Back
2004 Supreme(UK) 72
2004 (2) U.D. 5
High Court of Uttaranchal
P.C. Verma,Irshad Hussain, JJ.
State of U. P
Vs.
M/s Naresh Construction Company
F.A.F.O. no. 118 of 2001
Decided on : 22.5.2004.
Sri Bhupendra Singh, learned Standing Counsel for the defendant-appellant. Sri L.P. Naithani, Senior Advocate and Sri V.K. Bisht, Advocate for the plaintiff - respondent.
The main legal point established in the judgment is that the Arbitrator's award must be within the jurisdiction and scope of the contract, and claims for escalation or work within the contract's scope must be carefully considered. The court also upheld the award of interest despite the prohibition clause in the agreement.
Headnote:
Arbitration Act - Excavation of Khara Power Channel - 1940 - [KEYWORD] - Excavation of Khara Power Channel - 1.01.02, 4.01, 7.06, 7.07, 1.38, 1.04, 7.09, 8.05, 1.32.01, 13.01, 13.02, 1.01.09 - The court found that the award for escalation due to rise in cost of labor and material was not sustainable as it exceeded the jurisdiction of the Arbitrator. The claim for excavation of sand rock was also found to be unsustainable as it was within the scope of the contract. The award for transportation and stacking of boulders beyond reach was upheld as it was found to be justified. The award for disposal of surplus excavated material was deemed beyond the jurisdiction of the Arbitrator. The claim for clearance of silt deposited during the floods was partially upheld. The award of interest was found to be justified despite the prohibition clause in the agreement.
Fact of the Case:
The respondent was awarded the work of excavation of Khara Power Channel, but disputes arose during the execution of the work. The respondent raised claims for higher payments to the tune of Rs. 57,40,204/-. The claims were rejected by the department, and the matter was referred to the Arbitrator. The appellant challenged the award, and the objections were rejected by the court, making the award rule of the court.
Finding of the Court:
The court found that the award for escalation due to rise in cost of labor and material was not sustainable as it exceeded the jurisdiction of the Arbitrator. The claim for excavation of sand rock was also found to be unsustainable as it was within the scope of the contract. The award for transportation and stacking of boulders beyond reach was upheld as it was found to be justified. The award for disposal of surplus excavated material was deemed beyond the jurisdiction of the Arbitrator. The claim for clearance of silt deposited during the floods was partially upheld. The award of interest was found to be justified despite the prohibition clause in the agreement.
Issues: The issues included the sustainability of the claims for escalation, excavation of sand rock, transportation and stacking of boulders beyond reach, disposal of surplus excavated material, clearance of silt deposited during the floods, and the award of interest.
Ratio Decidendi: The court held that the award for escalation due to rise in cost of labor and material was not sustainable as it exceeded the jurisdiction of the Arbitrator. The claim for excavation of sand rock was also found to be unsustainable as it was within the scope of the contract. The award for transportation and stacking of boulders beyond reach was upheld as it was found to be justified. The award for disposal of surplus excavated material was deemed beyond the jurisdiction of the Arbitrator. The claim for clearance of silt deposited during the floods was partially upheld. The award of interest was found to be justified despite the prohibition clause in the agreement.
Final Decision: The appeal was partly allowed, setting aside the judgment and order of the court in regard to the award for escalation due to rise in cost of labor and material, excavation of sand rock, and disposal of surplus excavated material. The court confirmed the award for transportation and stacking of boulders beyond reach and the claim for clearance of silt deposited during the floods to the extent of Rs. 70,840/-. The award of interest was also confirmed.
Irshad Hussain, J.
This is an appeal under section 39 of the Arbitration Act, 1940.
2. By an agreement entered into between the parties the respondent was awarded the work of excavation of Khara Power Channel (Shakti Nahar) from 5.2 to 6.2 kilometers. The agreement was executed on 15.11.197 and work was to start from 16.12.1979 and was to be completed by 14.6.1981. The work however could not start as was agreed upon and after three extensions it was finally completed on 23.5.1985. During the execution of the work disputes arose between the parties and the respondent raised claims for higher payments to the tune of Rs. 57,40,204/-. The claims submitted vide letter dated 22.2.1983 were rejected by the department on 23-6-1983 whereupon the respondent filed a petition no. 112 of 1984 under section 20 of the Arbitration Act, 1940 and the learned Civil Court by its order dated 23.5.1985 referred the matter to the Arbitrator.
3. The claims submitted by the respondent before the Arbitrator for the aforesaid amount were as under:-
(i) Claim for escalation due to rise in cost of labour and material etc. (Rs.45,06,593/-).
(ii) Claim for excavation in sand rock. The claimant demanded extra rate of Rs. 36.12 for excavation of 268000 cu.m. of sand rock (Rs. 96,80,160/-).
(iii) Earth-work in approach road (Rs. 57,000/-).
(iv) Compaction of earth fill in embankment (Rs. 14,750/-).
(v) Excavation of boulders more than 600 mm. in size (Rs. 90,000/-)
(vi) Transportation and stacking of boulders beyond reach (Rs. 90,000/-).
(vii) Disposal of surplus excavated material from power channel. Extra expenditure due to disposal of extra material in river Yamuna (Rs. 43,29,750/- ).
(viii) Clearance of silt deposited during flood (Rs. 70,840/-). The claimants also claimed interest @ 24% from the dates given in their claim petition to the date the payment is made.
4. Against the above claims the department submitted objections on 16.8.1988. Counter reply was filed by the respondent on 7.12.1988 and finally the Arbitrator passed an award on 17.7.1991 and awarded a sum of Rs. 30,77,318/ - towards the various claims detailed as below :-
1. The respondents shall pay an amount of Rs. 5,33,080/- to the Claimants for escalation due to rise in cost of labour and materials due to delay in making available the site in time and delay in payments due to shortage of funds which resulted in extension of contract period from 18 months to 65 months.
2. The respondents shall pay an amount of Rs. 13,71,523/- to the claimants as extra cost for excavation of hard sandy rock which Is not covered by the contract.
3. The respondents shall pay an amount of Rs. 81,000/- to the claimants for stacking boulders beyond the stipulated reach.
4. The respondents shall pay an amount of Rs. 9,92,840/- to the claimants for disposal of excavated material from power channel involving extra lead.
5. The respondents shall pay an amount of Rs. 98,875/- to the claimants for clearance of silt deposited during the floods in 1980.
6. The respondents shall pay interest at the rate of 15% per annum from the date of completion of works i.e. 23.5.85 to the date of commencement of arbitration proceedings i.e. 11.5.88.
7. The respondents shall pay to the claimants interest at the rate of 6% per annum from 12.5.1988 to the date previous to the date of award i.e. 16.7.91.
8. The respondents shall pay the claimants interest @ 6% per annum from the date of award i.e. 17.7.91 to the date of actual payment of date of decree, whichever is earlier.
9. Both the parties will bear their own costs in connection with this arbitration. The secretarial and other expenses will be equally borne by both the parties.
5. The appellant challenged the legality and propriety of the award by preferring objections under section 30/33 of the Arbitration Act. Mise. Case No. 89/1991 was registered. The objections were rejected by the learned Civil Judge, Dehradun per judgment and order dated 23.8.1993 and the award was made
