Tripura Housing & Construction Board v. M/s Raimohan Majumder & Co.

The factual background in the context of which the present appeal has been filed is briefly enumerated hereunder:

3.1. The claimant-respondent, being a registered contractor entered into a contract Agreement being No.THCB/T/06/DED/(W-III)/13-14 with the applicant-appellants, the Tripura Housing & Construction Board(here-in- after referred to as the „appellants-Board‟) for construction of Auditorium Building of St. Paul‟s H.S School, A.D. Nagar, Agartala, Tripura. The total cost of the contract work was Rs.1,77,40,695/- and the stipulated period for completion of the said work was 10(ten) months from the date of issuance of the work order dated 11.12.2013 and the work was scheduled to be commenced from the fifteenth day of the date of issuance work order.

3.2. The appellants-Board on 20.02.2014 had furnished the relevant structural plan of the work to the claimant-respondent and the site was also handed over to him on finalization of layout plan. Accordingly, the claimant- respondent mobilized his plants and machineries, etc. deploying watch and wards staff and took preparation for execution of the work. But at that stage, the authority of the St. Paul‟s H.S School did not allow the claimant- respondent to go ahead with the work on the plea that the layout of the work site as finalized by the appellants-Board fell inside the playground of the school and the school authority desired to shift the work site towards back side of the school.

3.3. Situated thus, since there was deviation of the work site, an option was sought for on behalf of the appellants-Board from the claimant- respondent as to whether he was ready to execute the work necessitating the shifting of the work site of construction at the agreement rate and in response thereto the claimant-respondent communicated his decision to execute the work as per agreement, claiming rate for the deviated amount as well. However, the appellants-Board did not agree to accept the deviated amount so claimed by the claimant-respondent. Ultimately, the work could not be commenced, rather the contract was terminated and the work order was also cancelled.

3.4. As a result of the difference and disputes arose between the parties, on a petition filed on behalf of the claimant-respondent this Court appointed an Arbitrator for adjudication of the disputes arrived at between the parties.

3.5. Considering the controversies transpired from the respective statement of claims and defense and the documents filed by the parties, the learned Arbitrator framed the following issues: “(1) Is cancellation of work issued letter No.F.2(68)/THCB/DEO(W-III)/2012/82-84

01.01.2015 Respondent-the Dy. Executive Officer(W-III) addressed to the Claimant justified? If not, whether it amounted to breach of the terms and conditions of the Agreement executed by and between the Claimant and the Respondents under No THCB/06/DEO (W-III)/13-14 and the work order issued vide No. F.2(68)/THCB/ DEO(W- III)/2012/5702-19 dated on 11.12.2013? (2) Has the Claimant suffered any loss due to cancellation of the said work order under letter No.F.2(68)/THCB/DEO(W-III)/2012/82-84 dated 01.01.2015 above liable to be compensated? If it is in the affirmative, what shall be the quantum of compensation? (3) Is the Claimant entitled to interest on the amount of compensation as claimed for? If it is in the affirmative, what shall be the rate of compensation? (4) Is the Claimant entitled to cost of arbitration as claimed for?”

3.6. On going through the documentary evidence furnished by the parties with their respective statement of claim and defense and having heard the learned counsel of the parties, the learned Arbitrator by the impugned order dated 18.04.2017 rendered the award in the following manner: “(1) The respondents shall pay special damages on account of loss of profit an amount of Rs.17,74,070/- being the 10% of the value of the contract of Rs.1,77,40,695/- to the claimant within a period of three months from the date of announcing this award; (2) The claimant shall also be entitled to simple interest for the period from

07.02.2015 to 08.04.2017 @7% (seven percent) per annum and the claimant shall also be entitled to future interest @9% (nine percent) per annum with effect from 09.04.2017 till payment by the respondents. (3) In case the respondents fails to make payment of the amount of award including interest within the period of three months, the claimant shall be at liberty to realize the amount by putting the award in execution. (4) The cost of arbitration being the fees of the Arbitrator amounting to Rs.3,37,500/- has already been borne equally by both the parties as ordered by the Hon'ble the Chief Justice of the High Court of Tripura. So, no further award is made as to cost.”

3.7. Being aggrieved by the award dated 08.04.2017, the appellants- Board filed a petition before learned District Commercial Court, West Tripura, Agartala under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the arbitral award passed by the learned Arbitrator in Arbitration Proceeding No.01 of 2016 which was registered as Civil Misc(Arbitration) No.05 of 2017. The learned District Commercial Court by an order dated 19.03.2022 upheld the arbitral award passed by the learned Arbitrator and rejected the petition filed by the appellants-Board. Hence, the instant application at the instance of the applicant-appellants, Board.

#4. Mr. De, learned Addl. G.A. appearing for the appellants submitted that the Dy. Executive officer(W-III) could not hand over the clear site to the respondent-contractor to facilitate the commencement of work. As per the modified drawing, it was estimated to an amount of Rs.3,39,91,315/- and the value of the work under the agreement with the claimant-respondent was for an amount of Rs.1,77,40,695/- and thus, the deviation amount was Rs.1,62,50,620/- which was 92% on the higher side. It was further argued that to observe the formalities of a proposal for inclusion of deviation of work in the agreement in issue was placed before the Board in its 86th meeting, but the Board rejected the proposal and decided to invite fresh tender on the basis of modified drawing, as it was technically not feasible to get a part of the work done by one agency and the balance part by another agency, the appellants-Board could not consider the willingness of the claimant-respondent for execution of the work.

4.1. Mr. K. De, learned Addl. GA further submitted that Clause 12 and 12A of the terms of contract cannot supersede the financial power of the Executive Engineer or Dy. Engineer who signed the cancellation order on behalf of the Tripura Housing & Construction Board. The Board is constituted as per law and as such the Board has the power to rescind the agreement under compelling circumstances, which does not fall within the domain of dispute, as a result the decision of the Board cannot be held liable for committing breach of contract between the parties. In the instant appeal, the appellants have inter alia made the following prayers: “(i) Admit this application; (ii) Issue notice upon the respondent; (iii) Call for the LC records; (iv) After hearing the parties, set aside the judgment and order dated 19/03/2022 passed in Civil Mise(Arbitration) 05 of 2017 by the Ld District Commercial Court, West Tripura, Agartala, along with arbitral Award passed by the Ld. Arbitral Tribunal on 08/04/2017 in Arbitration Proceeding No. 1 of 2016; (v) Any other order/order(s) may pass as Your Lordship may deem fit and proper.”

#5. On the other hand, Mr. A. Sengupta, learned counsel appearing for the respondent-contractor submitted that the learned Arbitrator while discussing the issue no.1 rightly found that there was no justification in cancellation of the work order. Mr. Sengupta, learned counsel unequivocally submitted that the said cancellation of work order amounted to a breach of contract on the part of appellant and as such, the respondent-contractor claimed 15% of the value of contract as „loss of expected profit’.

5.1. Further, Mr. Sengupta, learned counsel reiterated that while deciding issue no.(ii), the learned Arbitrator relied on the decision laid down by the Hon‟ble Supreme Court in M/s A.T. Brijpaul Singh and Bros. vs.