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2003(6) Supreme 898
SUPREME COURT OF INDIA
(From Madras High Court)
V.N. Khare, CJI., S.B. Sinha, J.
Union of India -Appellant
versus
M/s. V. Pundarikakshudu & Sons and Anr. -Respondents
Civil Appeal Nos. 8337-8339 of 1997
Decided on 9-9-2003
Counsel for the Parties :
For the Appellant : N.N. Goswami, Sr. Advocate, C.V.S. Rao, Advocate for Ms. Anil Katiyar, Advocate.
For the Respondents : M.N. Rao, Sr. Advocate, A. Subba Rao, A.P. Jyothish, A. Chandra Mohan, Ms. Deepthi K., and Amar Jyothi, Advocates.
Held : It is not in dispute that the claims and counterclaims of the parties centred round determination by the arbitrator as to whether the appellant or the first respondent had committed a breach of contract. The power of the appellant to terminate the contract and to put forth the claim for extra expenditure involved to complete the incomplete items of work left out by the first respondent revolved round the issue as to whether it was a defaulter or not. The appellant could terminate the contract and get the work completed through another agency entitling it to lay the said claim, but its justifiability therefor indisputably would depend upon the interpretation of clause 54 of the Contract. The said clause empowers the appellant to cancel the contract, only if the contractor "fails to complete the works, work order and items of work, with individual dates for completion, and clear the site on or before the date of completion". Thus, the failure must be on the part of the contractors and not by reason of acts of omissions and commissions of the appellant herein. (Para 17)
The question as to whether one party or the other was responsible for delay in causing completion of the contract job, thus, squarely fell for consideration before the arbitrator. The arbitrator could not have arrived at a finding that both committed breaches of the terms of contract which was ex facie unsustainable being wholly inconsistent. Clause 54 of the contract could be invoked only when the first respondent committed breach of the terms of the contract. An action in terms thereof could be taken recourse to in its entirety or not at all. If one part of the award is inconsistent with the other and furthermore if in determining the disputes between the parties the arbitrator failed to take into consideration the relevant facts or based his decision on irrelevant factors not germane therefor; the arbitrator must be held to have committed a legal misconduct. (Para 22)
JUDGMENT
S.B. Sinha, J.-The appellant and the first respondent herein entered into a contract for construction of an auditorium complex at Willington Nilgiris for a sum of Rs. 64,79,982.95. The work commenced on 16.3.1979 and was to be completed on 15.3.1981. However, there had been amendment to the said agreement owing to increase in the scope of work. An extra time of six months was also given to the contractor in terms of the said amendment. The time for completion of the contract was extended from 16.9.1981 to 30.6.1982 and 1.7.1982 to 31.12.1982. The contract amount was also increased, because of the aforementioned amendment therein owing to increase in the scope of work, to Rs. 85.10 lakhs. Although the period of contract was over and the appellant did not grant any further extension, the same was purportedly terminated by the appellant herein on 28.2.1983, i.e., after the due date for completion of work, namely, 31.12.1982. Disputes and differences having arisen, the arbitration agreement was invoked by the Respondent No.1 and the claims and counterclaims of the parties were referred to one Brigadier M.M.L. Sharma who was appointed by the Engineer-in-Chief of the appellant. Before the arbitrator the first respondent submitted a claim for a total sum of Rs. 23,59,534.72 comprising 23 claims whereas the claim of the appellant herein amounted to Rs. 90,58,167.42 comprising 8 claims.
2. The sole arbitrator awarded a sum of Rs. 14,31,463/- in favour of the first respondent and a sum of Rs. 33,95,000/- in favour of the appellant herein. The award was filed in the District Court of Nilgiris.
3. Original Petition No. 29 of 1986 was filed by the respondent No. 1 herein under Sections 15, 16, 30 and 32 of the Arbitration Act praying to very modify or set aside to claim No. 1 under B Claim of the Government in Award dated 6.2.1986 and confirm the award in Claim q of the contractor made including the interest and decree in favour of the petitioner or in the alternative to set aside the award dated 6.2.1986.
4. Original Suit No. 31 of 1986 was filed by the first respondent for passing a judgment and decree in terms of the award passed in favour of the Plaintiff in claims serial No. A claims of the contractor by the 2nd defendant and directing the first respondent to pay the plaintiff Rs.14,31,462 whereas Original Suit No. 47 of 1986 was filed by the Union of India for a decree and judgment in terms of the Award for a sum of Rs. 33,95,000/- with interest at 18 per annum with costs.
5. The learned District Judge upheld the said objections of the first respondent holding: as the arbitrator made an award in favour of the first respondent presumably upon arriving at a finding that the appellant herein was responsible for causing delay in completion of the contract; the award made in favour of the appellant must be held to be inconsistent therewith.
6. It was further held that the appellant herein pushed in some calculation sheets on the last date of hearing which was accepted by the arbitrator without assigning any reason and without prior intimation to the first respondent which amounted to misconduct on the part of the arbitrator. The Court further took into consideration the fact that the Union of India admittedly caused 1654 days delay in accepting the designs and as the said admission was not taken into consideration by the arbitrator, that part of the award was vitiated.
7. The District Judge further held that having regard to the fact that the arbitrator had awarded compensation to the first respondent on various items including Claim A towards additional amount claimed due to escalation in prices of materials and men at 25 of the work done at the contract rates, loss sustained due to under-utilisation of cantering and shuttering materials, loss sustained due to underutilization, compensation for loss sustained on overheads due to prolongation of work, the impugned award cannot be sustained.
8. The learned District Judg
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