An arbitrator may award escalated costs due to employer delay despite prohibitory clauses, reinforcing that delays affecting contractor performance can lead to compensatory claims.

JUDGMENT :

Soumen Sen, J.

1. The present appeal filed under Section 37 of the of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) arises out of a judgment dated 28th January, 2019 passed by the Learned District Judge, Uttar Dinajpur in Misc Case No.115 of 2014 whereby the application under Section 34 of the Act filed by the appellant herein was dismissed and the Arbitral Award dated 12^th July 2007 in AP No. 18 of 2000 was affirmed.

2. Shorn of details, the relevant facts are stated hereinafter.

3. The claimant contractor in the arbitration proceeding is the respondent herein and the respondent in the arbitration proceeding is the appellant herein.

4. The appellant invited sealed tender for construction of cross-drainage structure at 28.15 km of D.N.M.C. in PS Islampur, District- Uttar Dinajpur and the participating tenderers were required to submit their tender on the basis of departmental schedule of rates attached to tender papers on 'at par' or 'percentage above' or 'percentage below' basis. In pursuance to the said tender, the respondent contractor submitted his tender on 19^th January, 1995 and appellant issued work order to the respondent by letter dated 10^th April, 1995 for a sum of Rs. 77,13,696/- which is 18.25% less than the estimated departmental value of different items amounting to Rs. 94,35,714/. A formal agreement was executed by and between the parties wherein it was mentioned that the work would be completed within six working months from the date of issuance of work order by the Department. The stipulated date of commencement of work was 17^th April, 1995 i.e. seven days after issuance of work order and the stipulated date for completion of the work was six working months therefrom. The work was terminated by a letter dated 14^th January 1998 by the Executive Engineer recommending the respondent agency be released. The prolongation period of the work in question was 31 months beyond the stipulated period.

5. Disputes having arisen between the parties with respect to execution of work and its due payments and the matter was referred to arbitration. The total claim was for an amount of Rs. 79,84,316 along with interest at the rate of 18 % per annum.

6. The seven heads of claim were decided and awarded as follows:

7. The main issue which arose for consideration in the instant appeal is whether the Learned Arbitrator exceeded his jurisdiction in allowing claim no. 4 which is on account of damages incurred due to escalation in labour and material prices and partially allowing claim no. 5 which was on account of additional work executed at site and off site.

Submissions on behalf of the Appellant

8. The learned counsel appearing on behalf of the appellants submitted that there was no prohibition on the respondent contractor to quote a price higher than the estimated price put to tender. The contract awarded also specifically mentioned that in case the contract was prolonged, the contractor would be entitled to extension of time with the rates remaining unchanged. It was argued that since delays were a common occurrence in commercial construction contracts and where escalation of price is prohibited, the respondent contractor could not have claimed for escalation since he had entered into the contract knowing fully well that he could not claim the same in the event there was a delay in completion of the contract.

9. It was also emphatically argued that an award could not be passed disregarding the prohibitory clauses contained in the agreement. An arbitrator is a creature of the agreement and in view thereof if an agreement co