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1990 Supreme(AP) 419
ANDHRA PRADESH HIGH COURT
M.S. Jagannadha Rao, J.
YELLURU MOHAN REDDY – PETITIONER.
v.
RASHTRIYA ISPATHNIGAM LTD. – RESPONDENT
Civil Revision Petition No. 329 of 1990
Decided on: November 9, 1990.
Smt. D. Prasanna Kumari, for the Petitioner.
V. Rajagopal Reddy, for the Respondent.
The decision of the Engineer on whether the work is extra work not contemplated by the contract or whether it is already included in the contract is not an excepted matter excluded from the purview of arbitration under a contract which contains an arbitration clause and also excludes certain matters from the purview of arbitration.
Headnote:
ARBITRATION - SCOPE OF ARBITRATION CLAUSES - EXCLUDED MATTERS - ENGINEER'S DECISION - FINALITY - EXCEPTED MATTERS - JURISDICTION OF ARBITRATOR - VARIATIONS AND ADDITIONS - CONSTRUCTION OF CLAUSES - LIMITATION - STARTING POINT.
Fact of the Case:
The petitioner entered into a contract with the respondent for the execution of certain works. The contract contained an arbitration clause which also excluded certain matters from the purview of arbitration and left them to the decision of the Engineer. A dispute arose between the parties regarding the payment of extra work claimed by the petitioner. The Engineer rejected the claim and the petitioner filed a petition under Section 8(2) of the Arbitration Act, 1940 seeking appointment of an arbitrator.
Finding of the Court:
The court held that the dispute between the parties did not fall within the excepted matters excluded from the purview of arbitration under the contract. The court further held that the petitioner had complied with the requirements of Section 8(2) of the Arbitration Act, 1940 and that the petition was not barred by limitation.
Issues: 1. Whether the dispute between the parties fell within the excepted matters excluded from the purview of arbitration under the contract? 2. Whether the petitioner had complied with the requirements of Section 8(2) of the Arbitration Act, 1940? 3. Whether the petition was barred by limitation?
Ratio Decidendi: 1. The court held that the dispute between the parties did not fall within the excepted matters excluded from the purview of arbitration under the contract because: * Clause 11.3 of the contract, which dealt with the valuation of variations and additions, did not cover the decision of the Engineer on whether the work was extra work not contemplated by the contract or whether it was already included in the contract. * The basic dispute between the parties was whether the work was new or not included in the contract as contended by the contractor or whether it was already included in the contract as contended by the Engineer. 2. The court held that the petitioner had complied with the requirements of Section 8(2) of the Arbitration Act, 1940 because: * The petitioner had given a one week's notice for appointment of arbitrator as required by the contract. * The petition for appointment of arbitrator was filed within 32 days after service of the notice, which was more than the time required by the statute. 3. The court held that the petition was not barred by limitation because: * No objection was raised by the respondent that the petition was barred. * The court relied on the decision in Monmouth C.C. v. Costello & Kemple Ltd. ((1965) 63 LGR 429 (CA)) which held that for limitation to start, the Engineer must make it clear that if his letter was intended as a 'decision' under the clause.
Final Decision: The revision petition was allowed and the O.P. filed by the petition was also allowed. The court below was directed to appoint an arbitrator in terms of the latter part of Clause 16.2 of the agreement and subject to the powers of the Court under Section 8 of the Arbitration Act, 1940.
Jagannadha Rao, J. - This civil revision petition raises a question of importance regarding the scope of arbitration clauses which also contain sub-clauses excluding certain matters from the purview of arbitration and also a question relating to the application of Section 8(2) of the Indian Arbitration Act, 1940 (hereinafter referred to as the Act).
2. The facts of the case are as follows : The petitioner entered into a contract with the respondent, the Visakhapatnam Steel Project, on 31.3.1986. Earlier the petitioner was awarded the work on 30.12.1985 in a sum of Rs. 6,15,750/- and the work was to be completed in four months. It appears from the counter that certain meetings took place between the petitioner and the respondent on 7th, 21st and 28th March, 1986 and a revised programme was fixed up in which the petitioner agreed to complete the work by the end of May, 1986 which would mean that there will be a delay of one month in the completion of the work. It is the case of the petitioner that he could not proceed with the work inasmuch as contrary to an alleged assurance a reservoir was allowed to get filled up with water by the respondent and that the trenches which were dug by the petitioner got filled up with water and therefore it became impossible to proceed with the contract without involving additional expenditure. The petitioner therefore addressed a letter on 26.5.1986 (Ex. A. 1) stating that he had excavated 27,000 cubic metres as against 15,000 cubic metres and covered a length which was short of 3 K.Ms. out of the total length to be covered. He stated that unless the water is bailed out it is impossible to excavate the soil. Extra cement is required. As in spite of the request to amend the agreement to include the additional work and additional expenditure, the same was not done, he is not able to proceed further. This being not a matter covered by the special conditions which could be disposed of by the Engineer, the petitioner requested that the rate for excavation of the earth and pitching be enhanced by 50% over the original rate or in the alternative, the petitioner may be given water free area after dehidration is made by the respondent. The Deputy Chief Engineer (Civil) sent a letter, Ex. A. 2, dated 4-6-1986 which does not refer to Ex. A. 1. He stated that the work was awarded on 30-12-1985 for completion in four months that in spite of the revised schedule it was not completed even by May, 1986, that the petitioner did not mobilise his resources and had stopped work already for 10 days. The petitioner was requested to resume work and complete it at the earliest. Otherwise the work will be get completed at the petitioner's risk. The same officer after receipt of Ex. A. 1 sent a further letter on 11.6.86 (Ex. A. 3) to the petitioner stating that the allegation that the site condition has become altered on account of the filling up of the water is incorrect. Under the General Conditions no change in unit rate is admissible for and variation in quantities, that the petitioner has not completed the work according to the revised schedule and did not even complete 25% of the pitching work. The item of earth work in the bill already included the so called additional work. The cement consumption now claimed is contrary to the petitioner's letter dated 23-12-1985. The road is, in fact, dry. The claim for extra rate is accordingly rejected. Before receipt of Ex. A. 3 the petitioner wrote Ex. A. 4 dated 14-6-86 stating that the contents of Ex. A. 2 have surprised him. The petitioner was ready and willing to proceed with the work if the points raised in Ex. A. 1 are answered. In reply the Deputy Chief Engineer wrote on 16-7-1986 as per Ex. A. 5 that the progress of work was poor in spite of 8 letters and therefore it is clear that the petitioner failed to complete the work and has abandoned the site. Therefore, on being satisfied with the certificate of the Engineer, the respondents were giving 7 days notice u
