2002 (7) TMI 800 - SC - Indian Laws

Supreme Court ruling on contractor's appeals: reinstates award for stone aggregate, upholds High Court decision on excavation claims.

Shyama Charan Agarwala & Sons Versus U.O.I.

The Supreme Court partly allowed the contractor's appeals, reinstating the award for future quantities of stone aggregate brought from distant sources. ... - Issues Involved:1. Reimbursement of additional costs for procurement of stone aggregate.2. Reimbursement of additional costs for excavation encountering rock other than soft/disintegrated rock/laterite rock.3. Reimbursement of additional costs due to working in restricted area.4. Interest on the above claims.5. Costs of reference.Issue-Wise Detailed Analysis:1. Reimbursement of Additional Costs for Procurement of Stone Aggregate:The contractor claimed reimbursement for additional costs incurred in procuring stone aggregate from distant sources like Belgaum and Hubli due to unavailability from local sources in Goa. The arbitrator awarded the claims, recognizing the unprecedented situation and the necessity of procuring materials from distant places. The High Court sustained the award for quantities brought up to 24-1-1994 but set aside the award for future quantities, stating it was beyond the terms of reference and subject to market conditions. The Supreme Court, however, held that the claim for future quantities was within the scope of arbitration and directed that payment be made for stone aggregate actually brought from distant sources post-24-1-1994.2. Reimbursement of Additional Costs for Excavation Encountering Rock Other than Soft/Disintegrated Rock/Laterite Rock:The contractor sought reimbursement for additional costs due to encountering harder rock types during excavation. The arbitrator awarded the claims, but the High Court set aside the award, interpreting the contract clauses to mean that all types of laterite rock, whether soft or hard, should be treated as soft/disintegrated rock. The High Court found that the arbitrator ignored relevant contract clauses and misinterpreted the provisions, concluding that the award was invalid. The Supreme Court agreed with the High Court's interpretation and upheld the decision to set aside the award.3. Reimbursement of Additional Costs Due to Working in Restricted Area:The contractor claimed additional costs due to working in a restricted area, which allegedly reduced labor output and working hours. The arbitrator awarded the claims, but the High Court set aside the award, noting that the contractor was aware of the working conditions and restrictions before filing the tender. The High Court held that the contractor could not later complain about these restrictions, as they were part of the contract's special conditions. The Supreme Court upheld the High Court's decision, agreeing that the arbitrator ignored relevant contract clauses.4. Interest on the Above Claims:The arbitrator awarded past interest, rejected pendente lite interest, and allowed future interest at 18% per annum if the awarded amounts were not paid within 30 days. The High Court sustained the interest awarded on the claim for stone aggregate brought up to 24-1-1994 but rejected interest on other claims due to the setting aside of those awards. The Supreme Court did not find fault with the High Court's decision regarding interest.5. Costs of Reference:The contractor's claim for costs of reference was rejected by the arbitrator, and this decision was not contested in the higher courts.Conclusion:The Supreme Court partly allowed the contractor's appeals, reinstating the award for future quantities of stone aggregate brought from distant sources. The appeals by the Union of India were dismissed, and the High Court's decision to set aside the awards for excavation and restricted area claims was upheld. The Supreme Court emphasized that the arbitrator must operate within the contract's terms and cannot ignore relevant clauses.