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SUPREME COURT OF INDIA
J. CHELAMESWAR, SANJAY KISHAN KAUL, JJ.
SUTLEJ CONSTRUCTION - Appellant
Versus
UNION TERRITORY OF CHANDIGARH - Respondent
CIVIL APPEAL No. 20885 of 2017
Decided on : 05-12-2017
Arbitration - Contract Dispute - Arbitration & Conciliation Act, 1996 - Section 34 - Performance of Contractual Obligations - Illegal Termination - Award Upheld
Fact of the Case:
The appellant was awarded a contract for earth excavation work and loading into trucks for road widening. The respondent terminated the contract, leading to arbitration. The arbitrator partly allowed the appellant's claims and rejected the respondent's counterclaims.
Finding of the Court:
The court found that the respondent's breaches caused delays and led to the illegal termination of the contract. The arbitrator's award was reasoned and upheld the appellant's claims.
Issues: Dispute over contract performance, termination, and arbitration process under Section 34 of the Arbitration & Conciliation Act, 1996.
Ratio Decidendi: The court held that the arbitrator's findings were based on evidence and should not be re-appreciated. The respondent's non-compliance with obligations led to the illegal termination of the contract.
Final Decision: The impugned order was set aside, and the enforcement of the award was upheld. The appeal was allowed without imposing costs.
JUDGMENT :
SANJAY KISHAN KAUL, J.
Leave granted.
1. The appellant was awarded a contract by the respondent of earth excavation work and loading into trucks and unloading for purposes of widening of the approach road Sukhna Choe on Chandigarh Kalka Road, Chandigarh vide memo No.201 dated 5.1.1996. The earth was required to be lifted from the first source near the regulator and carried through trucks from Golf side initially. There was a second source of lifting the earth as per permission of the Superintendent Engineer but it is not necessary to go into the details of the contract for the present purposes. Suffice to say that the respondent alleges that the appellant did not fulfil its obligations while the appellant, on the other hand, alleges that what was required to be done by the respondent to facilitate execution of the contract was not so done. This resulted in the respondent terminating the contract on 12.11.1996.
2. The conditions of the contract provided for arbitration and despite the appellant invoking the arbitration clause, the Superintendent Engineer failed to nominate an Arbitrator resulting in the appellant approaching the Court. In the course of the said proceedings Mr. R.N. Singal, retired District & Sessions Judge was appointed as an arbitrator in terms of order dated 31.7.2002 of the learned Civil Judge (Senior Division), Chandigarh.
3. The parties put forth their respective claims before the arbitrator. The appellant laid the claims while the respondent filed the counterclaims. The arbitrator made and published an Award dated 18.12.2013, partly allowing the claim of the appellant while rejecting the counterclaims of the respondent. The claims laid and the extent awarded as well as the counterclaims laid are as under:
| Claims made by the Appellant | Amount awarded by the Arbitrator | |||
| S.No. | Particulars | Amount (in INR) | Particulars | Amount (in INR) |
| 1. | Balance payment accruing from the last running bill | 2,00,014 | Claim No.1 and amount deposited by way of earnes | 1,20,299 32,000 |
| 2. | Payment due on account of transportation or earth not measured by department | 1/11/231 | Claim No.3 | 65,076 |
| 3. | Payment due on account of less lead paid | 95,400 | Claim No.4 | 7,74,375 |
| 4. | Idle hour charges of heavy earth moving machinery and labour deployed on the machinery | 31,22,280 | Claim No.6 | 45,435 |
| 5. | Payment due on account of earth eroded by heavy rains due to non-compaction of earth and leaking water pipelines | 1,69,206 | -- | -- |
| 6. | Payment on account of loss of profit on balance work | 90,835 | -- | -- |
| 7. | Loss due to prolongation of work | 12,80,000 | -- | -- |
| 8. | Litigation expenses | 25,000 | -- | -- |
| Total | 50,93,966 | Total | 10,37,185 | |
Interest @ 12% per annum was also allowed by the arbitrator in favour of the appellant.
| Counterclaims made by the respondent | ||
| 1. | Liquidated damages and the expenses incurred by it for completion of work | 8,01,808 |
| 2. | Loss due to delay in completion of work | 20,00,000 |
| Total | 28,01,808 | |
4. The respondent aggrieved by the Award filed objections under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the ‘said Act’), which were, however, rejected by the learned Additional District Judge, Chandigarh vide order dated 23.7.2013. The respondent thereafter preferred an appeal before the Punjab & Haryana High Court and the said appeal succeeded whereby the Award was set aside opining that the contract was rightly terminated and the Department rightly imposed the penalty.
5. We have heard learned counsel for the parties and have perused the record. The Award is a reasone
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