Supreme Court affirms arbitrators' award for cement shortage, dismisses claims on measurement method and cost escalation

The Supreme Court partially allowed the appeal, affirming the arbitrators' award of Rs. 3,70,221.50 for the shortage of cement in bags supplied by the respondent. However, the appeal was dismissed for the claims regarding the method of measuring the constructed area and escalation in the cost of construction after the original contract period, upholding the Division Bench's decisions on these matters. No costs were ordered.

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Issues Involved:

1. Claim No. 4: Shortage of cement in bags supplied by the respondent.
2. Claim No. 6: Method/mode of measuring the constructed area.
3. Claim No. 9: Escalation in the cost of construction during the period subsequent to the expiry of the original contract period.

Detailed Analysis:

Claim No. 4: Shortage of Cement in Bags Supplied by the Respondent

The appellant claimed a sum of Rs. 3,96,984.50 for the shortage of cement in bags supplied by the respondent, against which the arbitrators awarded Rs. 3,70,221.50. The appellant argued that the corporation had undertaken to supply cement in bags, each containing 50 kg, but the actual weight was less. The corporation's defense was based on a stipulation in Schedule-A to the Tender notice, which stated that "20 (Twenty bags) bags of cement shall mean one metric tonne for the purpose of recovery irrespective of variation in standard weight of cement filled in bags." The appellant countered this by referring to a letter dated 5th March 1984, which was a counter-offer stating that each 50 kg bag would be supplied at the site, and this letter formed part of the contract. The Division Bench rejected the appellant's claim solely based on the stipulation in the Tender notice. However, the Supreme Court upheld the arbitrators' award, stating that the attempt of the Court should always be to support the award within the letter of law, thus reversing the Division Bench's judgment on this count.

Claim No. 6: Method/Mode of Measuring the Constructed Area

The appellant claimed Rs. 53,11,735.60 for the constructed area, against which the arbitrators awarded Rs. 49,91,327. The dispute was about whether the area covered by balconies should be included in the measurements. The respondent argued that according to the tender conditions and clause (10) of the appellant's letter dated 5th March 1984, the area covered by balconies should be excluded. The clause clearly stated that the total build-up area should exclude balconies. The appellant contended that the plans were modified later, and the final construction did not have balconies. However, no agreed or sanctioned modified plan was presented. The Supreme Court agreed with the Division Bench that the arbitrators overstepped their authority by including the balcony area in the measurements, affirming the Division Bench's decision on this score.

Claim No. 9: Escalation in the Cost of Construction During the Period Subsequent to the Expiry of the Original Contract Period

The appellant claimed Rs. 32,21,099.89 for escalation in the cost of construction, against which the arbitrators awarded Rs. 16,31,425. The respondent resisted this claim based on a stipulation in their acceptance letter dated 10th January 1985, which stated that "the above price is firm and is not subject to any escalation under whatsoever ground till the completion of the work." The Division Bench held that the appellant could not claim any amount for escalation in the cost of construction carried out after the expiry of the original contract period due to this express stipulation. The Supreme Court agreed, stating that the arbitrators acted contrary to the stipulation/condition in the agreement, affirming the Division Bench's decision on this count as well.

Conclusion:

The Supreme Court allowed the appeal in part, specifically for Claim No. 4, affirming the arbitrators' award of Rs. 3,70,221.50. The appeal was dismissed for Claims No. 6 and 9, upholding the Division Bench's decision. There was no order as to costs.

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