CORAMTHE HONOURABLE MR v. The State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 19-8-2009CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHOSA Nos.441 of 2003 and 274 of 2004andCMP No.7678 of 2004 in OSA 441 of 2003Y.SavarimuthuEngineers and ContractorsNo.30, Viswasapuri 3rd StreetMadurai 625 016... Appellant in OSA 441/2003 and 1st respondent in OSA 274/2004vs1.The State of Tamil Nadu rep. By Secretary Public Works Department Government of Tamil Nadu Fort St. George Chennai 600 009.2.The Chief Engineer (H) TNUDP, Alandur, Chennai 600 016.3.The Superintending Engineer (H) TNUDP, Circle Chennai 600 015... Respondents 1 to 3 in OSA 441/2003 and appellants in OSA 274/2004 4.S.P.Krishnamoorthy Retired Chief Engineer (Highways) Chairman, Arbitration Committee Tamil Nadu5.S.Vedachalam Retired Chief Engineer (Highways) Member, Arbitration Committee Tamil Nadu https://hcservices.ecourts.gov.in/hcservices/

6.N.R.Jayavelu Retired Chief Engineer (Highways) Member, Arbitration Committee Tamil Nadu.. Respondents 4 to 6 in OSA 441/2003 and respondents 2 to 4 in OSA 274/2004Original Side appeals preferred under Order 36 Rule 1 of theO.S. Rules 1994 read with Clause 15 of the Letters Patent against theorder and decree dated 29.10.2003 made by this Court in O.P.Nos.419and 391 of 2000.For Appellants: Mrs.Kahilavani for Mr.S.Ravichandran for appellant in OSA 441/2003 and 1st respondent in OSA 274/2004For Respondents: Mrs.V.Bhavani Subbarayan Special Government Pleader(CS) Assisted by Mrs.ShanthiRakkappan for respondents1 to 3 in OSA 441/2003 &appellants in OSA 274 of2004COMMON JUDGMENT(Judgment of the Court was delivered by M.CHOCKALINGAM, J.)These two appeals challenge a common order of the learned SingleJudge of this Court made in O.P.Nos.391 and 419 of 2000 whereby anaward made by the arbitrators shown as respondents 2 to 4 in OSA274/2004, was challenged both by the Contractor and also by the Staterespectively.2.The appellant in OSA 441/2003, namely the petitioner in OPNo.419/2000, a Contractor, who was awarded the work of widening of 4lanes Inner Ring Road Madras City. The contract amount was fixed atRs.1,34,93,368/- and the contract period was fixed at 15 months. Thecontract was given on 10.11.1988, and the same was completed on18.11.1991. The contractor has raised certain disputes on thegrounds that there was a delay in handing over the site, and also hewas entitled to escalation charges and loss of profit. The Governmentquestioning the same made G.O.Ms.No.11/PWD/HN2 dated 1.6.1996,whereby a Committee was constituted consisting of the respondents 2to 4 as arbitrators. The following claims were made by the contractor.(1) Idling charges for the plants due to default of the department of Rs.19.20 lakhs.(2) Balance payment due to escalated cost of Rs.27.47 lakhs. https://hcservices.ecourts.gov.in/hcservices/ (3) Extra lead charges for the mix from Thiruneermalai site of Rs.3 lakhs.(4) Withheld amount in the bill of Rs.3 lakhs.(5) Loss of overhead charges of Rs.11.70 lakhs.(6) Loss of profit to the extent of work executed of Rs.11.70 lakhs.(7) Interest on the amount due for 13 months at 24% p.a. to the extent of Rs.19.78 lakhs.3.The said claims were opposed by the Government. Afterconsidering the claims, an award was passed by the arbitratorswhereby the claims made by the contractor in respect of (1) idlingcharges, (3) extra lead charges and (6) loss of profit, wererejected, and the claims in respect of escalation charges, refund ofwithheld amount, loss of overhead charges and interest were allowed. 4.Aggrieved over the denial of the claims, the contractor filedOP No.419/2000, while the Government has filed OP 391/2000 to setaside the award in toto. 5.The learned Single Judge raised the point for considerationand dismissed OP 391/2000 at the instance of the State, and OP419/2000 by the contractor was allowed in part. Under the claim (5)loss of overhead charges, it was found that the contractor wasentitled to Rs.1.92 lakhs, and in respect of claim (3) extra leadcharges, he was entitled to Rs.3 lakhs, and as regards claim (1)idling charges, the same was rejected. Hence these appeals.6.Advancing the arguments on behalf of the appellants in OSA274/2004, the learned Special Government Pleader for the State wouldsubmit that the learned Single Judge has not considered that thearbitral tribunal's power to adjudicate the dispute emanates onlyfrom the reference, and hence the tribunal should have adjudicatedthe issue only within the scope of reference; that the learned SingleJudge has also committed an error in relying on a judgment of theDivision Bench of this Court; that actually there was no escalationclause in the contract, and therefore, the contractor was noteligible for any escalation; that in such circumstances, the counterclaim made by the appellant's side, should have been accepted; thaton merits the claim for a sum of Rs.1,32,824/- awarded by thearbitral tribunal under the head of loss of overhead charges shouldhave been disallowed; that the specific stand of the departmentbefore the tribunal was that the contractor has "already built in thecost" of overheads into his quoted price; that the same was as perthe contract condition clause 3A of Column 3; that any furtherpayment over and above would amount to double benefit to thecontractor; that having upheld the payment of escalation beyond theperiod of original completion of the contract, the arbitral tribunalerred in allowing the overhead charges also which could only amountto double benefit to the contractor, and hence the learned SingleJudge should have set aside the award made by the arbitral tribunalin that regard; that the amount has also been increased fromRs.1,32,824/- to Rs.1.92 lakhs; that the arbitral tribunal has https://hcservices.ecourts.gov.in/hcservices/ allowed a sum of Rs.1,32,824/- on the ground that soon after theexecution of the contract, the contractor in his claim statement tothe department on 27.5.1992, had made a claim of only Rs.1,32,824/-;that thereafter, without prejudice even if the contractor is held tobe eligible for any amount under the head of loss of overhead, thesame ought to have been confined only to Rs.1,32,824/-; thatupholding the award of arbitral tribunal in allowing a sum ofRs.2,95,567/- on the claim by the contractor towards quality controlcharges of testing was erroneous; that it was against the terms ofconditions between the parties and was liable to be set aside; thatthe learned Single Judge has allowed a claim of Rs.3 lakhs under thehead 'extra lead' when the same has not even been claimed by thecontractor, in OP 419/2000; that the contractor has consciously givenup the claim on the head of lead charges; that awarding a sum of Rs.3lakhs to the contractors was actually without appreciation of thecontract conditions; that the contractor has also not proved by wayof positive evidence, and under the circumstances, the order of thelearned Single Judge has got to be set aside.7.Advancing arguments on behalf of the appellant in OSA441/2003, the learned Counsel would submit that as far as the firstclaim was concerned, the Government did not hand over the site to thecontractor immediately; that as early as 18.11.1991, the contractoraddressed a letter to the Chief Engineer, Highways, TNUD Project, inwhich he has stated that the possession of the site was given only on10.7.1989 after a delay of 8 months; that the designs and drawingsfor the culvert and re-alignment for the road portion were notsupplied; that after taking over the site, the pre-levels should havebeen given for proceeding with the work, but that was given only on25.9.1989, and that too for part of the site only; that the rest ofthe levels were approved only on 4.11.1989; that apart from that,there were many obstructions on the site like electricity board post,telephone post, transformer and encroachment made by the petty shopowners due to which the work was delayed and since the contractorincurred loss, he is entitled to claim escalation; that the learnedSingle Judge has rejected the claim on the ground that the contractorhad not produced any documentary evidence to establish that themachineries which had been hired were stationed in the work site, andfurther the arbitral tribunal has found that documentary evidence forpayment of hire charges to the owners of the plant and machinery hadnot been produced and therefore the claim was rejected; that it ispertinent to point out that in the claim statement, the contractorhad given the statement showing the idling charges per day, and asper the statement it was coming to Rs.6000/- per day; that there wassufficient evidence on record to show that there were 320 days forwhich the department was liable to pay the idling charges; that hemade a claim of Rs.19.20 lakhs; that the rejection of the claim bythe atbitral tribunal and also the affirmation by the learned SingleJudge were not correct which has got to be set aside; that as far asthe claim 6 was concerned, a sum of Rs.11.70 lakhs was claimed; thatthe same was also rejected; that when the tenders were called for andawarded, the contract stipulated that the entire work was to becompleted in 15 months; that on that basis, the contractor worked out https://hcservices.ecourts.gov.in/hcservices/ his overheads at 10% and the profit at 10% on the contract value;that accordingly, overheads and expenditure were regulated; thatsince the completion period was prolonged from 15 months to 28 monthsand since by virtue of the conditions of the contract, the contractorwas not permitted to move out his men and materials, and he lostRs.0.90 lakhs per month, and therefore the total loss was Rs.11.70lakhs; and that the appellant was entitled to this amount; but thelearned Single Judge without assigning proper reasons has rejectedthe same. The learned Counsel in support of her contentions reliedon a decision of the Apex Court reported in 2007 (2) SCC 720. 8.The learned Counsel would further add that in similar cases inOSA Nos.312 and 313 of 2002 by a judgment dated 28.3.2002, the claimof similarly placed contractor has been allowed, and hence, all theseclaims have got to be ordered.9.This Court paid its anxious consideration on the submissionsmade and also looked into all the materials and in particular, theorder under challenge.10.As could be seen above, the appellant contractor was awardedwith the work of widening of 4 lanes Inner Ring Road of Madras City.Admittedly, the contract value was fixed at Rs.1,34,93,368/- and thecontract period was 15 months. Though the work was given on10.11.1988, the same was completed on 18.11.1991, and thus there wasa delay of 13 months. When certain disputes were raised by thecontractor, the Government denied the same, and the arbitralcommittee was appointed, before whom the contractor made 7 claims,out of which the arbitral tribunal rejected the claims 1, 3 and 6,which compelled the contractor to file OP No.419/2000. Equally inrespect of the claims which were found in favour of the contractornamely claims 2, 4, 5 and 7, the State was aggrieved and has filed OPNo.391/2000. 11.As far as the first claim of Rs.19.20 lakhs towards idlingcharges for the plant and machinery was concerned, according to thecontractor before the learned Single Judge and equally here also, itwas due to default committed by the department by causing delay. Thelearned Single Judge has affirmed the rejection of the claim made bythe arbitral tribunal on the ground that no documentary evidence wasadduced in order to accept the same. The learned Single Judge hasalso pointed out that as per the claim of idling charges in respectof the machinery, the contractor had hired all machineries except onetipper, but in order to prove the same, he has not produced anydocumentary evidence to establish that these machineries werestationed in the work site, and thus he has incurred loss in thataspect, and under the circumstances, it cannot be accepted. It isnot in controversy that the work was given on 10.11.1988. Since thesite was not handed over immediately, the contractor has addressed aletter to the Chief Engineer, Highways, wherein he has categoricallystated that the possession was given only on 10.7.1989 after a delayof 8 months. It was also contended that the designs and drawings forthe culvert and re-alignment for the road portion were not supplied, https://hcservices.ecourts.gov.in/hcservices/ and even after taking over the site, the pre-levels were given onlyon 25.9.1989, and that too only for a part of the site. Theobstructions were also to be removed, and thus there was delay. Theclaim was rejected solely on the ground that no documentary evidencewas produced showing that the machineries were either hired orstationed in the work site. But, in the claim statement, thecontractor has pointed out that the contractor was to bear Rs.6000/-per day towards idling charges, and there were 320 days for which thedepartment was liable to pay. Merely because on the ground of non-production of documentary evidence, the entire claim, in theconsidered opinion of this Court, cannot be rejected. But, at thesame time, claim of Rs.19.20 lakhs towards idling charges at the rateof Rs.6000/- and also that too for 320 days cannot be accepted infull. However, this Court feels that it could be fixed at Rs.10 lakhs.12.As far as the denial of claim 6 'loss of profit to the extentof work executed for Rs.11.70 lakhs' is concerned, this Court isunable to see any merit in that claim. The learned Single Judge hasaffirmed the award in respect of the claim of loss of overheadcharges to the extent of Rs.11.70 lakhs. The learned Single Judgehas pointed out that the contractor is not entitled to the loss ofprofit as if he has incurred any loss. If the claims made by thecontractor under claims 5 and 6 are allowed, it would be nothing butallowing the identical claims which are shown on two heads, and hencethis Court is unable to see any merit in that contention.13.As far as the claim 2 was concerned, it was for the balancepayment due to escalated cost. It is not in controversy that theGovernment had executed a supplementary agreement on 12.1.9993 longafter the bill and made the payment of Rs.10,72,661/- only on29.1.1993. The same was also received by the contractor underprotest. It is true that he has not taken any action to recover thealleged amount; but it should not be forgotten that he received thefinal bill under protest. Even the payment of Rs.10,72,661/- was notonly paid under protest, but also after the supplementary agreementwas entered into. 14.As far as the claim 3 as to the extra lead charges wasconcerned, as per the agreement, the Government was to provide allthe materials in 7 ½ kms from the work site, but actually thecontractor was to bring the materials from a place which was awayfrom the work site, and the contractor had actually incurred moreexpenses. In this regard, the Government had no satisfactory answer.Thus the learned Single Judge has recorded that for the extra leadcharges, Rs.3 lakhs was to be ordered and rightly too.15.Equally, as far as the claim 4 for refund of the withheldamount was concerned, the learned Single Judge has pointed out thatthe arbitral tribunal has found that the contractor has not committedany default in making any provision for the test; but there was noproof on the side of the Government that he has carried out thosetests. The Government was not able to show that there was anyspecific condition that the contractor should bear those costs. https://hcservices.ecourts.gov.in/hcservices/ Hence the recovery of the amount by the department was arbitrary, andhe was entitled for the refund of Rs.2,95,567/- which would representretention amount. 16.Insofar as claim 5, the contractor was entitled to claim thesame since the full unobstructed site which was the basic requirementfor the work, was not available. The arbitral tribunal awarded onlyfor Rs.1,32,824/- on that count. The learned Single Judge haspointed out that the contractor was entitled to Rs.1.92 lakhs thoughlesser amount has been awarded by the tribunal. This Court is of theview that the same need not be disturbed. 17.Equally as regards the contentions put forth by the State forsetting aside the order of the learned Single Judge, this Court isunable to notice any merit in the same, and the appeal by the Stateis liable to be dismissed.18.In the result, OSA 441/2003 is partly allowed setting asidethe order of the learned Single Judge in respect of claim 1, and theappellant is entitled to Rs.10,00,000/- (Rupees ten lakhs only) underthat claim. In other respects, the order of the learned Single Judgeis confirmed. OSA No.274 of 2004 is dismissed. The parties shallbear their own costs. Consequently, connected CMP is closed.Sd/-Asst. Registrar./True Copy/Sub-Asst. Registrar.nsvTo:1. The Sub. Asst. Registrat,Original Side, High Court, Madras.+ 1 cc to Spl. Govt. Pleader (cs) SR.No.39953.+ 2 cc to Mr.Ravichantran, Advocate, SR.No.40395, 40394AKR (CO)A.S./31.08.2009OSA Nos.441/2003 and274/2004