TaxTMI 
TaxTMI 
1989 (1) TMI 314
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....ction of the award in respect of three items of his claim ( 1, 8 and 9) and item no. 1 of the respondent's counter claim. The Department also filed its objections to the award and prayed that a sum of Rs.8,080.29 should be awarded in favour of the Department or the award remitted to arbitrator. The learned single Judge dismissed the objections of the respondents. So far as the appellant's prayers were concerned, he allowed the same only in respect of item 1 of the respondent's counter claim. He held that the arbitrator was not justified in granting to the Government a sum of Rs.20,000 against the contractor. Both the contractor and the respondents preferred appeals to the Division Bench. The Bench reversed the order of the learned single Judge. It set aside the order of the learned single Judge in so far as the sum of Rs.20,000 was deleted thereby from the award of the arbitrator. The award was restored to its original terms and the contractor was held entitled to interest at 6 per cent on the amount found due to him after adjusting the sum awarded by the arbitrator in favour of the Government against the sum awarded in favour of the contractor. The contractor has preferred this a....
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.... these claims are concerned, that the appellant has any arguable case at all. As pointed out by the Division Bench of the High Court, the award was a non-speaking award. The arbitrator had considered the materials placed before him and had arrived at his conclusions. The award does not on the face of it disclose any error, much less any error of law, which needs to be set fight. We therefore, hold that the High Court was justified in affirming the award so far as the rejection of these three claims is concerned. The position in regard to the counter claim of the respondents which was allowed by the arbitrator and the Division Bench stands on a different footing. The respondents' claim before the arbitrator was that they were entitled to receive from the contractor "Rs.24,000 on account of payment of 10 per cent compensation on the tendered amount for not executing the work in accordance with the terms and conditions of the agreement". As against this claim the arbitrator awarded the respondents a sum of Rs.20,000. The learned single Judge took the view that having regard to clause 2 of the contract (pertaining to the claim by the respondent) read with clause 25 it was clear that a....
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....s shown in the tender." "Clause 25: Settlement of disputes by Arbitration: Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instruction, order, or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, Himachal Pradesh Public Works Department ........ " The Division Bench did not agree with the view of the learned single Judge. It pointed out that, while in the ordinary course, the rate of compensation payable by the contractor is one per cent of the amount of the estimated cost of the whole work, under clause 2, the Superintending Engineer is authorised to depart from this figure and determine the c....
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....s to urge before this Court, as they did before the High Court also, that, on a proper construction of clauses 2 and 25, this award was not justified. It is in this respect that this counter claim of the Department stands on a different footing from the earlier claims of the contractor which have been rejected and which, we have held above, have been rightly rejected. Learned counsel for the appellants contends that the terms of clause 2 clearly envisage the determination of the amount of compensation for the delay in the execution of the work only by the Superintending Engineer and specifically mentions that the decision of the Superintending Engineer in writing shah be final. The opening words of clause 25: "Except where otherwise provided in the contract" clearly take out of the purview of clause 25 any dispute in respect of a claim under clause 2. He submitted that the clause authorised only the Superintending Engineer to go into the question whether there is any delay or not and the reasons therefore and to determine the rate at which compensation should be charged from the contractor. If the Engineer-incharge levies a compensation under clause 2, the contractor can apply to ....
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....e contractor was at default or not being totally immaterial. The Department was, therefore, entitled to automatically deduct from the bills payable to the petitioner the compensation or penalty at the rate mentioned in clause 2 or such reduced amount as may be determined in a particular case by the Superintending Engineer and that if the contractor objected to this deduction that would give rise to a dispute which can be the subject matter of arbitration under clause 25. He therefore submitted that the Division Bench has rightly construed the terms of the contract and confirmed the award made by the arbitrator. We have gone through the judgment of the Division Bench of the High Court and we have also considered the arguments advanced on both sides. With great respect, we find ourselves unable to agree with the interpretation placed by the Division Bench on the terms of the contract. Clause 2 of the contract makes the time specified for the performance of the contract a matter of essence and emphasises the need on the part of the contractor to scrupulously adhere to the time schedule approved by the Engineer-in charge. With a view to compel the contractor to adhere to this time sch....
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....ice the amount of compensation will be initially levied by the Engineer-in-charge and the Superintending Engineer comes into the picture only as some sort of revisional or appellate authority to whom the contractor appeals for redress. As we see it, clause 2 contains a complete machinery for determination of the compensation which can be claimed by the Government on the ground of delay on the part of the contractor in completing the contract as per the time schedule agreed to between the parties. The decision of the Superintending Engineer, it seems to us, is in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause. In our opinion the question regarding the amount of compensation leviable under clause 2 has to be decided only by the Superintending Engineer and no one else. The Division Bench has construed the expression in clause 2 in parenthesis that "the Superintending Engineer's decision shall be final" as referring only to a finality qua the department; in other words, that it only constitutes a decl....
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....the Government might claim in terms of clause 2 of the contract. We have already pointed out that this is a penalty clause introduced under the contract to ensure that the time schedule is strictly adhered to. It is something which the Engineerincharge enforces from time to time when he finds that the contractor is being recalcitrant, in order to ensure speedy and proper observance of the terms of the contract. This is not an undefined power. The amount of compensation is strictly limited to a maximum of 10% and with a wide margin of discretion to the Superintending Engineer, who might not only reduce the percentage but who, we think, can even reduce it to nil, if the circumstances so warrant. It is this power that is kept outside the scope of arbitration. We would like to clarify that this decision of ours will not have any application to the claims, if any, for loss or damage which it may be open to the Government to lay against the contractor, not in terms of clause 2 but under the general law or under the Contract Act. As we have pointed out at the very outset so far as this case is concerned the claim of the Government has obviously proceeded in terms of clause 2 and that is t....