The main legal point established in the judgment is that the claim for escalation under a contract is admissible if the specified conditions are satisfied, and the principle of res-judicata does not apply to separate arbitration proceedings involving different periods and circumstances.

JUDGMENT :

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Leave granted.

2. This appeal is against the decision of the High Court of Madhya Pradesh in an Arbitration Revision No. 4 of 2009 under Section 19 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983¹ [hereinafter referred to as ‘the Adhiniyam’] whereby the award of the Arbitral Tribunal was upheld.

3. The short facts leading to the Arbitral Award and thereafter the decision of the High Court may be stated as under.

4. The State issued a tender notice² [Tender Notice No. 1/1992-1993] for the construction of a Masonry Dam and eventually, Respondent No. 1 (hereinafter referred to as ‘the Contractor’) was selected as the successful bidder. A contract was entered into on 06.11.1993 for a total consideration of Rs. 1,22,81,86,600/- to be completed within a period of sixty months.

5. As the only issue arising for consideration, in this case, relates to the claim of escalation made by the Contractor, the relevant clause is extracted hereunder:

“3.11(A) The quoted rates of the contractor shall be inclusive of the leads and lifts and in no case separate payment for leads or lifts to any materials including water shall be payable. Similarly no leads or lifts for the materials issued by the department as prescribed in the tender documents shall be payable. The contractor shall bring approved quality of materials. Different quarries are shown in Annexure-C. The details shown in the Annexure C are only as a guide to the contractor but the contractor before tendering should satisfy himself regarding the quantity and quality available and all other details of Annexure-C and provide for any variation in respect of leads, lifts, place and method of quarrying, type of rocks to be quarried and all such other aspects in his tendered rate. Later on any claim whatsoever shall not entertained except where any quarry is changed for circumstance beyond the control of contract under the written order of Superintending Engineer in-charge of work.”

6. Though the contract was entered into in 1993, the work was suspended for a long time and it resumed on 18.09.2000. While carrying out the construction work under the contract, the Contractor requested an alternate quarry on 07.03.2002, which was denied by the Executive Engineer on 11.03.2002. The decision of the Executive Engineer was also confirmed by the Superintending Engineer on 12.12.2002 and this has led the Contractor to seek a reference of the matter to arbitration³ [Reference Case No. 38/2003] (hereinafter referred to as ‘the first arbitration’).

7. While the above-referred claim for an alternative quarry followed by the reference to the arbitration was pending, the Contractor renewed the request for an alternate quarry, this time for excavating sand from Mahuar quarry. This request was made on 20.10.2002. On the basis of this request, a committee of two Executive Engineers and one Sub-Divisional Officer conducted an inspection of the original quarry that was allotted to the Contractor i.e. the Barua Sand quarry as well as the new proposed quarry i.e. the Mahuar Sand quarry. This inspection report dated 31.10.2002 suggested that there was no sand available in the quarry originally allotted under the contract and there was justification for the request made by the Contractor for allotment of the Mahuar quarry which had sufficient stock of sand available.

8. Following the inspection report the Superintending Engineer by his letter dated 12.11.2002 granted permission to the Contractor to excavate sand from Mahuar quarry. It is important to mention here the specific and categorical statement of the Superintending Engineer that the permission granted under his letter would be subject to the conditions specified in Clause 3.11(A) of the contract. The relevant portion of the letter is extracted herein-below:

“.....Accordingly after inspection and discussion, the permission for excavating the sand from Mahua river sand quarry, to the executive engineer is propos