1983 PLP 2006 (CLC)

Total: Rs.12,63,238.40

7. On the other hand the appellants have set up a counterclaim against the respondent as under :‑ Recoveries (a) Liquidated damages. Rs.2,74,300.00 (b) Deduction Memo. (i) Cement‑859 tons at Rs. 150 per ton Rs.1,28,850.00 (ii) M. S. bars‑2 Cwt. C 24 Lbs. at Rs.1,400 per ton. Rs. 155.00 (iii) Bitumen sheets‑4 Nos. Rs.97.80 (iv) Hire of mixer machine Rs.3,903.00 (v) Empty jute bags‑‑17514 Nos. at Rs. 2 each. Rs.35,028.00 (vi) Below specification work Rs.25,000.00 (vii) Tractor hire charges Rs.31,688.00 (viii) Non‑supply of flap valves‑52 Nos. at Rs.300 each. Rs.15,600.00 (ix) C. E's bill for mixer hire Rs.50.50 (x) Labour charges bill Rs.1,430.48 (xi) Cost of repairs and maintenance. Rs.7;200.00 (xii) Income‑tax arrears. Rs.40,576.00 (xiii) Income‑ax at 3% of Rs. 3,34,360.71 Rs.10,030.82.

Rs.2,99,609.60. Total to be recovered from the contractor (A + B) Rs.5,73,909.60 Less payable (1) Amount of final bill Rs.3,34,360.71 to contractor (2) Bank Guarantee Rs.1,37,150.00

Total Rs.4,71,510.71

Net recoverable from the, contractor Rs.1,02,398.89

8. It would appear that the appellants have not only denied their entire responsibility to pay any amount against any of the various items claimed by the respondent, on the other hand they have set up a counter‑claim against the respondent to the tune of Rs. 1,02,398.89. The learned Arbitrator has on the other hand allowed the following amounts against various items claimed by the respondent in para 4 of his statement of claim : (i) Total amount of award against items (a), (b), (c), (e), (g) and (h) under paragraph 4 of the respondent's claim. Rs.4,95,225.90 (ii) Amount of final bill claimed in para 2 of plaintiff's memo of claim. Rs.1,23,792.95 (iii) Interest at 6% on above amount i.e. (Rs. 4,95,225.90 ‑I‑ Rs. 1,23,792.95) from 1st July, 1972 to 30th June, 1975. Rs.1,11,423.39 (iv) Refund of guarantee amount encashed. Rs.1,37,150.00 (v) Interest at 6% on guarantee amount of Rs. 1.37,150 from 19th May, 1973 to 30th June, 1975. Rs.17,427.00 (vi) Cost of suit. Rs.10,000.00

Rs.8,95,019.24 LESS Income‑tax 3%, on item against (i), (ii), (iii) & (v). Rs.22,436;90

Net amount payable to Plaintiff. Rs.8,72,583.24

9. The learned Single Judge accepted the award as it was ‑ made by the Arbitrator, mainly on the ground that the integrity and impartiality of the Arbitrator was unquestionable. The learned Single Judge did no discuss the propriety or legality of the various items of claim set up by the parties against each other. Without imputing any ulterior motive to the learned Arbitrator it can be said the errors of law can be committed even by a person of integrity and errors of law may lead to some conclusions which may not be factually correct. In view of this fact we have thought it proper to scrutinize each item of claim set up by one party against the other, after hearing the learned counsel for the parties. At the outset it would be proper to refer to those items of claim which are either undisputed or established on the basis of the record of the proceedings. Such items are as follows :‑ (1) Net amount of the final bill.‑Under this item the respondent had claimed Rs. 2,58,290.95. From this amount the respondent deducted the amount of penalty of Rs. 10,000 which .was imposed upon him under clause 39 of the General Conditions of Contract for delay of one month. The net amount thus according to the respondent comes to Rs.2,48,290.95. This item has not been challenged by the appellants. They have. however, , claimed certain deductions as stated in para. 7(b) above. Out of the above items respondent has admitted his liability for deductions in respect of items (i), (ii) (iii), (iv), (vi), (ix), (x) (xi) and (xii). The admissions are contained in the statement in writing of the respondent dated 18th December, 1973‑which he had filed before the Arbitrator. The net amount payable by the respondent in respect of the final bill would thus come to Rs. 1,23,792.95. This amount has not been disputed by the learned counsel for the parties before us. (2) Bank Guarantee.‑ It is not disputed that the appellants were not entitled to encash the bank guarantee in view of the fact that the work was completed by the respondent according to the agreement between the parties and that whatever delay was caused had been condoned, while for the delay which was not condoned the respondent was penalised by being made to pay Rs. 10,

000. It may be stated that this amount has also been adjusted by the respondent while calculating the net amount payable under sub‑ para. (1) above. The appellants were, therefore, not justified in encashing the bank guarantee amounting to Rs. 1,37,

150. This amount was, therefore, rightly awarded by .the Arbitrator alongwith the interest amounting to Rs. 17,427. (3) Claim in respect of extra items.‑The various amounts claimed by the respondent under this head have been stated by him in para. 4 of his claim filed before the Arbitrator. These items have been specified in para. 6 above. Out of these items, in respect of the extra work specified in clauses (d) and (f ) have already been disallowed by the Arbitrator. These disallowances have not been disputed by the learned counsel for the respondent. The learned Arbitrator has, however, allowed the amounts specified against clauses (a), (b), (c), (e), (g) and (h) the total of which comes to Rs.4,95,

225. The amounts specified against each of the above clauses need to be scrutinised closely. So far as the amount specified against clause 4(a) amounting to Rs.70,337.25 is concerned, the learned counsel for the appellants has referred us to clause 18 of Particular Specifications, according to which no extra payment was payable to the respondent for this work. In our view the learned Arbitrator has not correctly interpreted clause 13 of the Particular Specifications, which provided that no extra payment will be made for `No Fines' concrete. Learned counsel for the respondent has been unable to satisfy us as to how in view of this clause the respondent could claim extra payment for this work. We are, therefore, of the view that the learned Arbitrator had awarded the amount under this clause to the respondent by wrongly interpreting clause 18 of the Particular Specifications. We, therefore, disallow the Respondent's claims in respect of this work. 4(b) So far as the amount in respect of the work' under this clause is concerned, the appellants have admitted vide their letter dated 12th August, 1970 (Sr. No. 11) addressed to the respondent that .the respondent was entitled to the payment for this extra work at the rate of Rs. 85.50 per 100 sq. feets. In view of this admission we are of the view that the learned Arbitrator had rightly allowed the respondent's claim for this work which comes to Rs. 1,84,708.85. 4(c) The amount claimed under this clause pertains to extra excavations executed by the respondent on account of leakage and bursting of K. P. T. dredger pipes. The amount claimed for this work under this clause is Rs. 34,

800. From a perusal of the General Conditions of the Contract, it would appear that no extra amount was to be paid to the contractor on account of works necessitated by contractual risks. The respondent had an opportunity of visiting the site before enter ing into agreement with the appellants in respect of the entire work. He must have anticipated leakage from the dredger pipe and, therefore, must have stated the rates keeping in view this risk. We are, therefore, of the view that the learned Arbitrator was not justified in awarding the amount for this work to the respondent. Learned counsel for the respondent has also not seriously pressed his claim for this work. We, therefore, dis allow this amount, which has been wrongly awarded to the respondent by the learned Arbitrator. 4(d) This amount has already been disallowed by the Arbitrator against which no cross objections have been filed nor the learned counsel for the respondent has pressed the claim for this work before us. 4(e) The amount claimed by the respondent for the work under this item must also be disallowed for the same reason for which the amount for the work under clause (c) above was disallowed. Learned counsel for the respondent has also not seriously pressed his claim for the amount for this work. 4(f) The amount claimed by the respondent for the work under this clause has already been disallowed by the learned Arbitrator. No cross objections have been filed against this disallowance, nor learned counsel for the respondent has pressed before us the claim for this work. 4(g) The appellants have admitted in the letter dated 12th June, 1971 (Sr. No. 20) addressed by Executive Engineer. K. P. T. to the respondent that the respondent had suffered damage on account of bursting of the dredger pipe line. The claim set up by the respondent by way of damages under this clause was originally Rs. 49,470, but it was agreed between the parties that the K. P. T. shall be liable to pay to the respondent Rs. 24,335 by way‑ of damages. This amount was accepted by the respondent by his letter dated 1st June, 1971 (Sr. No. 27) addressed to the construction department of the K. P. T. We are, therefore, of the view that this amount was rightly awarded by the learned Arbitrator to the respondent. 4(h) The learned Arbitrator has wrongly awarded Rs. 1,29,650 to the respondent for additional overheads claimed by the respondent under this clause. The claim of the respondent was that he had to pay this much amount by way of salaries of staff and other expenses on account of delay of 16 months in the work. It has already been discussed above that the delay of 16 months was not caused by any fault on the part of the appellants. On the contrary the respondent himself has admitted this delay and. had requested the appellants to condone the same. The delay was condoned only partly that is for 15 months and for the last month a token penalty was imposed upon him. The appellants could as well have exercised their discretion by rejecting the request of the respondent for condonation of this delay and could have claimed damages for the same. Instead of being subjected to damages, the respondent was excused because the delay was partly due to circumstances beyond the control of the respondent. But at the same time even the appellant was not responsible for this delay and as such there was no justification for awarding any amount under this clause to the respondent. We, therefore, disallow the amount which has been wrongly awarded by the Arbitrator to the respondent under clause (h). Even learned counsel for the respondent has failed to satisfy as to how the respondent can claim this amount when the responsibility for the delay cannot be attributed to the appellants. 4(i) The last item awarded by the Arbitrator is interest on the total amount under clauses (a), (6), (c), (e), (g) and (h), which were awarded by him to the respondent. Under this clause interest has been calculated at 6% on Rs. 495,225.90. The total amount of interest thus awarded to the respondent from 1st July, 1972 to 30th June, 1975 comes to Rs. 1,11,423.39. In our view it was beyond the scope of reference to the Arbitrator, to have awarded any interest to the respondent on the amount claimed by him for various works. According to section 29 of the Arbitration Act, the Arbitrator should have left the question of interest to be decided by the Court. We are, therefore, unable to agree with the learned Arbitrator in respect of the .amount of interest awarded to the respondent. This amount is also disallowed.

10. In view of the above discussion, we are of the view that the award needs to be modified. The amounts which have been wrongly awarded by the Arbitrator should be excluded from the claim set up by the respondent. It may also be added that the appellants have claimed liquidated damages to the extent of Rs. 2,74,300 as stated in para. 7(a) above. This claim was disallowed by the Arbitrator and no exception can be taken to this decision of the Arbitrator. The damages have been claimed by the appellants for the delay caused in the completion of the work by the respondent. But since the delay was partly condoned and partly penalised for, hence there was no justification for having claimed any amount by way of liquidated damages from the respondent. It may further be stated that under section 15 of the Arbitration Act, this Court has the same power as the original Court to modify the award to correct errors which are obvious on the face of the award. The sums which have been found above to have been wrongly awarded to the respondent, amount in our view, to be such errors. Consequently we modify the award and hold that the amounts to which the respondent is entitled as a result of the above findings would be as under :‑‑ Balance payable to the respondent on account of the final bill. Bank Guarantee. Interest on Bank Guarantee. Amount under clause 4(b). Amount‑under clause 4(g). Cost of the suit. Total: Rs.1,23,792.95 Rs.1,37,150.00 Rs.17,427.00 Rs.1,84,708.85 Rs.24,355.00 Rs. 10,000.00 Rs.4,97,423.80.

11. We accordingly modify the award to the extent stated above and hold that the respondent is entitled to be paid by the appellants an amount of Rs. 4,97,423.80 with 6% interest on the above amount from the date of the award to the date of the payment. Appeal is consequently partly allowed with no order as to cost, to the extent stated above. K. M. A. Appeal partly allowed.