of 43% was asked for. The contractor sent a letter P-29 on
06.05.1985 to the Superintending Engineer informing him that it is not
possible for the contractor to continue work at the existing rates, but it
shall continue to work upto end of June '85 with the expectation that the
revised rate could be paid in the extended period of contract. It was further
stated that if the contractor's offer is not considered just and reasonable
and decision is not communicated before 30.06.1985, the contractor will
close the work. The communications shows that the contractor however
was persuaded to continue the work on the assurance that the revision of
rate shall be recommended and was asked to continue the work.
Thereafter, vide letter P-36 on 21.04.1986, the Chief Engineer
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recommended to the Government for revision of rates. Therefore, on the
basis of such document, the learned Arbitration Tribunal came to a
conclusion that both the parties were expressed their opinion and desire
to continue the work and in lieu assurance that the rate would be revised.
The learned Tribunal therefore while considering such aspect has came to
finding of fact that no doubt that once the Superintending Engineer
informed the petitioner/contractor that they cannot accept the prayer for
revision of rate since there was no provision in the contract but in the very
letter specifically mentioned that the orders on issue of revision of rates
were being obtained from the competent authority and their decision shall
be conveyed to the petitioner. Therefore, the Tribunal has came to a
conclusion that the project was delayed of 26 ½ months of which 13
months was attributable to the State.
13. The contract clause 4.3.29 if is seen, it speaks about decision of
Superintending Engineer to be final except where otherwise specified in
the contract. Reading such clause along-with the recommendation of the
Superintending Engineer, it will lead to draw inference that Superintending
Engineer assured for the revised rates for the extended period which
escalated and therefore the contractor having worked on the assurance of
the Superintending Engineer would be saved under clause 4.3.29 of the
contract besides would be governed by the principles of promissory
estoppel. Therefore, it cannot be stated that the contractor was not
entitled for the escalated price which increased during the extended
period of contract.
14. Furthermore, it is settled proposition of law that in challenge of award in
revision, the scope of judicial interference is limited. It is a trite law that
the Court could not substitute its view in place of the interpretation
accepted by the Arbitral Tribunal. It was reiterated that the Arbitral
Tribunal is legitimately entitled to take the view which it holds to be correct
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one after considering the material before it and after interpreting the
provisions of the Agreement. Herein in this case, reading of the award
would go to show that the Arbitration Tribunal has done it after going
through the record and therefore on appreciation of evidence it would not
be proper for this Court to sit in appeal over the award of an Arbitration
Tribunal by reassessing or reappreciating evidence and it will not be
proper to re-examine the facts again in the different angle. The legal
position is also no more res integra that the Arbitrator having been made
the final Arbiter of resolution of dispute between the parties, the award is
not open to challenge on the ground that the Arbitrator has reached a
wrong conclusion. If the Court start analyzing the contract between the
parties and interpreting the terms and conditions thereof and which will
necessarily have to be in light of the contemporaneous conduct of the
parties, it will be nothing else than sitting in appeal over the arbitral award,
which in the considered opinion of this Court is not permissible.
15. Recently, the Delhi High Court in case of Delhi Development Authority
v. M/s. Bhardwaj Brothers reported in AIR 2014 DELHI 147 has laid
down that it cannot also be lost sight of that non-conferring of finality on
the arbitral awards not only affects the speed and expense of arbitration
but also has a more subtle consequences of, extensive judicial review
changing the nature of the arbitral process to an even greater extent. If
arbitration becomes simply another level of decision making, subject to
judicial review on merits, arbitrators may begin to decide cases and write
opinions in such a way as to insulate their awards against judicial reversal
producing opinions that parrot (sic) the appropriate statutory standards in
conclusory terms, but suffer from a lack of reasoned analysis.
16. The arbitration will not survive, much less flourish, if this core precept is
not followed through by the Courts. The integrity and efficacy of arbitration
as a parallel dispute resolution system will be subverted if the Courts
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appear unable or unwilling to restrain themselves from entering into the
merits of every arbitral decision that comes before it.
17. Reading of the award in this case would go to show that the Arbitration
Tribunal has meticulously gone into every aspect of the issue and has
passed an award and therefore in my opinion the judicial interference to
re-appreciate the evidence and record is uncalled for. Consequently, both
the revision filed by the State and the Contractor sans merit.
18. Now coming to the part of the interest, reading of the agreement clause
3.2.4 shows that for Mobilization, Plant and Machinery the advances were
to be made and it was carried interest @ 14% per annum. The Tribunal
has awarded 12% per annum as pendente lite interest. On the merits of
the claims made by the contractor, it is found that the Tribunal has
meticulously examined the claims of the contractor under each separate
head. I do not see any reason to interfere except on the rates of interest
awarded. As has been held in case of Krishna Bhagya Jala Nigam Ltd.
v. G. Harischandra Reddy & Another reported in (2007) 1 SCC 720,
after the economic reforms in our country the interest regime has changed
and the rates have substantially reduced and accordingly I am also of the
opinion to follow the guidelines as laid down by the Hon'ble Supreme
Court and consequently reduced the quantum of interest to the extent of
9% per annum in view of the substantial reduction of interest rates in the
country.
19. As a result, the revisions have no merit and are accordingly dismissed
with the aforesaid observation.
JUDGE