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Supreme Court of India
Chandigarh Construction Co. … vs State Of Punjab on 14 February, 2020Author: R. Banumathi
Bench: R. Banumathi, A.S. Bopanna
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.867870 OF 2013
Chandigarh Construction Co. Pvt. Ltd. .…Appellant(s)
Versus
State of Punjab & Anr. …. Respondent(s)
JUDGMENT
A.S. Bopanna,J.
1. The appellant is before this Court assailing the
order dated 08.04.2011 passed by the High Court of
Punjab & Haryana at Chandigarh in Civil Revision
No.2958/2008 which was disposed of along with Civil
Revisions Nos. 2949, 2960 and 2961 of 2008. Through
the said order the High Court allowed the Revision in part
Signature Not Verified
Digitally signed by
MADHU BALA
to the extent of allowing the Claim No.1 of the appellant
Date: 2020.02.14
14:21:05 IST
Reason:
by modifying the judgment passed by the Trial Court and
Page 1 of 26
the First Appellate Court, but insofar as the remaining
claims the judgments passed by the First Appellate Court
was affirmed. Consequently, the Award passed by the
Arbitrator stood modified to that extent. The appellant,
therefore, is aggrieved to the extent, the remaining claim
of the appellant was rejected. In that view the
consideration in the instant appeal pertains to the Claim
Nos.2, 3, 8, 12 and 16 as put forth and also the issue
relating to the grant of interest which arose for
consideration under Claim No.19.
2. For the purpose of convenience and clarity the
parties would be referred to in the rank assigned to them
in the arbitration proceedings. Accordingly, the appellant
herein would be referred to as the claimant, while the
respondents would be referred to as the opposite party.
3. The proceedings in question arises relating to an
Award passed under the Arbitration Act, 1940 (‘Act 1940’
for short). The claimant and the opposite party had
entered into a contract agreement dated 05.02.1985 for
construction of Sutlej Yamuna Link Canal (Punjab) and
in that regard to carry out the earth work, drainage
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behind lining and cement concrete lining of Raech RD
71.50 to 72.50 kms. The estimated cost of the project
was at Rs.31 lakhs and the contract amount for the work
was fixed at Rs.59,86,732/. The work concerned was to
be executed in eight months.
4. In respect of the said contract, the claimant
contended that during execution, the scope of work was
considerably increased on account of substantial
increase of earth work, sloughing of banks, rebuilding of
banks with selfdraining material, various decisions by
the department regarding rebuilding of banks and
changes in the strata encountered during excavation due
to incorrect geological data observations by the
department prior to inviting tender. In that view, the
claimant had raised a demand for the additional payment
which was disputed by the opposite party, which led to
an arbitral dispute. Since the agreement provided for
resolution of disputes by arbitration the claimant took
recourse to the same. In that background the claimant
had sought for additional payment in the claim statement
filed before the Arbitrator. The opposite party filed their
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objections disputing the claim put forth by the claimant.
The learned Arbitrator on considering the rival
contentions passed the Award dated 31.08.1994 and
awarded the amount as claimed by the claimant to be
paid by the opposite party with interest at the rate of 18%
per annum as also the future interest at 18% per annum
from the date of the Award to the date of payment. As
required under Act, 1940 the said Award was to be made
a ‘Rule of Court’ for which purpose the Award was
presented before the Court of the Senior SubJudge,
Ropar. The opposite party filed objections in the said
proceedings and contended that the Award passed by the
Arbitrator is not sustainable as the Arbitrator had
misconducted himself by awarding the amounts which
were not payable as per the contract and the learned
Arbitrator had not indicated reasons for the decision.
The learned SubJudge through the judgment and decree
dated 21.10.1995 accepted the objections to the extent of
rejection of Claim No.1 and reduction of interest to 12%
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per annum and in other respects the Award was made
the ‘Rule of Court’.
5. The opposite party however continued to remain
aggrieved insofar as the noninterference with regard to
other claims and, therefore, filed an appeal before the
District Judge, Ropar in Civil Appeal No.9/3110 of 2006.
The claimant preferred the cross appeal insofar as the
rejection of Claim No.1 by the learned SubJudge and
reduction of interest. The learned District Judge through
judgment dated 06.11.2007 rejected the cross appeal
filed by the claimant and allowed the appeal filed by the
opposite party (State of Punjab) and set aside the amount
awarded under Claim Nos.2, 3, 8, 12 and 16. The
claimant, therefore, contending to be aggrieved preferred
the Revision Petitions before the High Court. It is in the
said proceedings the High Court has rejected the
remaining claim except Claim No.1 as indicated above. It
is in that circumstance the claimant is before this Court
in this appeal.
6. Shri Nakul Dewan, learned senior advocate
appearing for the claimant would contend that the First
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Appellate Court and the High Court were not justified in
their conclusion to reject the Award passed by the
learned Arbitrator. It is contended that the basis on
which the Claim No.2 would arise for consideration will
be the same basis for the Award of the amount under
Claim Nos. 3 and 12. Even insofar as the Claim No.8 the
additional amount will have to be calculated on that
basis for the extra items used. In that background, it is
contended that under Note 6 to the schedule of work
which forms a part of the contract, it provides that extra
or other items of work shall be paid at the rate worked
out on the basis of relevant Punjab Common Schedule of
Rates Basis Plus Sanctioned Premium at the time of
tendering, which is to be worked out. In that light it is
contended that the estimated cost of the present contract
is at Rs.31 lakhs while the contract amount has been
worked out at Rs.59,86,732/. The difference between
the estimated cost and the contract amount is the
sanctioned premium which corresponds to the overall
premium of 93.12% on the work for the purpose of
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computing the rates of extra items/quantity or work
done. Insofar as the remaining claims the said 93.12%
would become applicable. In that circumstance when the
learned Arbitrator has taken note of this aspect and
decided the Claim No.2, the same would be sustainable.
It is contended that when the contract agreement is
explicit insofar as the value and the difference being the
sanctioned premium and the percentage being evident at
93.12% the decision of the learned Arbitrator not
indicating any further reasons in the Award would not be
fatal. When the obvious had been concluded by the
learned Arbitrator, the amount ultimately awarded is
sustainable and the claim put forth by the claimant is
justified.
7. Ms. Uttara Babbar, the learned counsel for the
opposite party (State of Punjab), would on the other hand
contend that the learned Arbitrator has not indicated any
reason whatsoever to arrive at the conclusion that the
claim made at 93.12% is admissible. The learned
counsel would in that regard refer to Clause 63 of the
contract which provides for reference of the disputes to
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arbitration. The said clause after referring to the manner
in which the learned Arbitrator is to be appointed, has
further specified the requirement that all Awards shall be
in writing and in case of awards amounting to Rs.1 lakh
and above, such Award shall state the reason for the
amount awarded. In that circumstance it is contended
that when the contract between the parties is explicit
with regard to the manner in which an Award is to be
passed by the learned Arbitrator, the Award passed in
such manner alone would be sustainable. In that light it
is contended that in the instant case the Award does not
indicate the reasons while answering Claim No.2, wherein
it is only stated that as per agreement the premium
works out to 93.12% and has awarded the same without
specifying the reasons for such conclusion. In that view
it is contended that such Award would not be
sustainable. The learned counsel refers to the schedule
of through rate items for construction, in the tender form
(Annexure P2) wherein Note 6 specifies that the Punjab
Common Schedule of Rates would be applicable. It is
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contended that as per the communication dated
05.01.1987 addressed by the Executive Engineer to the
claimant, it indicates that the percentage above the
departmental rates has been approved at 35.02%. In
that light it is contended that the calculation towards the
claim in any event could not have exceeded the same. In
that view it is contended that the learned Arbitrator had
not considered these aspects nor does the Award indicate
his mind. On the other hand, the learned First Appellate
Court and the High Court having taken note of these
aspects has arrived at the conclusion which does not call
for interference. With regard to the Claim No.8 relating to
extra payment for DALDAL (SWAMPY Area) the First
Appellate Court and the High Court has taken into
consideration that the claim had not been made within
the time provided and has accordingly rejected the claim.
In that view it is contended that the order passed by the
High Court does not call for interference.
8. In the light of the above, a perusal of the appeal
papers would indicate that there is no serious dispute
between the parties with regard to the contract entered
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into for construction, the work performed and certain
additional work having been carried out by the claimant.
The issue is however as to whether the learned Arbitrator
had appropriately considered the matter in its correct
perspective and in that light whether the Award of the
amount at the premium of 93.12% would be justified and
the manner of consideration by the learned Arbitrator
without assigning reasons for his Award is sustainable.
In that view the issue would be as to whether the First
Appellate Court as also the High Court were justified in
rejecting the claim raised by the claimant.
9. While considering these aspects it is noticed that
as pointed out by the learned counsel for the opposite
party, Clause 63 of the contract which provides for
arbitration of all disputes or differences between the
parties also indicates the requirement of the Award to be
as follows:
“All awards shall, be in writing and in case
of awards amounting to Rs.1 lakh and
above, such awards shall state the reasons
for the amount awarded.”
Keeping this in view, if the Award passed in the instant
case by the learned Arbitrator (Annexure P6) insofar as
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Claim No.2 is perused, all that the learned Arbitrator has
stated is as follows:
“As per agreement premium works out to
93.12% which is awarded.”
10. The said conclusion on Claim No.2 without
appropriate consideration is the basis of reckoning the
premium at 93.12% in respect of the Claims No.3 and 12
as well. The learned senior advocate for the claimant
while seeking to contend that the Award would still be
sustainable even in that circumstance has relied on the
decision of this Court in the case of Indian Oil
Corporation vs. Indian Carbon Ltd. (1988) 3 SCC 36 to
contend that it has been indicated therein that if the
reason as to how the Arbitrator has drawn the inference
is apparent the same would be sufficient. The decision in
the case of Ispat Engineering and Foundry Works,
B.S. City, Bokaro vs. Steel Authority of India Ltd.
B.S. City Bokaro (2001) 6 SCC 347 is relied, wherein it
is held that in the event, however, there are reasons,
interference would still not be available unless of course,
there exist a total perversity in the Award or the
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judgment is based on wrong proposition of law. In
addition, the decision in the case of D.C.M Ltd. vs.
Municipal Corporation of Delhi & Anr. (1997) 7 SCC
123 is relied upon to contend that even in case of a non
speaking Award if the Arbitrator has proceeded without
overlooking any term of the contract, the same cannot be
considered as an error apparent on the face of the Award.
In an attempt to persuade us the learned senior counsel
has with leave referred to the decision of the High Court
of Delhi in the case of M/s Naraindas R. Israni vs.
Union of India DRJ (1993) 25 to point out that in
respect of an agreement containing a similar clause the
learned Judge had held that the learned Arbitrator is not
required to give detailed reasons like a Civil Court but
what is expected of the Arbitrator is that he must give out
the trend of his thought process and it is not necessary
for the Arbitrator to give any arithmetic computation.
11. The learned advocate for the opposite party would
however point out from the very decision in the case of
Indian Oil Corporation Ltd. (supra) relied upon by the
Page 12 of 26
learned senior counsel for the claimant that this Court in
the said decision has also held that where an authority
makes an order in exercise of a quasijudicial function it
must record its reasons in support of the order it makes.
It was further observed that every quasijudicial order
must be supported by reasons. It is therefore contended
that the bar would raise higher for a judicial order which
should indicate reasons for the conclusion. The learned
advocate would further refer to the decision in the case of
Raipur Development Authority & Ors. vs. M/s
Chokhamal Contractors & Ors. (1989) 2 SCC 721
wherein it is held that though it is well settled that an
Award can neither be remitted nor set aside merely on
the ground that it does not contain reasons in support of
the conclusion or decision reached in it except where the
arbitration agreement or the deed of submission requires
it to give reasons. In that light the learned advocate
would point out that in the instant case the agreement
between the parties would require that the learned
Arbitrator has to assign reasons for the Award and when
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such requirement is stipulated the Award passed without
reasons would not be sustainable being contrary to the
explicit requirement in the contract between the parties.
The learned advocate for the opposite party has further
referred to the decision in the case of Gora Lal vs. Union
of India (2003) 12 SCC 459 wherein it is held as
hereunder:
“6. A perusal of the aforesaid clause would
show that the arbitrator is required to
indicate a finding along with the sum
awarded separately on each individual
item of the dispute. While giving a finding,
the arbitrator necessarily has to take into
consideration the disputes, claims and
counterclaims of the parties and after
considering the evidence on such claims
and the legal position, has to record his
finding on each disputed item. In the
present case what we find is that on each
item the arbitrator has awarded a sum
which according to us is not a finding but
is merely a conclusion.”
12. In the background of contentions put forth and
from the legal position enunciated in the decisions relied
upon, the position is clear that in the instant facts the
agreement between the parties required the learned
Arbitrator to pass the Award in a particular manner
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whereunder the reasons were required to be assigned
since that was the explicit requirement under the
contract. If in that background the Award impugned in
the instant proceedings is taken note the learned
Arbitrator has not assigned any reasons for the
conclusion reached on Claim No.2 which was also
relevant for considering the Claim Nos.3 and 12 as well.
If that be the position the only explanation that is sought
to be put forth by the learned senior advocate for the
claimant that the basis for such conclusion is the
difference of the value between the estimated amount at
Rs.31 lakhs and the contract amount at Rs.59,86,732/
to work out the premium would not be justified. The
quantum of the contract amount as against the estimated
cost by itself could not have formed the basis to conclude
the claim as made by the claimant towards premium of
extra items, extra items for supply and laying of self
draining materials and towards rehandling of earth
work. In that regard the contention to the contrary put
forth by the opposite party was that the tender form
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provided for that aspect under Note 6, which reads as
hereunder:
“Extra other items shall be paid for each
such items of work at thorough rate
worked out on the basis of relevant Punjab
Common Schedule of Rates basis plus
sanctioned premium (at the time of
tendering), plus or minus percentage above
or below worked out by the department by
reference to department’s estimated cost of
tender.”
13. The said provision would indicate that the rate as
prescribed under the Punjab Common Schedule of Rates
would be applicable. In that light it is noticed that the
letter dated 05.01.1987 relied upon by the learned
advocate for the opposite party which was addressed to
the claimant indicates that the premium as agreed under
the schedule is at 35.02%. The said contention had been
urged by the opposite party in their pleadings. In fact, as
pointed out by the learned advocate for the opposite
party, the First Appellate Court has taken note of this
aspect and has arrived at its conclusion to disapprove the
Award of premium at 93.12% for extra work.
14. In the above backdrop, we fully concur with the
manner in which the consideration was made by the First
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Appellate Court as also the High Court to arrive at the
conclusion that the claim as put forth by the claimant in
respect of Claims No.2, 3 and 12 at the premium of
93.12% worked out only on the basis of difference of the
amount between the estimated cost and the contract
amount is not justified. However, in that circumstance
when the learned Arbitrator has not assigned any
reasons but had unilaterally in a cryptic fashion
awarded the claim at the premium of 93.12% and when
the same was disapproved as not sustainable, the
appropriate course in the normal circumstance ought to
have been to set aside the Award and remit the matter to
the learned Arbitrator to make a fresh consideration to
determine the percentage of premium at which the claim
for the extra items would be sustainable, more
particularly in a circumstance where the additional work
carried out was not in serious dispute but the premium
for rate of payment was to be determined.
15. The said course would be open even at this stage,
but in the instant case we however take note that the
claim was under the Act, 1940 in respect of an agreement
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dated 05.12.1985 and the claim before the Arbitrator
itself was of the year 1994. In that background a perusal
of the consideration as made by the First Appellate Court
would indicate that it does not refer to the claim that was
admissible after working out the percentage of premium
that is applicable. It has only arrived at the conclusion
that the working out of the premium at 93.12% in respect
of the extra items on Claim Nos.2, 3 and 12 are set aside.
The learned First Appellate Judge ought to have arrived
at the conclusion of the admissible claim and in that
regard a conclusion ought to have been reached instead
of rejecting the claim outright since the course to remand
the matter to the Arbitrator was not adopted.
16. In that background since we have referred to the
communication dated 05.01.1987 which is produced at
Annexure R3 with the additional documents and also on
taking note of the contention urged by the opposite party
regarding the premium rates to be worked out at 35.02%,
we are of the opinion that instead of rejecting the entire
claim as made by the claimants, premium for the extra
items is to be determined at 35.02% and the claim based
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on the same is required to be awarded. To that extent,
the calculation is to be made by the opposite party and
the amount be paid to the claimant. The said calculation
with the premium at 35.02% shall be made in respect of
the extra items indicated under Claim Nos.2, 3 and 12.
17. Insofar as the Claim No.8, it relates to the work
carried out on DALDAL land wherein the soil was marshy
and extra construction material was required to complete
the work. The learned Arbitrator through the impugned
Award had taken note of the same and awarded the sum
of Rs.19,15,143/ after indicting the amount for the said
work on the same basis and deducting the agreed rate.
Though the learned SubJudge had accepted the same
for making it the ‘Rule of Court’, the learned First
Appellate Judge on taking note of the claim had arrived
at the conclusion that the learned Arbitrator was not
justified in granting the claim. In that regard, the First
Appellate Court had taken note of Clause 39 of the
Contract Agreement wherein a provision was made for
extra items. The second paragraph therein which
provides for the manner in which the contractor is
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required to submit the returns of the work claimed for
extra items was referred to. The said requirement
indicated that the contractor shall deliver in the office of
the Executive Engineer on or before the 10 th day of every
month during continuance of the work, the return
showing details of any work claimed for extra, and such
return shall also contain the value of such work as
claimed by the contractor. If the details are not
indicated, the Clause indicates that it shall be deemed
that the contractor has waived all claims not included in
such returns and will have no right to enforce any such
claim not so included. In that light since the claim was
ultimately found as not included in the monthly
statement, the First Appellate Court was of the opinion
that the requirement of the conditions of the contract was
not adhered to and, therefore, set aside the Award of the
said amount by the learned Arbitrator and the same
claim being made ‘Rule of Court’ by the learned Sub
Judge was also set aside. The High Court while adverting
to this aspect of the matter has held that insofar as the
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amount sought under Claim No.8 the question is not
whether the petitioner undertook this work but whether
the petitioner raised any claim for this extra amount in
terms with the contract. The High Court has also taken
note of Clause 39 of the contract and has declined the
claim.
18. In that background having taken note of Clause 39
of the Contract Agreement, it cannot be considered as a
statutory limitation or bar for the claim in all
circumstances. The said Clause no doubt prescribes a
method by which the claim is to be put forth in the
statement every month. The said requirement will have
to be construed as being put in the agreement so as to
ensure that the additional work has actually been done,
the claim is put forth along with details so that baseless
claim is not made at a distant point in time when it will
not be possible to determine. Though the Clause also
indicates that if such claim is not made, it would
amount to waiver, in a circumstance where the claim is
ultimately put forth in the forum where an adjudication
is made and based on the material if the adjudicating
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authority is satisfied that the actual work had been done
and the contractor being entitled to the extra amount
spent by him to carry out the work in an appropriate
manner, it would not be just and proper to deny such
claim only on the ground that it had not been indicated
strictly in the manner as provided in the contract
specially keeping in view the nature of work undertaken.
To that limited extent a perusal of the Award passed by
the learned Arbitrator would indicate that the learned
Arbitrator had taken into consideration the letter dated
14.11.1986 wherein the identification of soil which was
agreed to. The letter dated 09.03.1987 submitting the
test results identifying the strata encountered as DALDAL
is referred therein. The work having been completed
during the March, 1988 was also taken note. In that
circumstance when the fact remains that the DALDAL
land was situated in the area, work was carried out and
extra material was used, the claim in our opinion cannot
be rejected outright adopting a technical view of the
matter. However, the claim for the extra item in that
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regard for the work of 1,33,181.00/ ‘Cum’ will have to be
calculated with premium at the same rate of 35.02% over
and above the agreed rate and not at 93.12% as has been
taken into consideration by the learned Arbitrator for
awarding the amount. The appropriate calculation in
that regard shall however be worked out in such manner
so as to award the amount under the said Claim No.8.
19. Insofar as Claim No.16 we see no reason to
interfere with the orders passed by the High Court or by
the First Appellate Court. Further with regard to the
interest sought under Claim No.18 we are of the opinion
that in the absence of agreement with regard to the rate
of interest, the interest as awarded by the learned
Arbitrator was on the higher side and the First Appellate
Court was justified in reducing the same to 12% per
annum and the High Court was also justified in not
interfering with the same.
20. As already indicated above the unreasoned award
on being set aside by the First Appellate Court, the
matter in a normal circumstance ought to have been
remitted to the learned Arbitrator to redo the proceedings
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afresh in accordance with law. Such course ought to have
been adopted by us as well. We had proceeded to
examine the matter with regard to the validity of the
claim keeping in view the time lapse and since the
validity of the claim was to be taken note at the
appropriate premium if not at the percentage of premium
at 93.12% as determined by the learned Arbitrator. In
view of our conclusion relating to the claim being
sustainable to the extent as indicated by us above at the
premium of 35.02%, under Claim Nos.2, 3, and 12 the
calculation based on the extent and measurement of the
extra items is an exercise which cannot be undertaken
herein and as such the opposite party keeping in view the
directions herein shall work out the actual amount
payable in respect of the extent, measurement, quantity
and price based on which the claim is made. In that
regard we hold that the claimant is entitled to the claim
for extra items as put forth under Claim Nos. 2, 3, 8 and
12 by working out the difference of cost on the tender
premium at 35.02%. On arriving at the quantum of the
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amount, the same shall be payable with interest at 12%
per annum in the manner as ordered by the First
Appellate Court. The claim No.1 ordered by the High
Court is sustained. The said exercise for calculating and
paying the amount to the claimants on claim Nos.1, 2, 3,
8 and 12 shall be completed by the opposite party within
the period of six weeks from this date. In the event of
there being delay in payment beyond the said period, the
same shall carry interest at the rate of 18% per annum
till the date of payment.
21. In the result we pass the following:
ORDER
(i) The order dated 06.11.2007 of First Appellate
Court and the order dated 08.04.2011 by the High
Court in Rev. No.2958/2008 are modified.
(ii) It is ordered that in addition to the Claim
No.1 allowed by the High Court, the claimant is
also entitled to the amount under Claim Nos.2, 3,
8 and 12, however, to be calculated at the
premium of 35.02%. The same shall be calculated
with interest at 12% per annum and paid in six
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weeks from this date failing which the same will
carry interest at 18% per annum.
(iii) The appeals are, accordingly, allowed in part
with costs.
(iv) The Registry is directed to draw up the
decree/award in terms of the directions contained
hereinabove.
(v) Pending applications if any, shall also stand
disposed of.
………….…………….J.
(R. BANUMATHI)
.……………………….J.
(A.S. BOPANNA)
New Delhi,
February 14, 2020
Page 26 of 26
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