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2015 Supreme(Cal) 321
IN THE HIGH COURT OF CALCUTTA
SANJIB BANERJEE, J.
AKA LOGISTIC PRIVATE LIMITED – Appellant
Versus
DAMODAR VALLEY CORPORATION – Respondent
AP No. 1211 of 2015
Decided On : 29-7-2015
Important Points
Subject
Arbitration and Conciliation - Award - Interpretation
Act Referred
Headnote
DAMODAR VALLEY CORPORATION - ARBITRATION AND CONCILIATION ACT, 1996 - SECTIONS 2(1)(C), 26, 28(3), 33, 34 - AWARD - INTERPRETATION OF CLAUSE 8.122 OF THE WORK ORDER - PRICE VARIATION - ESCALATION - CENTRAL GOVERNMENT CIRCULAR VERSUS STATE GOVERNMENT NOTIFICATION - ERROR APPARENT ON THE FACE OF THE AWARD.
Fact of the Case:
Damodar Valley Corporation (DVC) issued a work order to the petitioner for liaising with railways and coal companies, uploading coal rakes, annual repair and maintenance of coal handling plants, and removal of technological waste. The petitioner claimed escalation based on notifications or circulars issued by the State Government in respect of periodical wage revision. The arbitrator rejected the petitioner's claim, interpreting Clause 8.122 of the work order as referring only to reimbursement for additional wage bills or expenses due to price increases.
Finding of the Court:
The court found that the arbitrator erred in interpreting Clause 8.122 of the work order. The clause clearly governed all prices offered by the contractor for services under Parts B, C, and D of the work order. The price variation clause made the prices offered in respect of Parts B, C, and D of the work order directly proportional to the change in the periodical wages declared by the State Government.
Issues: 1. Whether the arbitrator erred in interpreting Clause 8.122 of the work order? 2. Whether the interim award was final in nature and amenable to a challenge under Section 34 of the Arbitration and Conciliation Act, 1996?
Ratio Decidendi: 1. The court held that Clause 8.122 of the work order clearly governed all the prices offered by the contractor in respect of the services that were to be rendered by the contractor under Parts B, C, and D thereof. 2. The court held that the price variation clause (strictly speaking, it is not an escalation clause as it covers both an upward and a downward revision) makes the prices offered in respect of Parts B, C, and D of the work order directly proportional to the change in the periodical wages declared by the State Government such that the revised prices would vary to the extent of 90 per cent of the difference in the periodic wages.
Final Decision: The court allowed the petition to the limited extent of setting aside clauses B and C of operative paragraph 12.09 of the impugned award and remanded the matter to the arbitrator for a fresh consideration in accordance with law.
For the Petitioner: Mr S. N. Mookherjee, Sr Adv., Mr Kishore Dutta, Sr Adv., Mr Neelesh Choudhury, Adv., Mr Anirudha Poddar, Adv.
For the Respondent: Mr D. N. Ray, Adv.
1. The challenge here is to an interim arbitral award on the ground that it decides the rights of the parties finally and has required only the quantum due to the petitioner to be ascertained by an expert under Section 26 of the Arbitration and Conciliation Act, 1996. The ground urged by the petitioner is that there is error apparent on the face of the award in the flawed interpretation of a key clause of the agreement between the parties.
2. Pursuant to a tender process initiated in December, 2008, Damodar Valley Corporation issued a work order to the petitioner on June 25, 2009, inter alia, for liaising with the railways and coal companies for supply of coal to the Mejia Thermal Power Station of DVC, the uploading of coal rakes, the annual repair and maintenance of coal handling plants and the removal of technological waste from the relevant units. It is the admitted position that the work was undertaken by the petitioner for DVC about a fortnight prior to the issuance of the formal work order.
3. The matter in issue herein is the petitioner’s claim on account of escalation. It is not in dispute that the counter-claim made by the petitioner has been rejected in its entirety by the impugned interim award; as has been the claim on another head made by the petitioning-contractor before the arbitrator. There is no grievance regarding the rejection of the counterclaim of the employer or the rejection of the other head of claim that had been carried by the contractor to the reference.
4. Clause 8.122 of the work order dated June 25, 2009 deals with price variation. Since the only issue here relates to the interpretation of such clause, the same is set out:
“8.122 The rates / prices will remain firm for Parts – A (i & ii) throughout the contract period. However, in case of extension or extensions after satisfactory completion of one (1) year of the contract period. Offered Prices for Parts B, C & D which shall remain firm for 1st year during execution of the contract will be subjected to variation (both upward and downward) giving weightage of 90% only w.r. to the corresponding initial Offered Rates. Adjustment / Payment is respect of Contractor’s R.A. Bills during such extended period(s) will be made prior to ascertaining actual amount payable or adjustable, as the case may be, and this will be based on Notification / Circular issued by the Govt. of West Bengal from time to time in respect of periodical Wage Revision only.”
5. The petitioner claims that the offered prices for the services rendered or to be rendered by the petitioner under Parts B, C and D of the work order are subject to variation on the basis of notifications or circulars issued by the State Government in respect of periodical wage revision. The petitioner asserts that the prices quoted for the relevant part by the petitioner are directly proportional to the revision in wages declared by the State Government.
6. The petitioner reads the relevant clause as implying that all of the prices offered by the petitioner for the services to be rendered under Parts B, C and D of the work order would be subject to variation in terms thereof and the clause is not restricted to either the petitioner being reimbursed for any additional wage bill that it may have incurred or the petitioner being paid the additional expenses that the petitioner may have been exposed to for the prices of certain components going up in course of a year. The petitioner demonstrates that the parties had mistakenly proceeded on the basis of the wage revision by the Central Government as would be evident from paragraphs 16 to 25 of the statement of claim and the letters dated February 3, 2012, January 8, 2013 and June 18, 2013 addressed by the petitioner to DVC. The petitioner refers to the statement of defence filed by DVC and, in particular, to paragraph 11 thereof where DVC has specifically accepted the escalation to be based on the notifications and circulars issued by the State Gove
