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2011 (4) Supreme 531
SUPREME COURT OF INDIA
R V Raveendran and Markandey Katju, JJ.
M/s. J.G.Engineers Pvt. Ltd. — Appellant
versus
Union of India & Anr. — Respondents
Civil Appeal No.3349 of 2005
Decided on : 28-4-2011
(b) Arbitration and Conciliation Act, 1996 – Section 34 r/w Clauses 2 and 3 of the Contract – The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract – Arbitrator competent to make an award in this regard. (Para 14)
(c) Arbitration and Conciliation Act, 1996 – Section 16 – The question whether the other party committed breach cannot be decided by the party alleging breach – A contract cannot provide that one party will be the arbiter to decide who committed breach – Even in case of quantification of liquidated damages being excepted from arbitration, the question of delay and breach of contract can only be decided by an Arbitral Tribunal. (Paras 15 and 16)
(1987) 2 SCC 160; (2009) 2 SCC 337 – Relied upon
(d) Government Contract – Liquidated damages – Question of claiming liquidated damages from the contract would arise only if he is responsible for delay and breach of the contract. (Para 17)
(e) Arbitration and Conciliation Act, 1996 – Section 34 – Civil Court upholding the award – High Court not finding any infirmity, yet setting aside the award – Not permissible. (Para 18)
(f) Arbitration and Conciliation Act, 1996 – Section 28 r/w Clause 10(cc) of the Contract – Escalation in price shall be available only for the work done during the stipulated period of contract including validly extended period – The contractor not being responsible for the delay, is entitled for price escalation for the total work done. (Paras 20 and 22)
(2003) 5 SCC 705 – Relied upon
Facts of the case:
1. The respondents awarded the work of “extension of terminal building” at Guwahati airport to the appellant. As the appellant did not complete the first phase of the work within the stipulated time, the respondents terminated the contract.
2. At the intervention of the High Court the matter was placed before an arbitrator.
3. The Arbitrator awarded a sum of Rs.1,04,58,298/- with interest and costs in favour of the appellant and rejected the counter claims of the respondents.
4. The learned District Judge, Guwahati dismissed the petition under section 34(2) of the 1996 Act.
5. This order was reversed by the Guwahati High Court.
Finding of the Court:
No part of the decision of the High Court is sustainable.
Result : Appeal allowed.
JUDGMENT
R.V.Raveendran, J. —
This appeal is directed against the judgment dated 8.2.2005 of the Guwahati High Court allowing Arbitration Appeal No.1/2004 filed by the respondents and setting aside the judgment dated 12.12.2003 passed by Additional District Judge, Kamrup, Guwahati (by which the District court had dismissed the petition filed by respondents filed under section 34 of Arbitration & Conciliation Act, 1996 and affirmed the Award passed by the Arbitrator dated 5.9.2001, with clerical corrections made on 22.9.2001).
2. On 26.3.1993 the respondents awarded the work of “extension of terminal building” at Guwahati airport to the appellant. As per the contract, the date of commencement of work was 10.4.1993 and the period of completion of the work was 21 months, to be completed in different stages. As the appellant (also referred to as the `contractor’) did not complete the first phase of the work within the stipulated time, the respondents terminated the contract by order dated 29.8.1994. The termination was challenged by the appellant in a writ petition filed before the Gawahati High Court. By judgment dated 27.9.1994, the High Court set aside the termination and directed the respondents to grant time to the appellant till the end of January 1995 for completion of the first phase reserving liberty to the appellant to apply for further extension of time. As the work was not completed, the respondents granted an extension upto 31.7.1995 by letter dated 24.8.1995, without levying any liquidated damages. The contractor proceeded with the work even thereafter. However, as the progress was slow, the respondents terminated the contract on 14.3.1996 on the ground of non-completion even after 35 months. The appellant filed a writ petition, challenging the cancellation. The High Court by order dated 25.6.1996, noticed the existence of the arbitration agreement and referred the parties to arbitration. In pursuance of it, on a request by the appellant, the respondents appointed Mr. C.Vaswani as the sole arbitrator on 14.2.1997.
3. On 17.4.1997, the appellant filed its statement of claims. Claims 1 to 11 aggregated to Rs.2,38,86,198.31 (subsequently, reduced to Rs.2,06,70,495/-). Claim 12 was for interest at 18% per annum on the total claim amount from 20.5.1996 to date of realization. Claim 13 was for Rs.2,13,729/- as cost of arbitration. On 3.2.1999, the respondents filed their reply and also filed their four counter claims before the arbitrator aggregating to Rs. 279,54,225/-.
4. By award dated 5.9.2001 (as amended on 22.9.2001) the Arbitrator awarded a sum of Rs.1,04,58,298/- with interest and costs in favour of the appellant and rejected the counter claims of the respondents. The particulars of the amounts claimed and the awards thereon are as under:
The Arbitrator awarded to the contractor, simple interest @ 9% per annum on Rs.38,21,298 for the period 14.9.1996 to 31.3.1997 and simple interest @ 15% per annum on Rs.1,04,58,298 for the period 1.4.1997 to date of payment (under Claim No.12). The Arbitrator also awarded Rs.39,610/- towards costs (under Claim No. 13). All the counter claims of respondents were rejected.
5. On 12.12.2001, the respondents filed an application (Misc. Arbn. Case No.590/2001) under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act’) in the District Court, Guwahati for setting aside the aforesaid award. The respondents filed an additional petition in the said proceedings, under section 34 of the Act on 27.1.2003, raising additional grounds of challenge. The learned District Judge, Guwahati dismissed the petition vide order dated 12.12.2003, holding that none of the grounds under section 34(2) were made out. This order was reversed by the Guwahati High Court, by the impugned judgment dated 8.2.2005, in Arbitration Appeal No.1/2004 filed by the respondents, recording the following findings: (i) The award on claim Nos.1, 3 and 11 related to ‘excepted matters’ which were bey
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