IMPORTANT POINT
The court upheld the Arbitral Tribunal's award on escalation claims, affirming the limited grounds for judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996.

ORDER :

Per, Shree Chandrashekhar, J.

This Civil Miscellaneous Appeal has been filed by the State of Rajasthan through its Executive Engineer to challenge the decision of the Commercial Court passed in Civil Misc. Case No.04/2023 by which the challenge laid to the Arbitral award dated 27th October 2009 has been dismissed.

2. Pursuant to the Agreement No.61/1995-96 executed between the parties for construction of the Police-line at Hanumangarh Jn., the subject work was allotted to M/s. Lila Dhar Devki Nandan (in short, claimant). As per the Agreement, the total contract value was for Rs.2,88,04,833/- and the work under the Agreement was to be completed within two years from issue of the work order no.8024 on 21st March 1996. There were certain disputes that arose between the parties regarding admissibility of escalation as per the stipulation under Clause 45 of the Agreement which could not be resolved and the matter finally came to the High Court in S.B. Micellaneous Arbitration Application No.45/2002 seeking appointment of Arbitrator. By an order dated 21st August 2003, the application filed by the claimant was allowed and the Arbitral Tribunal entered the reference on 24th February 2004. The claimant made claims under three separate heads viz. (i) for escalation to the tune of Rs.31,54,223/- (ii) interest for the period between 14th April 2001 to 23rd February 2004 @ 18% per annum over the claim for Rs.31,54,223/- and (iii) interest pendente-lite and future upto the date of payment on Rs.31,54,223/- @ 18% per annum from 24th February 2004; alongwith the tentative cost of arbitration proceedings at Rs.15,000/-. The Arbitral Tribunal held that the claimant is entitled for the sum of Rs.31,54,223/-and granted interest @ 15% per annum both for the period between 14th April 2001 to 23rd February 2004 and interest pendente-lite.

3. The Arbitral Tribunal considered the claim pressed by the claimant for escalation in the following manner:-

“….In the present case the escalation clause no. 45 is applicable as the contract amount is Rs. 2,88,04,833.00 and the contract period is of two years. Moreover, the respondent itself has also made the payment of six price escalation bills, amounting to Rs. 11,15,740/-, which tantamounts to its admission that the escalation clasue no. 45 is applicable in this case.

In the written arguments the respondent has stated that according to the Circular no. D-209 dated 19.03.1998 of the Chief Engineer PWD, Rajasthan, Jaipur, the claimant is not entitled to receive from the respondent a sum of Rs. 31,54,223/ for price escalation because the said Circular is issued on 19.03.1998 whereas the agreement was executed in the year 1995-96.

In this regard I find that the claimant has not demanded the price escalation amount on the basis of the Circular dated 19.03.1998 (Ex.-C/9). On the other hand the price escalation is demanded by the claimant under clause 45 of the agreement, the calculation, formula, price index etc. of which are not disputed by the respondent.

Further I have also consulted the said Circular and I find that the Circular is only the guidelines for deciding the cases of interim/final extension in the completion period which is the internal matter of the department with a view to adopt a uniform policy and the amount of the price escalation should be paid as per the clause 45 of the agreement.

In the written arguments the respondent has further stated that escalation after the stipulated date of the completion is not admissible because the time extension up to the actual date of completion has been sanctioned with 1/2% compensation, vide letter no. F.1(1)PW/AS/96 dated 29.11.2000 of the Additional Secretary, PWD Rajasthan, Jaipur.

In the written arguments the respondent has further argued that the claimant cannot raise the contention that the Additional Secretary is not the authorised person to levy the compensation under clause 2 of the agreement and at the same relies upon the time extension made by the