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2011 Supreme(Mad) 1990
High Court of Judicature at Madras
VINOD K. SHARMA
Union of India, Rep. by its Executive Engineer, BSNL, Civil Division III
Versus
Shri T.Panicker & Another
O.P.No.433 of 2003
Decided on : 07-04-2011
For the Petitioner:S. Udaya Kumar, Advocate.
For the Respondents:A.R. Janakan, Advocate.
The Arbitrator has the jurisdiction to interpret the contract and determine the amount of claims. The court also has the authority to modify the rate of interest based on commercial considerations.
Headnote:
Arbitration and Conciliation Act - Union of India - 34
Fact of the Case:
The Union of India filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an award related to a construction contract. The contractor was awarded the work for the construction of additional Satellite Main Earth Station Antenna Room and duct covering at BSNL, Korattur, but failed to complete the work within the agreed period.
Finding of the Court:
The court found that the claims of the first respondent were contestable and contested by the petitioner. The court upheld the award with modifications, reducing the rate of interest to 9% p.a.
Issues: The issues included contesting the claims raised by the respondent, challenging the award as biased, and disputing the grant of interest at 18% p.a.
Ratio Decidendi: The court held that the Arbitrator has the jurisdiction to interpret the contract and determine the amount of claims. The court also reduced the rate of interest from 18% to 9% p.a. based on the commercial contract.
Final Decision: The original petition was ordered to be dismissed with the modification of reducing the rate of interest to 9% p.a. No costs were awarded.
1. This petition, under Section 34 of the Arbitration and Conciliation Act, 1996, has been filed by the Union of India to challenge the award dated 23.01.2003.
2. The respondent Shri T.Panicker, Engineering Contractor, was awarded the work for the construction of additional Satellite Main Earth Station Antenna Room and duct covering at BSNL, Korattur, vide agreement dated 20.07.1998. The contractor was to commence the work on 30.07.1998 and was required to complete on 29.11.1998. In the contract initially awarded, period fixed for completion of work was 10 months, which was, on mutual understanding, reduced to 4 months. The contractor was able to complete the work only on 28.09.1999 i.e. with the delay of 10 months.
3. The total contract price agreed by the 1st respondent was for a sum of Rs.27,05,435/- (Rupees Twenty Seven Lakhs Five Thousand and Four Hundred Thirty Five only), whereas the measurement of actual amount worked out to be Rs.24,64,836/-(Rupees Twenty Four Lakhs Sixty Four Thousand Eight Hundred Thirty Six only). The contractor sought reference in terms of Clause 25 of the agreement.
4. The request of the first respondent was accepted and Shri Gurbox Singh, Chief Engineer (Arbitration) was appointed as the sole arbitrator. On vacation of office of the Chief Engineer (Arbitration) Shri Gurbox Singh, the present Arbitrator Shri A.K.Nayak was appointed as the Sole Arbitrator.
5. The first respondent filed the following claims under different heads:
Claim No.1
On account of increase in cost of construction beyond the contract period.
Rs.1,08,800/-
Claim No.2
On account of payment towards the extra items of building work.
Rs.15,360/-
Claim No.3
On account of payment towards extra work of 12mm thick cement plaster to the walls of Antenna Room.
Rs.15,360/-
Claim No.4
On account of additional payment towards extra item of PVC flooring in Antenna Room.
Rs.6,400/-
Claim No.5
On account of payment towards idle establishment charges beyond the contract period at site and office.
Rs.2,56,600/-
Claim No.6
On account of payment towards idle construction equipment charges during the prolonged period of contract.
Rs.96,000/-
Claim No.7
On account of payment towards centering materials idle charges during the period of 1 month.
Rs.9,200/-
Claim No.8
On account of payment towards extra lift charges over 3.5M height including compensation.
Rs.8,200/-
Claim No.9
On account of payment towards refund of withheld amount including compensation.
Rs.6,000/-
Claim No.10
On account of payment towards loss of profit and the value of the work reduced.
Rs.65,280/-
Claim No.11
On account of payment towards delayed payment of final bill security deposit withheld amount of 10cc claim.
Rs.80,000/-
Claim No.12
On account of refund of excess recovery towards cost of steel made from running mill including compensation.
Rs.33,000/-
Claim No.13
On account of cost of arbitration
Rs.30,000/-
Claim No.14
On account of interest......
6. The claims of the first respondent were contested by the petitioner, by filing a detailed counter before the 2nd respondent, by pleading therein that claims raised were contrary to the facts and agreement. In the application under Section 34 of the Act, challenge was also to award interest @ 18% p.a.
7. Learned counsel for the petitioner challenges the impugned award by contending therein that the award passed is contrary to the terms and conditions of the contract and the award is biased. In support of this petition, learned counsel for the petitioner vehemently contended that under heads referred to above, the respondent had claimed a sum of Rs.1,08,800/- on account of increase in cost of construction beyond the contract period. Against the said claim, the Arbitrator allowed a sum of Rs.75,905/-, which is against the terms of the contract.
8. This contention is based on the fact that the contract was agreed to be concluded within a period of 4 months, therefore, the contractor was not entitled to this amount. The escalation cost was payable only for the
