Union of India, Public v. M/s R. B. S. Candiaparkar & Ors

:2: Heard Shri M. Amonkar, learned Central Government Standing Counsel appearing for the appellants and Shri R. G. Ramani, learned Central Government Standing Counsel appearing for the respondent.

The above appeal challenges the judgment passed by the learned District Judge, North Goa, Panaji, in Civil Misc. Application No. 22/2008, whereby an application under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after referred to as 'the Arbitration Act' ) filed by the appellants came to be rejected.

Briefly, the facts of the case are that by an agreement dated 31.08.1999, executed between the appellants and the respondent for the work of construction of the office building and residential quarters for the Mercantile Marine Department of Mormugao, work was awarded to the respondent as per the terms and conditions mentioned therein. The agreement also contain an arbitration clause to refer any disputes to arbitration. As a dispute arose between

the parties, the respondent invoked the arbitration clause and :3: as the appellants did not appoint an arbitrator despite of such request, an application was moved to this Court under Section 11(6) of the Arbitration Act which was allowed by order dated 04.08.2006 whereby a sole Arbitrator was appointed. The parties put up their respective claims before the said Arbitrator and after hearing the parties in accordance with law, the learned Arbitrator passed an award dated

08.11.2007. The appellants filed an application under Section 34 of the Arbitration Act challenging the said award dated 08.11.2007 passed by the sole Arbitrator on the ground that the Arbitrator was not justified not to accept the compensation for the delay as determined by the Superintending Engineer. After hearing the parties, the learned District Judge by the impugned judgment dated

04.06.2010 rejected the application filed by the appellants. Being aggrieved by the said judgment, the appellants preferred the above appeal.

Shri. M. Amonkar, learned Central Government Standing Counsel appearing for the appellants has assailed the impugned judgment only on two counts. The learned Counsel has taken me through Clause 25 of the agreement executed between the parties and pointed out that such :4: Clause itself begin with an exception to refer the matters to the Arbitrator which are otherwise to be decided by the Superintending Engineer. The learned Counsel has thereafter taken me through Clause 2 of the said agreement and pointed out that the said Clause itself contemplates that any compensation to be paid on account of the delay in completing the work was to be determined by the Superintending Engineer and as such, the order was binding between the parties and was final. The learned Counsel further pointed out that the learned Arbitrator has in fact encroached into the jurisdiction of the Superintending Engineer by coming to the conclusion that there was no delay in completing the work as according to the learned Arbitrator the delay, if any, could not be attributed to the respondent. The learned Counsel further pointed out that this was not an arbitral dispute which could be adjudicated by the learned Arbitrator as according to him, such matter was to be decided only by the Superintending Engineer. The learned counsel as such submits that the impugned award passed by the learned Arbitrator deserves to be set aside.

Next contention of Shri Amonkar, learned counsel appearing for the appellants is that in view of the Section :5: 28(b) of the Contract Act, the claim of the respondent is time barred. The learned counsel has pointed out that the Clause itself envisages that any such claim has to be put forward within 120 days from the date of filing of the claim and as such, according to the learned counsel as no such claim was put forward within the said period, the amount, if any, claimed by the respondent stands forfeited in favour of the appellants. The learned counsel further pointed out that this aspect has been erroneously considered by the sole Arbitrator and as such, the impugned award passed by the learned Arbitrator deserves to be quashed and set aside. The learned counsel further brought to my notice that the final bill was prepared on 13.10.2003 whereas the claim put forward by the respondent was only on 12.09.2005 which according to him was beyond the period of 120 days as provided in Clause 25 of the said agreement. The learned counsel thereafter has taken me through the impugned judgment and pointed out that the learned Judge has failed to appreciate the submissions of the appellants in a proper prespective and as such, the impugned award deserves to be quashed and set aside.

Shri Ramani, learned counsel appearing for the :6: respondent has supported the impugned judgment. The learned counsel has pointed out that what is provided in Clause 2 of the said agreement is that only the quantum of the compensation on account of delay is to be fixed by the Superintending Engineer. The learned Counsel further pointed out that it is the case of the respondent that they had completed the work on 16.09.2001 whereas the contention of the appellants is that the work was completed on

29.11.2001. This dispute according to the learned counsel is to be decided by an Arbitrator. Apart from that, the learned counsel has further pointed out that whether the delay is to be attributed to the respondent or not is a matter to be decided by the learned Arbitrator. The learned counsel has taken me through Clause 2 of the said agreement and pointed out that this dispute raised by the appellants does not come within the ambit of the said Clause of the agreement. The learned Counsel as such submits that the contention of the learned Counsel appearing for the appellants to the effect that the dispute adjudicated by the learned Arbitrator is without jurisdiction cannot be accepted as according to him the learned Arbitrator has rightly assessed the evidence on record and has correctly interpreted the Clauses to come to the conclusion that the :7: dispute is arbitrable by the learned Arbitrator. The learned counsel as such submits that the said contention of Shri Amonkar, learned Counsel appearing for the appellants deserves to be rejected.

With regard to the second contention of the learned Counsel appearing for the appellants, Shri Ramani, learned Counsel appearing for the respondent points out that such contention, if any, does not defeat the right reserved to raise an objection within the provisions of Section 34 of the Arbitration Act. The learned counsel has taken me through the provisions of the Arbitration Act and pointed out that such contention cannot be raised by the appellants as an objection to an award passed by the learned Arbitrator. The learned Counsel however points out that the contention of the appellants that the claim is time barred cannot be accepted. The learned Counsel has pointed out that the claim put forward by the respondent is within the time prescribed under the law and in any event, reading the provisions of Section 28(b) of the Contract Act, no time limit can be fixed as provided in the said agreement. The learned Counsel further pointed out that reducing the period contemplated under the Limitation Act and any such period waived would :8: be void. The learned Counsel as such submits that no interference is called for in the impugned judgment.

I have carefully considered the submissions of the learned counsels appearing for the respective parties. A short point for consideration in the present appeal would be to ascertain as to whether the disputes which have been arbitrated by the learned Arbitrator come within the scope of Clause 25 of the said agreement. Clause 25 of the said agreement reads thus : “CLAUSE 25 – Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in-before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the :9: execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter : i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Superintending Engineer in writing for written instruction decision.

The contention of Shri Amonkar, learned counsel appearing for the appellants is to submit that the claim put forward by the appellants comes within the exception as provided in the said Clause. The exception provided in the agreement relied upon by Shri Amonkar, learned Counsel appearing for the appellants is Clause 2 of the said agreement which reads thus :

CLAUSE 2 – If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract or extended date of completion, he shall, without prejudice to any other right or remedy available under the law to the :15: Government on account of such breach, pay as agreed compensation the amount calculated at the rates stipulated below or such smaller amount as the Superintending Engineer ( whose decision in writing shall be final and binding ) may decide on the amount of tendered value of the work for every completed day/week ( as applicable) that the progress remains below that specified in Clause 5 or that the work remains incomplete. This will also apply to items or group of items for which a separate period of completion has been specified. i) Completion period (as originally stipulated) not exceeding 3 months. @ 1% per day ii) Completion period ( as originally stipulated) exceeding 3 months. @ 1% per week. Provided always that the total amount of compensation for delay to be paid under this Condition shall not exceed 10% of the Tendered Value of work or of the Tendered Value of the item or group of items of work for which a separate period of completion is originally given. :16: The amount of compensation may be adjusted or set-off against any sum payable to the Contractor under this or any other contract with the Government.

On plain reading of the Clause 2 of the said agreement, I find that only claim which can be determined by the Superintending Engineer would be the quantum of the amount payable by the respondent in which there is a delay in completing the work. On perusal of the claims put forward by the respondent which have been accepted by the learned Arbitrator, I find that the Claim no.1 is with regard to the amount payable by the appellants on account of an erroneous preparation of the final bill. The other amounts are on account of the damages for the breach committed by the appellants which resulted in extra over head expenses to the respondent. These claims of the respondent by no stretch of imagination can come within the exception as provided in Clause 25 of the said agreement. Apart from that, as stated herein above, Clause 2 of the said agreement relied upon by Shri Amonkar, learned Counsel appearing for the appellants does not come within its ambit the claims adjudicated by the learned Arbitrator. The learned Judge whilst passing the :17: impugned judgment has rightly appreciated the material on record and has come to the conclusion that the dispute raised by the respondent was arbitral within Clause 25 of the said agreement. I find no fault in the impugned judgment on that count. The learned Judge whilst passing the impugned judgment has rightly relied upon the judgments of the Apex Court referred to therein. The ratio laid down therein clearly applies to the facts of the present case and as such, the first contention of Shri Amonkar, the learned counsel deserves to be rejected. On going through Section 28(b) of the Contract Act, the Clause relied upon by Shri Amonkar, learned counsel has to be considered as null and void. In any event, such an objection does not come within the scope of Section 34 of the Arbitration Act. The learned Judge has rightly considered the said aspect and rejected the said objection raised by the appellants. In view of the provisions of Section 28 of the Contract Act, such Clause, if any, is null and void and in any event, the objection of the appellants would not come within the scope of Section 34 of the Arbitration Act. The learned Arbitrator has also dealt with the said aspect and has come to the conclusion that the claim put forward by the respondent was within the period prescribed in law. :18: