D. S. R. VARMA, J.

( 1 ) HEARD both sides.

( 2 ) THIS appeal is directed against the order and decree, dated 8-4-2005, passed by the XIV Additional Chief Judge, City Civil court, Hyderabad, allowing the petition in o. P. No. 72 of 2003, filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity "the Act") seeking to set aside the award, dated 21-9-2002, passed by the arbitrator.

( 3 ) THE appellant herein is the respondent no. 1, the respondents 1 to 3 herein are the petitioners and the respondent No. 4 herein is the respondent No. 2 respectively in O. P. No. 72 of 2003 before the Court below.

( 4 ) FOR the sake of convenience, in this judgment, the appellant, the respondents 1 to 3 and the respondent No. 4 will be referred to as "the contractor", the "railways" and "the arbitrator", respectively.

( 5 ) THE contractor is the successful tenderer for certain Railway works, particulars of which are not relevant. An agreement was entered into, which contains a clause to the effect that whenever extra work is entrusted, the same rate should be applied upto 25% and in case the works exceed 25%, the rates shall be decided by mutual discussions. The work entrusted to the contractor was completed in the month of August, 1996, and finalized on 31-3-1997. It appears that final bill was also paid on 22-11-1999. Since the amounts as demanded by the contractor were not paid, the arbitration clause was invoked.

( 6 ) INITIALLY though no Arbitrator was appointed, by judicial intervention of this court, a learned retired Judge of this Court was appointed as the sole Arbitrator. Before the Arbitrator, the contractor made as many as 7 claims, some of which are partly allowed and some were rejected.

( 7 ) CLAIM Nos. 4 and 5 are among the claims which were rejected. Insofar as claim no. 1 is concerned, the same was partly allowed by directing the Railways to pay a sum of Rs. 40,000/- towards execution of work over and above 25% of the tender schedule; insofar as claim No. 2 is concerned, the same was partly allowed by directing the railways to pay a sum of Rs. 58,62,182-24 paise towards difference in rates; insofar as claim Nos. 3 and 6 are concerned, the railways was directed to pay the interest at the rate of 12 per cent per annum from september, 1996, till the date of payment; and insofar as claim No. 7 is concerned, the railways was directed to pay a sum of rs. 1,50,000/- and Rs. 75,000/- towards the costs of arbitration.

( 8 ) THE said award was challenged before the Court below.

( 9 ) THE Court below formulated the following points for consideration: (i) Whether the dispute is an excepted matter and is not arbitrable? (ii) Whether the claimant is entitled to the amounts awarded by the arbitrator?

( 10 ) THE Court below, on considering the material available on record, held against the contractor on both the points and eventually set aside the award. Hence, the present Civil miscellaneous Appeal.

( 11 ) THE whole controversy revolves around two points viz. , (a) Whether the claim of the appellant under claim No. 2 for a sum of rs. 69,13,214/- i. e. , difference in rates, is an "excepted matter" and hence a non-arbitrable item? (b) Whether the appellant is entitled for the interest as claimed?

( 12 ) MR. Vemulaplli Prasada Rao, the learned Counsel appearing for the contractor, contended that the Court below erroneously held that the amount awarded by the Arbitrator under claim No. 2 is an "excepted matter" as per Clause 39 of the General Conditions of the Contract (for brevity "the GCC") and hence the said claim is not arbitrable. He further contended that since the procedure prescribed under Clause 39 of the GCC is not followed, the rates prescribed or offered by the Chief Engineer cannot be termed as "the rates determined in the appeal by the contractor and hence the same cannot be brought into the fold of Clause 39 of the GCC and consequently cannot attract Clause 63 of the GCC as excepted matter . In other words, it

Click Here to Read the rest of this document