M/s Padmanathan Construction Company Private Limited, a v. The State of Jharkhand (earlier Bihar) through Executive Engineer, Water Resources Department

Judgment

1. Heard the learned counsel for the parties in both the cases. Both the cases arise out of common order dated 29.05.2007 passed in Misc. Case No. 2 of 2004, by the learned Sub-Judge I, Ghatshila wherein the State had challenged the arbitral award passed by the sole Arbitrator. Arbitration Appeal No. 16 of 2007 2. Arbitration Appeal No. 16 of 2007 has been preferred by the claimant against the part of the impugned order dated 29.05.2007 to the extent it has been held that the dispute based and related to the termination of contract was: - a. beyond the scope of submission to the learned arbitrator; 2 b. the arbitrator has not considered the terms of the contract i.e clause 51 which provides for an appeal before the Superintending Engineer against any decision of the Executive Engineer and the claimant having not exhausted the remedy, the dispute regarding termination as taken up by the learned Arbitrator was immature; c.

The dispute regarding termination of contract by the Executive Engineer was barred by limitation as the order of termination was received by the claimant on 18.03.1997 and claim was raised by the claimant before the learned Arbitrator in the year 2001. d. The dispute relating to termination of contract was barred by res- judicata – the claimant had requested the State to widen the scope of reference to include the decision of termination of contract which was not accepted by the State and two bank guarantees were invoked – the claimant filed application before the learned Sub-Judge to include the dispute regarding termination of the contract which was rejected vide order dated 19.08.2000 against which civil revision was filed before the High Court which was also withdrawn.

I.A. No. 574 of 2010 in Arbitration Appeal No. 16 of 2007 3. I.A. No. 574 of 2010 has been filed in Arbitration Appeal No. 16 of 2007 seeking amendment of the memo of appeal in view of subsequent event challenging the order dated 17.11.2009 passed by the learned court below in Misc. Case No. 2 of 2004 whereby application filed by the claimant under Sections 151 and 152 of the CPC seeking clarification of the impugned order dated 29.05.2007 has been decided. It has been submitted by the learned counsel for the claimant that the learned Sub Judge – I, Ghatshila, while setting aside the award to the extent it related to termination of contract, did not clarify as to which parts of the claim decided in the award were based and related to the termination of contract and in such circumstances the application under Section 151 and 152 of the CPC was filed.

He has submitted that the learned court below vide order dated 17.11.2009 has passed an order that the total amount of award payable to the claimant in connection with the part of the award not based any relatable to termination of contract would be Rs. 23,98,782.26 and upon deduction of counter claim of the State 12,68,450/- the net payable amount to the claimant would be 11,30,332.26 only. The learned counsel has submitted that the legality 3 and validity of the order dated 17.11.2009 will be required to be considered only in case this Court refuses to interfere with the impugned order setting aside the part of the award based and relatable to the termination of contract. The subsequent order dated 17.11.2009 is required to be considered on the grounds mentioned in the I.A.

No. 574 of 2010. He has submitted that only claim 4.1 was based and related to the termination of contract and therefore the remaining award ought not to have been disturbed by the learned court below while passing the

subsequent order dated 17.11.2009 which has been challenged vide I.A. No. 574 of 2010. 4. On the other hand, the learned counsel appearing on behalf of the State has submitted that the learned court below has wrongly confined the judgment to setting aside the part of the award which are based and relatable to termination of contract and in fact the entire award was fit to be set aside. The learned court below has not at all considered the grounds raised by the State in connection with challenge to the award to the extent of claims awarded to the claimant and the extent of counter claims denied to the State. Arbitration Appeal No. 03 of 2008 5. Arbitration Appeal No. 03 of 2008 has been preferred by the State for setting aside the remaining part of the impugned order dated

29.05.2007 passed by the learned Sub-Judge I, Ghatshila in Misc. Case No. 02/2004, whereby the learned court below has set-aside only that part of the arbitral award based and related to the termination of contract and has not considered the grounds for setting aside the award relating to the remaining part of the award. 6. The foundational background of the case as is reflecting from the impugned award is as under:- towards (a) The Government of India received credit from International cost of Subarnrekha Development of Association Multipurpose Project and the work was to be undertaken phase wise. As a sequel, tender for construction of two numbers of cross drainage work of Galudih Right Main Canal was invited, the tender submitted by the claimant was found to be the lowest and upon negotiation an agreement was executed on 27.02.1991 for a total value of work as Rs. 2,10,34,192.00; the work order was issued on 07.03.1991 stating that the work would commence from 27.02.1991. The time stipulated for completion of work was 24 months - initial 25% of work to be completed by the end of first 6 months - next 15% by the end of 12 months - next 35% by the end of 18 months and the balance 25% by the end of 24 months i.e. by 27.02.1993. 4 (b) The claimant deposited security amount to the extent of Rs. 10.518 lacs and received Rs. six lacs as mobilization advance; 14 lacs as machinery advances and commenced the work. There were certain modifications in connection with the work and drawings and consequently there were certain modifications with regard to rates. The quoted rate of the contractor was Rs. 690 per m3; the work rate after deducting Rs. 1 from the quoted rate should have been 689.00 per m3; whereas the chief engineer had recommended a rate of Rs. 649 per m3 for approval which according to the claimant was incorrect and was never corrected in spite of requests though payments were being made @ 689 per m3 in anticipation of approval of the Tender Committee. (c) In the meantime, there was a strike of the engineers of the State from 20.08.1991 which continued till 04.11.1991; during this period the men of the claimant were forced to sit idle for about 2 ½ months. Further, the actual quantity of PCC in the agreement was Rs. 281 m3 whereas the contractor was ordered to do PCC work to the extent of 6281 m3 as per actual requirement. The department allowed to do the work as per requirement, but ordered to make payment of only 75% of the quantity, withholding 25% pending approval of the tender committee. Thus, after completion of item of work, huge sum of the claimant was blocked and the department did not take steps to resolve the issue. (d) As a result of the aforesaid, up to May, 1992, six bills on account payment worth Rs. 30,13,747/- of gross value was prepared and paid to the claimant out of which the amount of security deposit, Income Tax, Sales Tax and recovery of cement and advanced granted to the contractor and interest thereon were made with cheque value of Rs. 18,48,965.00 only. Recovery of about 7265 bags of cement was done up to the month of May, 1992. (e) Certain communications were issued by the Department in connection with widespread expenditure incurred in the project, its utility and on account of non-availability of fund, many works were hampered. The claimant was directed to go slow with the construction work and instruction were also given to close those contracts which were not of immediate benefit to the department and the agencies were not at fault. The claimant continued to work. Another 6210 bags of cement were issued to the claimant but they were constrained in the progress of work and certain materials were not supplied in time the Executive Engineer and Superintending Engineer recommended for extension of time up to 31.03.1994 but the Chief Engineer vide letter vide letter dated 16.06.1993 granted extension of time only up to 31.12.1993. In the meantime, 7th account bill was prepared on 10.10.1992 which was duly checked by the Assistant Engineer, but the same could not be paid due to paucity of fund. Measurement of the work done beyond 1992 was taken and recorded on 30.07.1993 and this also could not be paid within the extended time of completion of work. Ultimately vide letter dated 14.09.1993, the Executive Engineer accepted that the approval of rate by the tender committee was still awaited and assured that the payment will be made as soon as the fund is allocated by the department. The claimant applied for another extension of time up to 31.03.1995. The authorities of the department recommended that no further extension would be granted but the claimant was requested to extend the validity of bank guarantee every year which was compiled by the claimant year after year. The bank guarantee of Rs. 5 10,51,800.00 was validated up to 26.02.1998 and bank guarantee for mobilization advance of Rs. 6.00 lacs up to 31.03.1998. The claimant applied for another extension of time up to 31.03.1997 but no extension was granted and ultimately the claimant vide his letter dated 28.12.1996 submitted his claim for an amount of Rs. 96,16,885.00 to the executive engineer. In retaliation, the department submitted a counter claim of Rs. 1,16,92,155.00 vide letter dated 06.02.1997. Thus, dispute arose between the parties. The executive engineer rescinded the agreement vide letter dated 15.03.1997; invoked both the bank guarantees worth Rs. 10,51,800 and Rs. 6,00,000.00 on 02.11.1998. The claimant approached the superintending engineer as well as the chief engineer against the order of the executive engineer but to no avail. He then approached the administrator for appointment of Arbitrator. (f) The then Engineer in chief was appointed as a sole arbitrator vide Administrator’s letter dated 10.07.1997 but with the limited scope of arbitration i.e. to consider the claim of the contractor submitted vide his letter dated 37/96 dated 28.12.1996 and counter claim of the department submitted by Executive Engineer vide his communication dated 06.02.1997. (g) The claimant filed representations seeking removal of limit of the scope of arbitration and the claimant also took recourse of legal action in civil court and finally the High court of Jharkhand, Ranchi in Request Case No. 6/2001 vide order dated 10.08.2001 directed the learned arbitrator to enter upon reference and start arbitration proceedings. (h) As per the order passed in Request Case No. 6 of 2001, which has also been quoted in the arbitral award, the petition was disposed of by directing that the learned Arbitrator shall immediately and in any case within two weeks from the date of communication of the order by either of the parties enter upon reference and start arbitral proceedings. The parties were at liberty to file their claim and counter claim uninhibited by any order of appointment or the reference passed or issued by the respondent-State. The Arbitrator was to receive all the claims/counter claims of both the parties and shall settle the claim/counter claim depending on the arbitrability passed on the terms and conditions of the contract. Liberty was reserved with the parties to raise their objection before the learned arbitrator with regard to the maintainability and arbitrability of the claims/counter claim of the parties on all the grounds available to them and the learned arbitrator was to consider such objection and pass appropriate order in accordance with law. There was also a direction that the learned arbitrator shall endeavour to conclude the proceedings as soon as possible preferably within a period of six months from the date he enters upon the adjudication of the proceedings. (i) The learned Arbitrator commenced the proceeding on 05.09.2001 upon receipt of the order of the High Court on 24.08.2001 The State sought time and delayed the proceeding for an about 4 ½ months and ultimately they appeared on 19.01.2002 and during the hearing, one petition under Section 16(5) of the Arbitration and Conciliation Act, 1996 was filed and argued that in view of the clauses of the agreement action taken by the Executive Engineer was final and conclusive and not arbitrable and therefore the proceeding was not maintainable. It was also argued that the High Court had no jurisdiction to widen the 6 limitation imposed on arbitrator. This petition was objected to by the claimant. The learned arbitrator disposed of the petition and ordered to consider the above point of objection while making the ultimate award and continued with the proceedings. It was also decided to inspect both the cites of the work to acquaint the present position of the work and the site inspection was done on 10.02.2002 in presence of both the parties. (j) The findings of the inspection have also been discussed by the learned arbitrator in the award. Thereafter parties filed a large number of documents in support of their contention and both the parties decided not to examine any witness but to rely on the documentary evidences. The claimant submitted claim totaling to Rs. 2,24,07,758 plus interest to Rs. 7,26,19,985.00 plus interest. The claims and counter claims have been mentioned in the chart in paragraph 3 of the award. The details and the sequence of events in connection with the tender and various extensions/prayer for extensions have been recorded in paragraph No. 4 of the award. the State submitted the counter claims totaling Argument of the claimant in Arbitration Appeal No. 16 of 2007 7. Learned counsel for the claimant has submitted that the learned Arbitrator had entered into reference by virtue of order passed by this Court under Section 11 (6) of Arbitration and Conciliation Act, 1996 wherein, a clear direction was issued that the parties would be at liberty to file their claim/counter-claim uninhibited by any order of restricted reference passed or issued by the respondent. Learned counsel submits that occasion to make such observation had occurred in view of the fact that respondent had issued a letter dated 10.07.1997 wherein although they had agreed for arbitration, but they were limiting the claim of the appellant only to the extent of the claimant’s letter no.37/1996 dated

28.12.1996 and counter-claim of respondent submitted on

06.02.1997. The learned counsel submits that the agreement stood terminated on 15.03.1997 and there was no occasion to restrict the arbitration till an anterior date i.e., 28.12.1996 or 06.02.1997. In view of the aforesaid, the learned arbitrator had the jurisdiction to enter into reference also in connection with the disputes based and relatable to the termination of contract on 15.03.1997. 8. On the point of exhausting the appellate remedy of appeal against the order of termination of contract, the learned counsel has referred to the clauses 45, 51 and 52 of the general conditions of contract to submit that in order to refer the matter to arbitration, the arbitration clause contained in clause 52 is not restricted to the eventualities mentioned in 7 clause 51; rather, it is also linked to the eventualities mentioned in clause 45 or disputes arising out of the contract. He has also submitted that in such circumstances, the entire dispute was referred and was to be considered by the learned Arbitrator, which was actually done. He has submitted that the learned court below has misconstrued the arbitration clause and has set aside the claim by referring to Section 34 (2) (iv) of Arbitration and Conciliation Act, 1996 by stating that the arbitral award was dealing with the dispute not contemplated by or falling within the terms of submission to arbitration. Learned counsel has further submitted that otherwise also, the impugned order does not even refer to any particular claim which could have been segregated and said to be beyond the reference to arbitration. Argument of the State in Arbitration Appeal No. 16 of 2007 9. Learned counsel for the respondent-State has submitted that so far as termination of agreement is concerned, Clause 52 of the contract does not provide arbitration for termination rather, it was only for the matters which cropped up during the implementation of the project. Thus, the dispute regarding termination was not arbitrable. 10. He has further submitted that the termination of the contract was done as back as on 15.03.1997 and the request case was filed only in the year 2001 and therefore, the challenge to termination was itself barred by limitation. The learned counsel has relied upon the judgment passed by the Hon'ble Supreme Court reported in (2021) 5 SCC 738 (Bharat Sanchar Nigam Limited and Anr. Vs. Nortel Networks India Private Limited) to submit that when no period of limitation has been prescribed, then Article 137 of the Limitation Act will come into play and the termination could have been challenged only within a period of three years from the date of termination. 11. He has also submitted that challenge to termination of contract was barred by the principle of res judicata. A petition under Section 9 of the Arbitration Act was initially filed before the District Judge on

01.07.1997 which was returned and re-filed before the Sub Judge on

16.09.1997 and in the said case, a petition was filed by the appellant for referring the dispute regarding termination of contract to arbitration, but the said plea was rejected. Against the order of rejection by the learned Sub Judge, the appellant preferred a civil revision, which was withdrawn on 09.02.2001. 8 Rejoinder Arguments of the Claimant in Arbitration Appeal No. 16 of 2007 12. In response, the learned counsel for the claimant submits that a petition seeking amendment was filed before the learned Sub Judge and learned Sub Judge while dismissing the amendment application observed that the scope of injunction was limited and it could not be extended by allowing the amendment and thereafter, the civil revision was filed and ultimately, when it was withdrawn in 2001, the request case was filed for appointment of Arbitrator. It has been submitted that the cause of action continued and the arbitration proceedings which had commenced in connection with other disputes on 10.07.1997 was still continuing. Findings of this Court in Arbitration Appeal No. 16 of 2007 13. Both the learned counsels have also filed written submissions to explain their points of arguments. The following comparative chart would show the rival contentions of the parties: - Arguments of the State The decision of the learned Sub Judge – I, Ghatshila dated 19.08.2000 on the point of termination of contract was final and binding and therefore the arbitrability of the matter regarding termination of the contract was barred by res judicata. Arguments of the Claimant I. The decision of the learned Sub Judge – I, Ghatshila dated 19.08.2000 on the point of termination of contract cannot be said to be res judicata as- a) Matter of termination of contract was directly and substantially not an issue. The order itself says that the nature and scope of case would change from injunction to wrongful termination of contract if the amendment is allowed and the Appellant should approach the appropriate authority for termination of contract. b) Order 19.08.2000 interlocutory amendment of petition. Under section 9 of the Arbitration Act, the court does not have any jurisdiction to refer any dispute to arbitration and the court itself says that scope of sections 8 and 9 are quite different. Thus, any findings on a matter between parties by a court without jurisdiction will not operate as res judicata. c) The Hon’ble Jharkhand High Court vide order dated 10.08.01 in Request Case No. 06 of 2001 directed Arbitrator to enter upon reference. It was further directed that the parties shall be at liberty to file their claim/ counter claim uninhibited by any order of appointment or the reference passed or issued by the respondents. Thus, the jurisdiction of the arbitral tribunal extended to all claims/ counter claims 9 without being limited by order dated 19.08.2000 passed by the learned Sub Judge – I, Ghatshila. II. The dispute relating to termination of contract is arbitrable because: a) General Conditions of Contract (GCC) – 51 does not contemplate any dispute in relation to termination of contract. The wording of GC- 51 clearly indicates that the said clause is in respect of instructions or decisions to be complied with by the contractor during the execution of work. After termination of work, there is no scope of any instruction to be given to the Contractor for prompt compliance. b) The Superintending Engineer, being the authority in overall charge of the work [as per definition in clause 1(m)], any termination of contract by Executive Engineer cannot be without his knowledge and approval. In such a case, after termination of contract by Executive Engineer, there is no scope for making Superintending Engineer regarding such termination, which already had his approval. appeal c) Termination of contract by Executive Engineer under GC- 45 does not give any scope of appeal to Superintending Engineer as performance under the contract comes to an end after termination of contract. d) The claims submitted by the appellant vide it’s letter dated 28.12.1996 was before the termination of contract. The termination of contract was by letter dated 15.03.1997 and the nature of claims could not be crystallised before termination of contract. e) Appellant vide claims letter dated 09.05.1997 requested for reference to arbitration being dissatisfied with rejection Superintending Engineer. The copy of Appellant’s letter dated 30.04.1997 was also enclosed which evidenced that the dispute relating to termination of contract was also subject matter of discussions with the Superintending Engineer on 22.04.1997. Thus, this notice for arbitration also included disputes relating to termination of contract. f) The counter claims of the Respondent in particular the extra expenditure for completion of balance work is solely dependent on valid termination of contract. The said counter claim adjudicated without cannot Without resorting to clause 51 of the conditions of contract, the claimant was not entitled to invoke clause 52 i.e. arbitration clause. Clause 52 of the Contract provides for mechanism for appointment of arbitrator. According to clause 52, thirty days’ time is given to the Administrator from the date of receiving the request to refer the dispute to arbitration. In the event of failure of the Administrator, the Claimant had option to appoint arbitrator and make reference. However, the claimant did not adhere to the procedure prescribed under clause 52. The claimant failed to adhere to the procedure prescribed under clause 52 and as such there was no valid reference of dispute relating to termination to the Arbitrator. appeal thirty days, Clause 51 of the conditions of Contract, provides for in-house mechanism for settlement of disputes. The Contract have to approach the Executive Engineer at the first instance, who is required to give his decision in writing within thirty days. If decision is not given or the contractor is the decision of the dis-satisfied with Executive Engineer, the contactor may within Superintending Engineer, who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal and shall give a decision within sixty days after evidence is adduced by the contractor. Clause 51 further provides that if the contractor is dissatisfied with his decision, the contractor within thirty days from receipt of the decision shall indicate his decision to refer the dispute to arbitration failing which the said decision shall be final and conclusive. Clause 52 further provides arbitration shall be in respect of only those disputes or differences in respect of which the decision has not been final and conclusive. Without looking into the compliance of clause 51 of the conditions of contract, the Ld. Sole Arbitrator could not have entertained termination of contract under clause 52 of the contract. Reference may be made to the Judgment of the Hon’ble Supreme Court in the case of Mitra Guha Builders (India) Co. - versus- ONGC reported in (2020) 3 SCC relating 10 considering the validity of the order of termination of contract.

222. Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. III. The claim of the Appellant relating to termination is not barred by limitation because: a) The Bank Guarantee no. 30 dated 27.02.1991 for Rs. 10,51,800 and No. 32 dated 22.08.91 for Rs. 6,00,000 was renewed by the Appellant at the request of the Respondent upto 26th February, 1998 and 21st March, 1998 respectively. The Request Case in Hon’ble Jharkhand High court was filed within 3 years from the date of encashment of bank guarantees. b) After appellant termination of contract by Respondents’ letter dated 15.03.1997, the claimant made several requests for reference to arbitration of all disputes. The appellant’s letter dated 30.04.1997, 09.05.1997, 10.06.97 and 25.06.97 clearly indicate that disputes relating to termination were also raised by the appellant requested arbitration of all disputes. As per counsel of Respondent before arbitrator as noted in the award, the Appellant’s demand for arbitration in relation to termination of contract was rejected in 1997 itself. In other words, even according to the Respondent, the Claimant demanded arbitration relating to termination of contract in 1997 itself. c) As pe section 21 of Arbitration Act, 1996, unless otherwise agreed between the parties, the arbitral proceedings in respect dispute commence on the date on which a request for that dispute to be referred to arbitration Respondent. instant case, the claimant’s request that the dispute relating to termination be referred to arbitration was received by the Respondent in 1997 itself. Accordingly, the arbitration proceedings commenced in 1997 itself and as such, disputes termination are not at all barred by limitation. particular received relating d) In a IV. The impugned order dated 29.05.07 is vague as it does not specify as to which item of the award related to termination of award has been set aside though it is clear from the award that only Claim 4.1 termination of contract. is based on and related a. The terminated contract was 15.03.1997 and arbitrator was appointed and reference was made to the sole arbitrator on 10.07.1997 with respect to referred dispute 28.12.1996 of the Claimant. letter b. The cause of action arose to the claimant on 15.03.1997 and the period of limitation will start from the date when contract was terminated. c. The request case filed in the year, 2001 was itself beyond the period of limitation of three years. The claim relating to termination of contract was time barred. d. Even if it is presumed for argument’s sake that the proceeding commenced u/s.21 of the Act of 1996 on 30.05.1997 i.e. the day on which dispute relating to termination was raised, still the Request Case filed in the year, 2001 was itself time barred and request made to refer the dispute relating to termination was itself time barred. Reference may be made to the judgment of the Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Limited vs M/S Nortel Networks India Pvt. Reported in (2021) 5 SCC 738 wherein it has been held that the period of limitation for filing an application under Section 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator. e. In view of the submissions made hereinabove, the claim termination of contract as well as request case filed for referring the said claim are time barred. relating Award is nullity having been rendered 11 after period prescribed by the Hon’ble High Court a. The Hon’ble High Court vide order 10.08.2001 directed the Ld. Arbitrator to enter upon the reference and conclude the proceeding as soon as possible and preferably within a period of six months the date he enters upon adjudication of the proceeding. b. Ld. Sole Arbitrator entered into the reference on 05.09.2001 and rendered the award on 27.11.2003 i.e. after more than two years. c. Thus, the award rendered by the Ld. Sole Arbitrator, after time limit fixed by the Hon’ble Court, is in violation of the Hon’ble High Court’s order and is void ab-initio. Argument of the State on the point of res-judicata.

14. It is the case of the State that the decision of the learned Sub Judge – I, Ghatshila dated 19.08.2000 on the point of termination of contract was final and binding and therefore the arbitrability of the matter regarding termination of the contract was barred by res judicata. The arguments of the claimant in response to this argument has already been mentioned above.

15. This Court finds that it is not in dispute that the Executive Engineer rescinded (terminated) the agreement vide letter dated 15.03.1997; the claimant filed a petition under Section 9 of the Act before the civil court for restraining the State from invoking the bank guarantee and during the pendency of the case before civil court, the State invoked both the bank guarantees worth Rs.10,51,800.00 and Rs.6,00,000.00 on

02.11.1998. The claimant approached the Superintending Engineer as well as the Chief Engineer against the order of the Executive Engineer but to no avail and the claimant approached the administrator for appointment of Arbitrator. The then Engineer in chief was appointed as a sole Arbitrator vide Administrator’s letter dated 10.07.1997 but with the limited scope of arbitration i.e. to consider the claim of the contractor submitted vide his letter dated 37/96 dated 28.12.1996 and counter claim of the department submitted by Executive Engineer vide his communication dated 06.02.1997. In such circumstances, the claimant filed a petition before the learned court below in the pending petition under section 9 to refer the dispute regarding termination of 12 agreement to the learned arbitrator but the said plea was rejected. Against the order of rejection by the learned Sub Judge, the claimant preferred a civil revision, which was withdrawn on 09.02.2001. Finally, the claimant also took recourse of legal action in the High Court of Jharkhand, Ranchi under Section 11 of the Act being Request Case No. 6/2001 and vide order dated 10.08.2001, a direction was issued by directing that the learned Arbitrator shall immediately and in any case, within two weeks from the date of communication of the order by either of the parties, enter upon the reference and start the arbitration proceedings and it was clearly observed that the parties will be at liberty to file their claim/ counter-claim uninhibited by any order or appointment or the reference passed or issued by the respondents and the Arbitrator shall similarly receive all the claims/counter-claims of both the parties; adjudicate upon and settle such claims/counter-claims depending on their arbitrability passed on the terms and conditions of the contract; both the parties would be at liberty to raise their objections before the Arbitrator with regard to the maintainability or arbitrability of the claims/counter claims of the parties on all the grounds available to them. The operative portion of the order passed in the request case has been quoted in later para of this judgement.

16. Upon perusal of the award, this Court finds that although a petition objecting to the jurisdiction of the learned Arbitrator was filed before the learned Arbitrator under Section 16(5) of the Act, but no objection was taken on the point of res-judicata. The gist of the objection was taken under Section 16(5) has been mentioned in internal page 7 of the award by stating that during hearing, one petition under Section 16(5) of Arbitration & Conciliation Act was filed and argued that in view of the sections specified in the agreement actions taken by Executive Engineer which was final and conclusive are not arbitrable and thus the proceeding is not maintainable. It was further argued that High Court had no jurisdiction to widen the limitations imposed on arbitrator and pressed for an immediate order on their petition. Whatever objection was taken under section 16(5) of the Act including the point of limitation has been rejected by the learned Arbitrator. However, the learned court below has recorded that the dispute in connection with termination of the contract was barred by the principles of res-judicata on account of order passed by the learned court below. This Court is of 13 the considered view that filing of the petition before the learned court below to refer the dispute of termination of the contract for arbitration in a petition under section 9 seeking injunction against invocation of bank guarantee and the rejection of such petition has no consequence as it was beyond the jurisdiction of the learned court below in a petition under section 9 to refer the dispute to arbitration. This is coupled with the fact that the State had already referred the matter to arbitration with respect to part of the dispute (excluding termination of the contract) and ultimately petition under Section 11 of the Act was filed in which order was passed by directing that the learned Arbitrator shall immediately and in any case, within two weeks from the date of communication of the order by either of the parties enter upon the reference and start the arbitration proceedings. It was clearly observed that the parties will be at liberty to file their claim/ counter claim uninhibited by any order or appointment or the reference passed or issued by the respondents and the learned Arbitrator shall similarly receive all the claims/counter claims of both the parties. Consequently, the entire dispute including termination of contract became subject matter of consideration by the learned Arbitrator. Further, the learned Arbitrator has clearly recorded a finding at para 8 of the award on the point of scope of the dispute for consideration and on the point of arbitrability of dispute as under: - “8. I have carefully considered the rival submissions. From the evidence on record, I find that the claimant submitted a list of his claims vide his letter dated 28.12.1996 when the contract was not terminated. The respondent, by a letter dated 15.03.1997, terminated the contract. The claimant lodged his protest against such termination. The claimant issued a reminder vide their letter dated 27.03.1997 to the Executive Engineer with a copy to the concerned Superintending Engineer. The Superintending Engineer requested the claimant to come for a discussion for settlement of claimant's claims along with necessary papers on 22nd April, 1997 at his office chamber. A meeting was held the Superintending Engineer on 22.04.1997 but no minutes of the said meeting was made available though according to the claimant, such minutes were kept which is denied by the respondent. By a letter dated 30th April, 1997 (Annexure C-57), the claimant confirmed the meeting on 22.04.1997 and recorded the offer made by the claimant in the said meeting which included that the respondent should revoke order of termination of the contract and forfeiture of security deposit and should intimate the Bank accordingly. In the said letter, the claimant also requested for a copy of the minutes of the discussion/ negotiation held on 22nd April, 1997 in the office of the said Superintending Engineer. By a letter dated 06.05.1997, the said Superintending Engineer indicated that all the claims of the claimant were rejected vide Clause GC-51 of the contract. The Superintending Engineer did not make any denial of the facts stated in the claimant's letter dated 30th April, 1997 (Annexure C-57). Thereafter, the claimant, vide his letter dated 09.05.1997 (Annexure C-59) addressed to the 14 Arbitrator, requested for a reference to arbitration being dissatisfied with the rejection of the claims of the claimant vide Superintending Engineer's letter dated 06.05.1997. Along with such letter dated 09.05.1997 the claimant also enclosed a copy of their letter dated 30.04.1997 (Annexure C- 57) from the aforesaid sequences of events and correspondences, it is clear that the disputes relating to the termination of the contract by the Executive Engineer vide his letter dated 15.03.1997 wad included in the subject matter of discussions between the claimant and the Superintending Engineer on 22.04.1997. Accordingly, claimant's notice for arbitration dated 09.05.1997 also included the disputes relating to the termination of the contract vide letter dated 15.03.1997.

8.1 That apart, I find substance in the claimant's contention that the GC-51 does not include action by the Executive Engineer terminating the contract. The said clause ………..”

17. This Court finds that the learned court below while dealing with the point of res-judicata has not at all considered the various findings of the learned Arbitrator including the finding that the letter regarding reference of dispute for arbitration included the dispute regarding termination of contract. The learned Arbitrator has dealt with all the points raised by the State in the petition under Section 16 and has rejected the same by well-reasoned order, but the learned court below instead of dealing with the reasons assigned in the award has held that the dispute regarding termination of contract was barred by res-judicata. Such approach of the learned court below is erroneous and cannot be sustained in the eyes of law. Otherwise also considering the entire narration of events, the plea of res-judicata is devoid of any merits. Accordingly, the finding of the learned court below with regard to termination of contract being barred by res-judicata cannot be sustained in the eyes of law and is accordingly set-aside.

18. Argument of the State that the award is null and void having been rendered after period prescribed by the Hon’ble High Court vide order dated 10.08.2001: It has been argued by the State that the Award is nullity having been rendered after period prescribed by the Hon’ble High Court vide order dated 10.08.2001. The Learned Sole Arbitrator entered into the reference on 05.09.2001. The Learned Sole Arbitrator rendered the award on 27.11.2003. The present proceedings arise out of arbitral award governed by Arbitration and Conciliation Act, 1996 pre - 2015 amendment. The order of reference dated 10.08.2001 indicates that no hard and fast time line was given by this Court for pronouncement of 15 the award. The operative portion of the order of request is quoted as under: - “After hearing the learned Counsel for the parties, I dispose of this petition by directing that Sri Rama Shankar Pathak shall immediately and in any case, within two weeks from the date of communication of this order by either of the parties enter upon the reference and start the arbitration proceedings. The parties all be at liberty to file their claim/ counter claim uninhibited by any order or appointment or the reference passed or issued by the respondents. The Arbitrator shall similarly receive all the claims/counter claims of both the parties. He shall, however, adjudicate upon and settle such claims/counter claims depending on their arbitrability passed on the terms and conditions of the contract. Both the parties all be at liberty to raise their objections before the Arbitrator with regard to the maintainability or arbitrability of the claims/counter claims of the parties on all the grounds available to them. The Arbitrator shall consider such object and in the award that he shall pass ultimately, while dealing with the same, shall return his findings thereupon and decide the issue in accordance with law. It shall be the Arbitrator’s endeavour to conclude the proceedings as soon as possible preferably within the period of 6 months from the date he enters upon the adjudication of the proceedings.” (Emphasis supplied) 19. The use of the phases “endeavour”, “as soon as possible” and “preferably within” in the aforesaid order of the High Court, preceding the guideline of 6 months’ time period to render the award, clearly shows that the time period of 6 months was merely directory and not mandatory. Therefore, the learned Sole Arbitrator was not mandated to render the award within the period of six months from the period from the date he enters upon the adjudication of the proceedings.

20. It is also important to note that the learned Arbitrator at internal page 6 and 7 of the award has also projected as to how the case proceeded which, interalia, reflects that the arbitration proceedings commenced on

24.08.2001; the parties were directed to file documents by 21.09.2001; the State sought time on couple of dates; State filed petition under Section 16(5) of the Act of 1996 on 19.01.2002 which was disposed of by the learned Arbitrator by stating that it was to be considered while passing the final award; site inspection was done in presence of both the parties on 10.02.2002 and on subsequent dates both the parties filed large number of documents in support of their contentions and then both the parties decided not to examine any witness but to rely on the documentary evidences. Six months from the date of reference expired on 05.03.2002 and the award does not reflect any objection from either side in connection to proceeding before the learned Arbitrator. This Court finds that no such point was ever taken by the State as a ground 16 for setting aside the award. This is over and above the aforesaid finding that the time line given by this Court at the time of reference was not mandatory.

21. In view of the aforesaid findings, the arguments of the learned counsel for the State alleging nullity of the award on the ground that the award was rendered after period prescribed by the Hon’ble High Court vide order dated 10.08.2001, is devoid of any merits, hence rejected. Argument of the State that the claim relating to termination was barred by limitation

22. The learned Arbitrator has dealt with the point of limitation in connection with the termination of contract at para 9.0 to 9.3 of the award and after detailed discussions of the materials on record and by a reasoned order has rejected the plea of limitation with regard to termination of contract as raised by the State. The para 9.0 to 9.3 of the award is quoted as under: - “9.0. The respondent also contended that the contract was terminated by a letter dated 15.03.1997. The respondent straightaway rejected the claimant's demand for arbitration relating to the termination in 1997 itself, but the claimant filed the request Case No. 06 only in the year 2001. Accordingly, the disputes relating to termination of the contract or challenge to the decision of the termination are barred by limitation under the Limitation Act, 1963. In the instant case, it is seen from the records that the first extension of time was granted by the respondent up to 31st December 1993. The second extension of time up to 31.03.1994 was recommended for acceptance by the Executive Engineer to the Superintending Engineer-but no communication from the Superintending Engineer was received. The prayer for second extension by claimant was not rejected also. The claimant made an application for 3rd extension up to 31st March 1995 and also made a 4th application for extension of time up to 31st March 1997. The respondent did not reject the said application for extension of time by the claimant but neither any extension of time was communicated to the claimant. The respondent, however, instructed the claimant to extend the Bank Guarantee, from time to time. The Bank Guarantees No. 30 dated 27.02.1991 for Rs. 10,51, 800/- and No. 32 dated 22.08.1991 for Rs. 6,00,000/- were renewed by the claimant at the request of the respondent up to 26th February 1998 and 21st March 1998 respectively by a letter dated 02.11.1998 (Annexure C-64). The claimant's Banker, Allahabad Bank intimated the claimant that the above two Bank Guarantees have been invoked by the Executive Engineer, Galudih Right Canal Division No. 1 and the bank was paying the guaranteed amount by debiting the same to the claimant's over-draft account. The request case was filed within 3 years from the date of encashment of Bank Guarantee by the respondent.

9.1. It is seen from the record that after termination of the contract by the respondents letter dated 15.03.1997 the claimant made several requests for reference to arbitration of all the disputes. The issue of termination was also 17 discussed in the meeting that the Superintending Engineer held on 22.04.1997. The claimant letter dated 30.04.1997 (Annexure C-57), dated 09.05.1997 (Annexure C-59), dated 10.06.1997 (Annexure C-61), and dated 25.06.1997 (Annexure C-62), clearly indicate that the disputes relating to the termination was also raised by the claimant and the claimant also requested arbitration of all the disputes. The learned counsel of the respondent have argued that the respondent straight way rejected the claimant ’s demand for arbitration relating to the termination in 1997 itself. In other words, even accordingly to the respondent the claimant demanded arbitration relating to termination in 1997 itself.

9.2. As per the section 21 of the Arbitration and Conciliation Act, 1996, unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the request for that dispute to be referred to arbitration is received by the respondent.

9.3. In the instant case, the claimant’s request that the dispute relating to termination by referring to arbitration was received by the respondent in 1997 itself. Accordingly, the arbitration proceedings commenced in 1997 itself and as such, the disputes relating to termination is not at all barred by limitation.”

23. As per the impugned judgment, it has been held that:- “So it is abuse of contract and procedure of arbitration and conciliation Act. It is a misconduct as decided Steel Authority of India Ltd. (1999) 8 SCC 122 (2001) 6 S.C. cases 347 arbitrator or Umpire has no authority or jurisdiction beyond that detained by the term of the contract or what the parties desire under the contract. The decision of termination of contract of Executive Engineer was received by the O.P. on 18.3.97 vide Executive Engineer Letter No. 124 dated 15.3.97 and the O.P. was filed request case No. 6 of 2001 in the year 2001 after expiry of three years. Hence the prayer for appointment of arbitration deciding the dispute regarding termination of contract is barred by limitation Act 137 and S. 3 of Arbitration Act 1940 Section 20 and 37, the arbitrator has not considered point limitation as decided by Supreme Court Cases (1999) 8 S.C.C. Steel Authority of India Ltd. Versus Budharaj.” (Page 9) (emphasis supplied) 24. This Court finds that the learned court below has not at all considered the findings recorded by the learned Arbitrator on the point of limitation as contained in para 9.0 to 9.3 of the award as quoted above including the provision of Section 21 of the Abirritation and Conciliation Act of 1996 as well as the bundle of facts and the sequence of events mentioned in the said paragraphs. This Court finds that the point of limitation has been well discussed and considered by the learned Arbitrator and the plea of the State was rejected and the learned court below held that the prayer for appointment of arbitration deciding the dispute regarding termination of contract is barred by limitation Act 137 and S. 3 of Arbitration Act 1940 Section 20 and 37, the arbitrator has not considered point limitation as decided by Supreme 18 Court Cases (1999) 8 S.C.C. Steel Authority of India Ltd. Versus Budharaj, without dealing with the reasons and findings of the learned arbitrator.

25. Section 21 of the Arbitration and Conciliation Act, 1996 reads as follows:- “21. Commencement of arbitral proceedings. —Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”

26. The learned court below has failed to consider the award as per the applicable law, i.e Arbitration and Conciliation Act, 1996 particularly Section 21 of the Act of 1996. The learned court below has also failed to acknowledge the reasoning given by the learned sole Arbitrator in light of the specific provisions of the Arbitration and Conciliation Act, 1996 which is the applicable arbitration law. This Court is of the considered view that the learned arbitrator has taken a reasoned and plausible view based on materials on record and as per the applicable i.e Arbitration and Conciliation Act, 1996 and there was no scope for interference with the findings recorded by the learned Arbitrator on the point of limitation within the permissible grounds for interference under Section 34 of the Arbitration and Conciliation Act, 1996.

27. So far as the judgment passed by the Hon’ble Supreme Cour reported in (1999) 8 SCC 122 (supra- as relied upon by the learned court below) is concerned, the same does not apply to the facts and circumstances of this case. It was a case decided under the provisions of Arbitration Act, 1940 which did not have any corresponding provision like that of Section 21 of the Arbitration and Conciliation Act, 1996; in the aforesaid judgement, the Hon’ble Supreme Court was of the view that it was a duty of the Arbitrator to reject the claim when on the face of it, it was barred by limitation and in the said case, the learned Arbitrator had failed to consider the point of limitation although the reference itself was subject to the contention that it was barred by limitation. In the aforesaid circumstances, the Hon’ble Supreme Court was of the view that the learned Arbitrator had failed to exercise his jurisdiction to reject the claim as on the face of it, it was barred by the period of limitation. In the said case, after giving notice demanding the amount, there was a supplementary agreement between the parties without 19 saving the right of the contractor to claim the amount which was already demanded and the contractor had agreed to complete the balance work as per terms and conditions of the supplementary agreement. In the present case, the parties have contested the point of limitation before the learned Arbitrator and the learned arbitrator has rejected the plea of the State on the point of limitation by appreciating the materials on record and the applicable law.

28. In view of the aforesaid findings, the impugned order passed by the learned court below, so far as it holds that the prayer for appointment of arbitrator deciding the dispute regarding termination of contract was barred by limitation cannot be sustained in the eyes of law and accordingly such finding is set-aside and it is held that the claim relating to termination was not barred by limitation. This point is accordingly decided against the State and in favour of the claimant. Argument that the claimant was not entitled to invoke clause 52 i.e. arbitration clause without resorting to clause 51 of the conditions of contract with regard to termination of contract.

29. It is the case of the State is that the claimant ought to have preferred appeal against the order of termination before Chief Engineer in terms of clause 51 of the agreement and having not done so the matter regarding termination of contract before the learned Arbitrator was pre- mature and could not have been entertained by the learned Arbitrator. It is their case that question of reference to arbitration under clause 52 of the agreement arises only when the internal remedies are exhausted. Thus, the pre-condition prescribed for appointment of arbitrator has not been followed. The learned counsel for the State has supported the findings of the learned court below in this regard. It has been held by the learned court below that the arbitration with regard to termination of the contract was pre-mature. The learned counsel for the appellant has relied upon the judgement passed in the case of “Mitra Guha Builders (India) Co. Vs. ONGC” reported in (2020) 3 SCC 222.

30. Clause 45, 51 and 52 of the contract are quoted as under :- Clause-45:Default by Contractor - If the contractor shall neglect or fail to proceed with the works with due diligence or he violates any of the provisions of the contract, the Executive Engineer may give the 20 Contractor a notice, identifying deficiencies in performance and demanding corrective action. After such notice is given, the Contractor shall not remove from the site, any plant, equipment any materials. The Government shall have a lien on all such plants equipment and materials, from the date of such notice, till the deficiencies have been corrected. If the contractor fails to take satisfactory corrective action within fourteen days after receipt of the notice, the Executive Engineer will terminate, the contract, in whole or in part. In cases the entire contract is terminated, the amount of security deposit together with the value of the work done but not paid for shall stand forfeited to the Government. The plants, equipment and materials held under lien shall then be at the disposal of the Government. The Executive Engineer may also possession of the whole or part of the works site, plant, equipment and material brought on placed thereon and cause the whole or part of the work to be completed by utilizing them through other agencies, at the cost of the Contractor. In such cases, the value of the work done through such agencies shall be credited to the Contractor at his contract prices. On completion of such works, if the expenses incurred for carving out such work, as certified by the Executive Engineer, are in excess of the value of the work credited to the Contractor the deference shall be paid by the Contractor to the Government. He shall also be liable for the liquidated damages under the contract. The Executive Engineer may direct that a part of the whole of such plant, equipment and materials be removed from the site within a stipulated period. If the Contractor falls to do so, the Executive Engineer may cause them to be sold, holding the net proceed of such sale to the credit to the Contractor. After completion of the works, and settlement of amount the lien by the Govt. on the Contractor’s plant, equipment and balances of materials shall be released. Termination of the contract either in whole or in part shall be adequate authority for the Executive Engineer to demand discharge of the obligation from the guarantors of the Security for performances. Clause: 51:- Settlement of Disputes:- If the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, record or ruling of the Executive Engineer on any matter in connection with or arising out of Contract or the carrying out of work to be un-acceptable, he shall promptly ask the Executive Engineer in writing, for written instructions or decision. Thereupon the Executive Engineer shall give the written instructions or decision within a period of the thirty days of such request. Upon receipt of the written instructions or decision the Contractor shall promptly proceed without delay to comply with such instructions or decisions. If the Executive Engineer, fails to give his instructions or decision in writing within a period of thirty days after being requested, or if the Contractor is dissatisfied with the instructions or decision of the Executive Engineer, the Contractor may within thirty days after receiving the instructions or decisions appeal to the Superintending Engineer, who shall afford an opportunity to the Contractor to be heard and to offer evidences in support of his appeal. This officer shall give a decision within a period of sixty days after the Contractor has been given said evidence in support of his appeal. 21 to refer the dispute to arbitration If the Contractor is dissatisfied with the decision, the Contractor within a period of thirty days from receipt of the decision shall indicate his intension to refer the dispute to arbitration, failing which the said decision shall be final and conclusive. 52. Arbitration All disputes or difference in respect of which the decision has not been final and conclusive shall be referred for to a sole arbitration appointed as follows: - Within thirty days of receipt of notice from the Contractor of his intension the Administrator Subernrekha Project, Jamshedpur shall send to the Contractor a list of three Officer of the rank of Superintending Engineer or higher, who have not been connected with the work under this contract. The Contractor shall within fifteen days or receipt of this first select and communicate to the Administrator, the name of one officer from the list who shall then be appointed as the sole arbitrator. If contractor fails to communicate his selection of name, within the stipulated period, the Administrator shall without delay select one officer from the list and appoint him as the sole arbitrator. If the Administrator fails to send such a list within thirty days, as stipulated, the Contractor shall send a similar list to the Administrator within fifteen days. The Administrator then select one officer from the list and appoint him as the sole arbitrator within fifteen days. If the Administrator, fails to do so, the Contractor shall communicate to the Administrator the name of one officer from the list, who shall then be the sole Arbitrator.

31. Upon perusal of clause 51 of the agreement, it is clear that the same applies under specified circumstance i.e. if the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, records or ruling arising out of the contract or the carrying out of the work to be unacceptable, he shall promptly ask the Engineer-in-charge in writing for written instructions or decision. It also provides that upon receipt of written instruction or decision, the contractor shall promptly proceed without delay to comply with such instruction or decisions. There is also an appellate remedy in clause 51 mentioning that when the Engineer-in-charge fails to give his instruction or decision in writing within a period of thirty days after being requested, or if the contractor is dissatisfied with the instructions or decision of the Engineer-in-charge, he may file appeal within thirty days to Chief Engineer who in turn was to decide the appeal within a period of thirty days after the contractor has given the evidence in support of his appeal. It is at this stage, the contractor, if dissatisfied with this decision, may indicate his intention within thirty days to refer the dispute to arbitration, failing which, the said decision shall be final and conclusive.

32. This Court finds that it was the specific case of the appellant -State that 22 the claimants had not exhausted the appellate remedy under clause 51 of the agreement and therefore could not have invoked clause 52 of the agreement to appoint the Arbitrator. It has also been argued before this Court that clause 52 of the agreement does not cover the dispute involved in this case with regard to the termination of contract. This Court finds that termination of contract has been provided under clause 45 of the contract as quoted above and clause 51 of the agreement has nothing to do with termination of the contract. Admittedly, the dispute involved in the present case arose out of measurement carried out in absence of the claimants, refusal to extension of time and then termination of the agreement. Once clause 51 is not attracted, there is no occasion of availing any remedy under clause 51 of the agreement and therefore, the claimant rightly invoked clause 52 of the agreement and the arbitrator was appointed in terms of clause 52 of the agreement. The clause 52 of the contract is widely worded so as to, interalia, include the disputes arising out of acts and omissions under clause 45 as well as clause 51 and for disputes arising out of action under clause 45 i.e termination of contract clause 52 would be applicable without availing the appellate remedy for the disputes under clause 51 and the appeal provided under clause 51 of the contract.

33. This Court finds that the aforesaid clauses of the agreement has been interpreted by the learned arbitrator and the plea of the State has been rejected as follows: - “5. As at the very outset the respondent filed an application under section 16 (5) of the Arbitration and Conciliation Act, 1996 and contended that the jurisdiction of the Arbitral Tribunal is limited to the counter claim of the respondent and the claims of the claimant contained in claimant's letter dated 28.10.1996, the respondent contended that the clause 52 is not wide open but has limited obligation. As per the said clause 52 all disputes and differences in respect of which the decision has not been final and conclusive, shall be referred to the arbitration. It was contended by the respondent that the disputes and differences in which the decision has become final and conclusive cannot be referred to arbitration. The respondent contended facts and circumstances of the case, the termination of the contract vide respondent's letter dated 15.03.1997 has become final and binding since the superintending Engineer against the termination of contract by the Executive Engineer. The respondent contended that the claims filed by the claimant vide their letter dated 28.12.1996 are arbitrable but disputes relating to the termination of the contract are not within the jurisdiction of the learned Arbitrator to decide.

6. The claimant contested the objection of the respondent and argued that the Clause GC-51 does not contemplate any dispute relating to the 23 termination. of the contract. The wording of the said clause GC-51 clearly indicates that the said clause is in respect of the instructions or decisions to be complied with by the contractor during the execution of the work. After the termination of the contract, there is a scope for any instructions to be given to the contractor for prompt compliance. The claimant further stated that the Superintending Engineer, being the authority of overall charges of works, any termination of the contract by the Executive Engineer cannot be without his knowledge and approval. In such a case, after the termination of the contract by the Executive Engineer, there is no scope for making any appeal to the Superintending Engineer regarding such termination which already had his approval. Moreover, termination of the contract by the Executive Engineer is governed under the Clause 45 under the General Conditions of the Contract which does not give any scope of appeal to the superintending Engineer as the performance under the contract comes to an end after the termination of the contract.

7. In the instant case, the claims submitted by the claimant vide his letter date 28.12.1996 was before the termination of the contract. The termination of the contract was by letter dated 15.03.1997 and the nature of the claims could not be crystallized before termination of the contract. Accordingly, the claimant submitted that all the claims of the claimant are arbitrable in the present reference and the objection by the respondent are frivolous and are liable to be and should be rejected.

8. I have carefully considered the rival submissions. From the evidence on record, I find that the claimant submitted a list of his claims vide his letter dated 28.12.1996 when the contract was not terminated. The respondent, by a letter dated 15.03.1997, terminated the contract. The claimant lodged his protest against such termination. The claimant issued a reminder vide their letter dated 27.03.1997 to the Executive Engineer with a copy to the concerned Superintending Engineer. The Superintending Engineer requested the claimant to come for a discussion for settlement of claimant's claims along with necessary papers on 22nd April, 1997 at his office chamber. A meeting was held the Superintending Engineer on 22.04.1997 but no minutes of the said meeting was made available though according to the claimant, such minutes were kept which is denied by the respondent. By a letter dated 30th April, 1997 (Annexure C-57), the claimant confirmed the meeting on 22.04.1997 and recorded the offer made by the claimant in the said meeting which included that the respondent should revoke order of termination of the contract and forfeiture of security deposit and should intimate the Bank accordingly. In the said letter, the claimant also requested for a copy of the minutes of the discussion/ negotiation held on 22nd April, 1997 in the office of the said Superintending Engineer. By a letter dated 06.05.1997, the said Superintending Engineer indicated that all the claims of the claimant were rejected vide Clause GC-51 of the contract. The Superintending Engineer did not make any denial of the facts stated in the claimant's letter dated 30th April, 1997 (Annexure C-57). Thereafter, the claimant, vide his letter dated 09.05.1997 (Annexure C-59) addressed to the Arbitrator, requested for a reference to arbitration being dissatisfied with the rejection of the claims of the claimant vide Superintending Engineer's letter dated 06.05.1997. Along with such letter dated 09.05.1997 the claimant also enclosed a copy of their letter dated 30.04.1997 (Annexure C-57) from the aforesaid sequences of events and correspondences, it is clear that the disputes relating to the termination of the contract by the Executive Engineer vide his letter dated 15.03.1997 was included in the subject matter of discussions between the claimant and the Superintending Engineer on 22.04.1997. Accordingly, the claimant's notice for arbitration dated 09.05.1997 also included the disputes relating to the termination of the contract vide letter dated 15.03.1997. 24

8.1 That apart, I find substance in the claimant's contention that the GC- 51 does not include action by the Executive Engineer terminating the contract. The said clause GC-51, inter alia, reads as under:- "Settlement of disputes If the contractor considers any work demanded of him to be decided the requirement of the contract or considers any drawings, records or ruling of the Executive Engineer on any matter in connection with or arising out of the contract or carrying out of the work to be unacceptable, he shall promptly ask the Executive Engineer in writing for written instruction or decision. Thereupon the Executive Engineer shall give his written instruction or decision within a period of thirty days of such request. Upon receipt of the written instruction or decision, the contractor shall promptly proceed without delay to comply with such instruction or decision."

8.2 The clause expressly indicates that on receipt of written instruction or decision from the Executive Engineer, the contractor shall promptly proceed without delay to comply with such instructions or decisions. In case of termination of the contract, there is no question for the contractor to promptly proceed without delay to comply with any such instruction or decision. The termination of contract puts an end to the further performance under the contract and only the rights and obligations remain till the of termination of the contract. Further, as per definition in Clause 1(m), the Superintending Engineer means the Superintending Engineer in the circle in the overall charge of the works. Accordingly, it is not possible for the Executive Engineer to terminate the contract without the previous knowledge and approval of the Superintending Engineer or even other higher authorities like the Chief Engineer and Secretary. A major contract of such a nature can hardly be terminated at the level of Executive Engineer without the knowledge and approval of at least the Superintending Engineer. If the termination is made with the previous knowledge and approval of the Superintending Engineer, there will be hardly any scope to make any appeal to the said Superintending Engineer for revocation of the order of termination.

8.3 It is also to be noted that the counter claim of the respondent in particular the extra expenditure for completion of the balance work is solely dependent upon the valid termination for the contract. The said counter claim cannot be adjudicated without considering the validity of the order of termination of the contract.

8.4 In the facts and circumstances of the case, I do not find any substance in the respondent's application under Clause 16(5) of the Arbitration and Conciliation Act, 1996 regarding jurisdiction of the learned Arbitrator and the same is rejected.”

34. This Court is of the considered view that primarily interpretation of agreement is within the domain of the arbitrator. Upon perusal of the aforesaid findings of the learned arbitrator with regard to interpretation of clause 45, 51 and 52 of the conditions of contract, this Court finds that the learned Arbitrator has rightly interpreted the clauses of contract and applied to the facts of the case after appreciating the materials on record and rightly rejected the State’s application under Clause 16(5) of the Arbitration and Conciliation Act, 1996 regarding jurisdiction of the learned Arbitrator and held that claimant were entitled to invoke 25 clause 52 i.e., the arbitration clause, without resorting to remedies provided under clause 51 of the agreement and the contrary view of the learned court below cannot be sustained in the eyes of law. This Court finds that the learned court below has not dealt with the reasons assigned and interpretation made by the learned Arbitrator with regard to the clauses of contract. The learned Arbitrator by interpreting the terms of the contract and by a reasoned order as quoted above, has held that the dispute regarding termination of contract was not subject matter to be taken in appeal under clause 52 of the contract while holding that the learned arbitrator has not considered the terms of the contract as mentioned in clause 51 so the dispute in connection with termination of contract taken by the arbitrator under section 52 of the contract was pre- mature. While recording the aforesaid finding, the learned court below was of the view that the claimant had to file an appeal under clause 51 of the contract against the termination of the contract but this was not done and the matter was straight away taken to the arbitrator pursuant to the order of the High Court. The entire approach of the learned court below is erroneous and cannot be sustained in the eyes of law. Accordingly, the finding of the learned court below that the dispute in connection with termination of contract taken by the arbitrator under section 52 of the contract was pre-mature, is not sustainable in the eyes of law and hence set-aside.

35. Thus, all the reasons assigned by the learned court below to set-aside the part of the award related to termination of contract is not sustainable in the eyes of law, even additional point which has been argued by the learned counsel for the State that the award was delivered after the period prescribed by the High Court is also not sustainable in the eyes of law in view of the reasons cited above.

36. Accordingly, the Arbitration Appeal No. 16/2007, which challenges that part of the impugned order, whereby the part of the award based and related to termination of contract has been set-aside and is hereby allowed.

37. In view of the aforesaid findings, the subsequent order passed by the learned court below in I.A. No. 574/2010 for quashing consequential order dated 17.11.2009 is also of no consequence and therefore, the order dated 17.11.2009 is also set-aside. 26

38. So far as the remaining part of the award dealing with claim and counter claim for the entire dispute including that of termination of contract, the same is subject matter of consideration in Arbitration Appeal No. 03/2008.

39. So far as the rest of the portion of the award is concerned, it is subject- matter of consideration in Arbitration Appeal No. 03/2008. Arbitration Appeal No.03 of 2008 Argument of the appellant (State) in Arbitration Appeal No. 03 of 2008

40. Learned counsel for the appellant in Arbitration Appeal No. 03/2008 has argued his case in connection with the various claims. With regard to claim No. 1, the learned counsel has submitted that as per the agreement, there was a provision under clause 17 regarding penal recovery of unused materials. The learned Arbitrator records about the penal claim, but does not allow penal recovery and only allows the value of unused goods. The learned counsel submits that this part of the award is contrary to the agreement entered into between the parties and ignoring clause 17. The learned counsel has also submitted that further error in connection with claim No. 1 is that the claim is only for Rs. 20,00,040/-, but the awarded amount is Rs. 21,47,177/- which is much more than the claim. The learned counsel has also referred to para-11 of the award which refers to an earlier letter mentioning the claim of Rs. 19,87,495/-.

41. So far as claim No. 4 is concerned, the learned counsel has submitted that the claimant had prayed for 15% of the unexecuted value of work i.e. Rs. 1,54,33,900/- which came to Rs. 23,15,000/-, but the learned Arbitrator has awarded 15% of Rs. 1.65 crores and the awarded amount has come to Rs. 24,75,000.00 which is again much above the claimed amount.

42. The learned counsel has submitted that with regard to quantification of claim No. 4, the same is ex-facie non-speaking in view of the fact that the learned Arbitrator has referred to two decisions of the Hon’ble Supreme Court and has recorded that the Hon’ble Supreme Court has held that in case of illegal termination of contract, loss of profit is required to be awarded. The learned counsel submits that while 27 quantifying the amount at 15% of Rs. 1.65 crores, no reason has been assigned as to how and under what circumstances the learned Arbitrator has quantified the amount to be 15%.

43. With regard to claim No. 4.7, the learned counsel for the appellant has submitted that the claimant claimed the amount over and above the other heads of loss of profits. He submits that the same is primarily not loss of profit, but is loss of profitability. The learned counsel submits that the basic enquiry in terms of Section 73 of the Contract Act has not been undertaken and the learned Arbitrator while dealing with the said claim has recorded a finding that the claimant is entitled to some compensation on account of useless retention at the work site for more than 3 years and has quantified the amount @ Rs. 25,000/- per month which came to an amount of Rs. 9,00,000/-. The learned counsel submits that it was nobody’s case to make such quantification @ Rs. 25,000/- per month and such award on ad hoc basis, without any deliberation on the evidences with regard to justifying the claim, is not sustainable in the eyes of law.

44. The learned counsel for the appellant has further referred to claim No. 5 which related to loss of goodwill and credit worthiness. The appellant had claimed Rs. 30,00,000/-. The learned counsel submits that while dealing with the same, the learned Arbitrator has clearly recorded that the claimant has not furnished any basis for the amount claimed, but allowed the amount of Rs. 5,00,000/- on this account by recording that the amount of Bank Guarantees encashed was Rs. 16,51,80/- and was of the view that the claimant is certainly entitled to some compensation and/or damages for loss of his credit worthiness and made the award. The learned counsel has also submitted that loss of goodwill is required to be proved. However, from perusal of the claim, it relates to loss of goodwill, loss of reputation and loss of credit worthiness due to alleged wrongful encashment of bank guarantee.

45. The learned counsel has also submitted that some of the counter-claims were rejected and even those counter claims which were allowed, the claim of interest has been rejected. The learned counsel has referred to the counter claim, wherein a claim was made on compound interest @ 22% per annum, but admittedly, there is no such clause in the agreement for awarding 22% compound interest. The learned counsel 28 submits that there are clauses in the agreement for simple interest. The learned Arbitrator ought to have considered those clauses of the agreement, but from perusal of the award, it does not reflect anywhere that the appellant had referred to any such clause of the agreement before the learned Arbitrator with regard to any contractual rate of interest. The learned counsel has also submitted that pendent lite interest @10% has been awarded and future interest has been awarded @18%. The learned counsel submits that interest awarded is excessive. The learned counsel has also submitted that this is without prejudice to his submission that the termination of the contract was never referred for arbitration. However, during the course of argument, it transpired that substantial portion of the counter claim was based on termination of contract. Argument of the respondent (claimant) in Arbitration Appeal No. 03 of 2008

46. Learned counsel for the claimant Mr. Rajan Raj has referred to the award and has submitted that the internal page 2 of the award refers to the fact that the project was financed by the World Bank. He submits that on account of the fact that the finances were not available, the work was lingered at the instance of the State. The learned counsel has further referred to internal page 3 of the award to submit that there was strike of the engineers of the State during the period from 20.08.1991 to

04.11.1991, for which the claimant cannot be responsible. The learned counsel has further referred to the internal page 4 of the award to submit that up to May, 1992, six bills were raised and there was non- payment of the bills, so the question of recovery of any penal amount on account of not refunding the unused materials does not arise. On the point of penal recovery, the learned counsel has referred to clause 17 of the contract to submit that the penal recovery was to be preceded by a notice in terms of the said clause, but in the entire award, there is no reference of any notice and therefore, the condition precedent for penal recovery was not satisfied. He submits that the learned arbitrator has rightly not allowed penal recovery but has allowed recovery of the amount on account of unused materials.

47. The learned counsel submits that the learned Arbitrator has considered the entire gamut of affairs between the parties and recorded all the 29 documents and materials placed before him, which has been discussed thoroughly particularly in paragraph 10 of the award. The learned counsel has also submitted that the learned Arbitrator was the Engineer- in-chief of the respondent and he was aware of the entire project and was a technical person, so it was not expected that the award will be in the form of a judgment. The learned counsel submits that the basic materials to arrive at a conclusion for which the amount has been awarded, has been duly dealt with by the learned Arbitrator. The learned counsel has also submitted that otherwise also, it is permissible for the arbitrator to make an honest guesswork while awarding the amount. He also submits that there is no legal bar that the arbitrator cannot award any amount over and above what was claimed. The learned counsel submits that in case the arbitrator finds, on the basis of materials on record, that further amount, over and above what was claimed, is required to be awarded, it is permissible for the learned Arbitrator to do so depending upon the materials which are placed before him. The learned counsel submits that the essential work of the learned Arbitrator is to come to a definite conclusion in connection with the claim or counter claim of the respective parties.

48. The learned counsel has submitted that the aforesaid submissions with regard to the claim is without prejudice to the argument of the claimant that in the petition filed under Section 34 of the Arbitration and Conciliation Act,1996, no specific ground was taken with respect to the claim which was awarded by the learned Arbitrator. The learned counsel submits that the requirement to give the foundational materials for challenge in a petition filed under section 34 of the aforesaid Act of 1996 is a mandatory requirement of law, in as much as, such material has the effect of putting the other side on notice to response to the ground. The learned counsel submits that the State had raised general grounds in the petition under Section 34 of the Arbitration and Conciliation Act, 1996 which are no grounds at all in the eyes of law.

49. In, response, the learned counsel for the appellant (State) has also submitted that the learned court below has only dealt with the as to whether the award which was based and relatable to the termination of contract was within the jurisdiction of the learned arbitrator and has set- aside the award based and relatable to the termination of contract but 30 the merits of the claim and counter claim, which were partly allowed and partly rejected by the learned arbitrator has not been considered by the learned court below and accordingly it has been submitted that the learned court below has failed to exercise his jurisdiction in terms of Section 34 of the Arbitration and Conciliation Act of 1996. Findings of this Court

50. This Court finds that various points were raised before the learned court below in the petition filed under section 34 of the Act of 1996 which included the jurisdictional issue with regard to the part of the award based and relatable to the termination of contract and also with regard to merits of the claim allowed by the learned arbitrator and counter claim disallowed by the learned arbitrator and also point of interest.

51. The learned court below has only dealt with the aspect to whether the award which was based and relatable to the termination of contract was within the jurisdiction of the learned arbitrator and has set-aside the award based and relatable to the termination of contract but the merits of the claim and counter claim, which were partly allowed and partly rejected by the learned arbitrator has not been considered by the learned court below. The claim/counterclaim based and relatable to the termination of contract were apparently not dealt with as it was held by the learned court below that the part of the award based and relatable to the termination of contract was itself without jurisdiction, barred by limitation and also barred by the principles of res-judicata. The aforesaid finding of the learned court below in connection with the award based and relatable to the termination of contract has been set- aside by this Court in Arbitration Appeal No. 16 of 2007, but the merit or otherwise of the allowed claim and disallowed counter-claim with regard to the entire dispute including those based and relatable to the termination of contract are required to be considered by the learned court below within the limited scope of the enquiry under Section 34 of the Act of 1996 on the grounds already raised before the learned court below after taking into consideration all the objections which have been raised by the claimant on the point of maintainability /merits of the grounds raised by the State in the petition under Section 34 of the Act of 1996. The challenge to allowed claim and disallowed counter-claim with regard to the entire dispute including those based and relatable to 31 the termination of contract having not been considered by the learned court below, the matter is remanded to the learned court below for consideration within the available scope of scrutiny of the award under Section 34 of the Act of 1996.

52. Accordingly, the parties are directed to appear before the competent court on 14.08.2023. Upon their appearance, the learned court below is directed to make endeavour to pass final order within a period of three months from 14.08.2023. The parties are directed to make endeavour to cooperate and not seek any unnecessary adjournments. There would certainly be no occasion to re-open the points and issues which have already been decided in Arbitration Appeal No. 16/2007 which has been allowed as aforesaid.

53. Arbitration Appeal No. 03/2008 is accordingly disposed of. Mukul/Saurav (Anubha Rawat Choudhary, J.)