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IN THE HIGH COURT OF CALCUTTA
Krishna Rao, J.
State Of West Bengal - Appellant
Versus
Tapas Kumar Hazra - Respondent
AP 1036 of 2011 & IA No: GA 3 of 2022
Decided On : 25-08-2022
Arbitration and Conciliation Act - Challenge to Arbitration Award - Section 34 - [CONSTRUCTION OF SUB-DIVISIONAL COURT] - [Arbitration and Conciliation Act, 1996, Section 34] - The court discussed the claims raised by the respondent and the award passed by the Ld. Sole Arbitrator. The key legal provisions discussed include the requirement for the arbitrator to assign reasons in support of the award, and the limited scope of interference by the court in arbitration awards. The court set aside the award based on contradictory reasons and lack of reasoning for certain claims.
Fact of the Case:
The petitioner invited item rate tender for construction of Sub-Divisional Court. The respondent participated in the tender process and offered a lower rate. After delays and disputes, the respondent raised multiple claims before the Ld. Sole Arbitrator. The Arbitrator awarded certain claims in favor of the respondent.
Finding of the Court:
The court found that the Arbitrator's award was based on contradictory reasons and lacked reasoning for certain claims. The court also addressed the issue of limitation raised by the petitioner and concluded that the objection cannot be sustained. Consequently, the court set aside the award.
Issues: The issues included the validity of the claims raised by the respondent, the reasoning provided by the Arbitrator, and the objection raised by the petitioner regarding limitation.
Ratio Decidendi: The court's decision was based on the contradictory reasons provided by the Arbitrator, the lack of reasoning for certain claims, and the rejection of the objection raised by the petitioner regarding limitation.
Final Decision: The court set aside the award and allowed the application challenging the award.
JUDGMENT
Krishna Rao, J. - This is an application under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award passed by the Ld. Sole Arbitrator dated 2nd September, 2011. The petitioner had invited item rate tender for construction of Sub-Divisional Court at Kalyani in the District of Nadia (Structural portion) two storied building for an estimated cost of Rs. 1,21,38,824/-. The respondent had participated in the said tender process and offered less rate of 2.90 % i.e. Rs. 1,17,86,798/- than the estimated cost fixed by the petitioner. The rate quoted by the respondent was accepted and work order was issued in favour of the respondent on 09.01.1997. After issuance of work order an agreement was entered between the parties and as per agreement, the tender amount was Rs. 1,17,86,798/-, date of commencement was 15th January, 1997, time of completion was 18 months and date of completion was 14th July, 1998.
2. As there was delay on the part of the petitioner for providing working drawing and finalization of lay out of the building and thus the respondent could not complete the work in the stipulated in the agreement and accordingly the respondent had made a request to the petitioner for extension of time with the condition to claim in respect of additional cost of construction and added expenses but the petitioner had not extended the time as prayed for by the respondent and the contract was closed on completion of period stipulated in the agreement.
3. On 15th July, 2002, the respondent had made request to the Chief Engineer, Public Works Department, Govt. of West Bengal for appointment of Arbitrator and accordingly in terms of Clause 25 of the agreement, an Arbitrator was appointed. The respondent had raised following claims before the Ld. Sole Arbitrator :
'LIST OF OUT STANDING DUES AND CLAIM
Sl. No. | Description | Amount |
1. | Compensation on account of loss of expected profit on the value of unexecuted portion of the contract. | Rs. 14,30,000 |
2. | Compensation on account of the cost of the materials; collected by the Claimant/Contractor at the site during the period intervening between middle of March 1998 and onset of monsoon in 1998, due to unlawful closure of the contract. | Rs. 90,000/ |
3. | Compensation on account of advances given to the suppliers and/or manufacturers of various kind of building materials which could not be realized in view of nonexecution of job to the extent of scope of contract, for reasons solely attributable to the department. | Rs. 1,22,000/ |
4. | Compensation on account of advances given to labor gangs of various kinds which could not be realized due to non execution of the contract to the extent of the scope of the agreement for the reason solely attributable to the department. | Rs. 6,70,000/- |
5. | Compensation on account of loss of Goodwill and/or reputation due to unlawful closure of the contract by the department. | Rs. 10,00,000/ |
6. | Compensation on account of idle/barren labour detained at the site of work due to suspension of the job from time to time for the reasons attributable to the department. | Rs. 91,000/- |
7. | Amount payable to the Claimant/Contractor in respect of works executed but not paid by the department, despite repeated request and/or reminders made for the same (Be it noted here that no payment has been made in respect of instant contract till date). | Rs. 19,82,361/- |
8. | Compensation on account of maintenance of establishment (both offsite and on site) during the period till July-1998 inception. | Rs. 5,62,000/- |
9. | Compensation on account of mobilization including the expenditure incurred towards construction of temporary structures at the location shown by the department (Site Godown, camp, labour hutments, Site Office, bath and W.C. etc etc.) | Rs. 1,24,000/- |
10. | Compensation on account of extra expenses incurred by the claimant towards carriage of building materials by head load. | Rs. 40,000/- |
11. | Amount payable on account of extra labour employed for additional leads and lifts due to change in design of foundation made by | |
The court emphasized the requirement for the arbitrator to assign reasons in support of the award and the limited scope of interference by the court in arbitration awards.
An arbitrator's award may be upheld if it conforms to contract terms, despite challenges regarding procedural compliance or interpretation, provided it does not contravene public policy.
The court affirmed the limited scope of review under Section 34 of the Arbitration and Conciliation Act, emphasizing respect for arbitral awards unless stark violations of public policy or procedural....
Courts may only set aside arbitration awards under specific grounds; the presence of reasoning by the arbitrator, while not mandatory, must be assessed for adequacy, but cannot be dismissed purely ba....
The court confirmed the validity of the Arbitrator's findings regarding excess work claims and the correct application of interest, highlighting that overlapping interest claims were erroneous.
The court upheld the Arbitrator's findings that the rescission of the contract was unjust and delays were primarily attributable to the petitioner, affirming the award under Section 34 of the Arbitra....
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