2017 Supreme(Cal) 746

IN THE HIGH COURT OF CALCUTTA
Sanjib Banerjee, Siddhartha Chattopadhyay, JJ.
State of West Bengal - Appellant
Vs.
Pam Developments Private Limited - Respondent
APO No. 63 of 2017, GA No. 834 of 2017 & OCO No. 1 of 2017 in AP No. 736 of 2011
Decided On : 21-09-2017

A party cannot take advantage of its own wrong. Once an employer in a works contract is found to be in breach and the period of completion of work has to be extended as a result thereof, there cannot be any embargo on either the contractor claiming, or any adjudicatory body awarding, damages commensurate with the additional costs or loss incurred by the contractor.

Headnote:

The treatment of "no damage" clauses in a works contract falls for consideration in this matter. There has been considerable industry on either side in an attempt to bring some clarity on the legal issue in the backdrop of there being no apparent uniformity on the jurisprudential principles governing such aspect in this country.

Fact of the Case:

The immediate lis is an appeal from an order passed on a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The State-employer seeks to whittle down the award by attacking the several heads of claim that have been awarded in part or in full by the arbitrator and which passed muster in the first court. The respondent-contractor is a veteran in the field of road construction and a regular litigant. It has a counter-claim for the amounts shaved off from the award by the judgment and order impugned.

Finding of the Court:

The arbitrator's view on such aspect was somewhat novel. But what is more important is that the sentiment expressed in such view is backed by years of training and experience as a judge and, in effect, is a commentary on the inequitable operation of the restrictive clauses in the backdrop of the conduct of the parties. The arbitrator was persuaded to hold that upon the expiry of the contractual period, a new agreement would be deemed to have been entered into by the parties covering the period of completion and during which period the restrictive covenants in the agreement would not be attracted. Even if there may not be any legal basis to such finding as a whole, what cannot be missed is that the inequity of the situation that presented itself prompted the arbitrator to bypass the formal agreement between the parties altogether.

Issues: Apart from the nitty gritties of the arithmetic that the arbitrator was required to work out, the principal legal issue in the reference was whether the clauses of restriction in the agreement between the parties stipulating that there would be no payment on account of price escalation or idle labour or idle machinery or the like, prohibited even the consideration of such heads of claim or stood in the way of the arbitrator making any award in respect thereof.

Ratio Decidendi: The arbitrator's view in such regard cannot be accepted and, to such extent, the first court was right in interdicting the award on such count. The most obvious reason why the finding of the arbitrator, that the parties are deemed to have entered into a new contract after the expiry of the contractual period for the purpose of completing the work thereunder, does not appeal is that the disputes pertaining to such period, if they were not covered by the agreement, would also fall beyond the purview of the arbitration agreement contained therein and the entire exercise of the arbitrator would be reduced to a nullity. There are other reasons to disagree with the arbitrator on such score, but, again, the sentiment must be appreciated.

Final Decision: The judgment and order impugned dated November 3, 2016 insofar as they interfere with the award dated April 6, 2011 are set aside and the award of April 6, 2011 restored. It is, however, recorded that the principal sums of Rs. 2 lakh and Rs. 11,27,342 awarded by the arbitrator on account of the final R/A bill and security deposit, respectively, have been paid; though the appellant herein will be liable for interest thereon in terms of the award. APO 63 of 2017 with GA 834 of 2017 and OCO 1 of 2017 are disposed of by dismissing the appeal and allowing the cross-appeal as indicated above. The respondent contractor will also be entitled to costs assessed at Rs. 3 lakh for the proceedings in the court of the first instance and in this appeal.