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2007 Supreme(Mad) 4014
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIAN & THE HONOURABLE MRS. JUSTICE CHITRA VENKATARAMAN
The Chief Engineer, National Highways, Madras 600 006
Versus
Gammon India Ltd., & Another
Original Side Appeals Nos.256 and 257 of 2003
Decided On : 07-12-2007
For the Appellant:R. Subbiah, Special Government Pleader. For the Respondents:R. Krishnasamy, Senior Counsel, for R. Venkataraman, Advocate.
The main legal point established in the judgment is that the interpretation of contract terms, specifically regarding escalation claims, should be in accordance with the express terms of the contract and cannot be overridden by implied terms.
Headnote:
Escalation - Contract Dispute - Clause 1.2, Clause A-14 - [Clause 1.2, Clause A-14] - The court discussed the dispute over escalation claims under the contract, emphasizing the interpretation of Clause 1.2 and Clause A-14. The court held that the terms of the contract allowed for escalation till the extended period, rejecting the appellant's contention that the escalation period was restricted by a unilateral letter.
Fact of the Case:
The case involved a dispute over escalation claims under a contract for the completion of a bridge construction project. The appellant sought to set aside the award of the arbitrator, while the first respondent sought a decree in terms of the award.
Finding of the Court:
The court found that the terms of the contract allowed for escalation till the extended period, rejecting the appellant's contention that the escalation period was restricted by a unilateral letter. The court upheld the award of the arbitrator and dismissed the appeals.
Issues: The main issue was the interpretation of the contract terms regarding escalation claims and the validity of the arbitrator's award.
Ratio Decidendi: The court held that the terms of the contract allowed for escalation till the extended period, and the appellant's contention regarding the restriction of the escalation period by a unilateral letter was rejected.
Final Decision: The appeals were dismissed, and no costs were awarded.
K. Raviraja Pandian, J.
O.S.A No.256 of 2003 is filed against the order made in O.P. No.189 of 1995 and in application No.3583 of 2001. O.S.A. No.257 of 2003 is filed against the order made in
O.P. No.184 of 1996. The appellant in both the appeals is the Chief Engineer of National Highways, Chennai. He assails the common order of the learned single Judge of this Court dated 18.04.2001 made in the above referred to Original Petitions whereby the learned single Judge dismissed the petition filed by the appellant, i.e., (O.P.No.184 of 1996) filed seeking for the relief of setting aside the award dated 30.01.1995 passed by the arbitrator and allowed the O.P. No.189 of 1995 which was filed by the first respondent herein seeking for the relief of passing a decree in terms of the award.
2. Mr.Subbiah, learned Special Government Pleader appearing for the appellant contended that though various claims under claims Nos.2, 5(b), 6 (A), (B), (C) and 9 (B) were put in issue before the learned single Judge, in these appeals, claim No.6 (A), (B), and (C) under which escalation sought for by the first respondent, granted by the arbitrator and confirmed by the learned single Judge is alone put in issue. He contended that though the period for completion of the work has already been over, at the instance of the first respondent herein, the appellant extended the time upto 30.09.1988 for completion of the work with the rider that the first respondent could claim escalation upto 20.04.1988 only. The said extension has been accepted by the first respondent without any demur or protest. Hence, the first respondent cannot claim escalation for the period subsequent to 20.04.1988. The extension granted by the appellant could be regarded as terms of the contract. If that be so, as per the terms of the contract, the appellant could claim escalation only upto 20.04.1988 and for the subsequent period the claim cannot be made and the escalation granted by the arbitrator for the subsequent period from 21.04.1988 to 30.09.1988 is beyond the scope of arbitration agreement and the grant of escalation by the arbitrator would amount to misconduct on his part in travelling beyond the agreement. He further contended that it is the discretion of the appellant that while granting the period of extension to restrict the right of the respondent to claim for escalation by fixing the period. Having accepted the extension of time with the restriction of period for claim of escalation upto 20.04.1988, the escalation claimed by the first respondent, granted by the arbitrator and affirmed by the learned single Judge has to be set aside.
3. On the contrary, Mr.Krishnasamy, learned senior counsel appearing for the first respondent contended that the terms of the contract provide for various clauses. The clause pertaining to Adjustment of price variation in materials P.O.L. and labour and wages provided that the operative period for this contract shall end on the last date of completion of period as per clause 1.2 of the tender document or with the last date of the valid period of time extension granted by the accepting authorities. The period of extension shall be considered in continuation of the original operative period. The said clause further provided for extension of time granted for any other reason whatsoever and other than those specified in the first respondents letters dated 211. 1982 and 21.02.1983, no adjustment in the contract price shall be made on account of variation in the price of materials, P.O.L., and labour wages. The letter dated 211. 1982 referred to in the aforesaid clause was the letter of the first respondent, wherein under clause A-14 escalation was sought for.
The relevant portion read as follows:
Clause A.14 Escalation
The formula evolved at All India level as suggested by the Ministry of Shipping & Transport (copy enclosed) is acceptable in this instance subject to the following modifications:
1. The operative date shall be the dat
