TaxTMI 
TaxTMI 
2013 (4) TMI 507
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....as cost of proceedings in favour of the respondent without giving any reasons also major parts and claims of the claimants have been rejected by the learned Arbitrator. 2. The relevant facts are that the respondent was awarded the work "C/O Link Road Under Pass" across Ring Road i/c slip road retaining wall for a tendered amount of Rs.1,16,56,344/- by the Executive Engineer on 14th August, 1995. The entire work was to be completed within eight months starting from 24th August, 1995. The stipulated date of completion was 23rd May, 1996. 3. It was the case of the respondent that due to various breaches on the part of the petitioner, the work could be completed on 28th March, 2000, after a delay of 1435 days. Thereafter, the dispute which arose between the parties was referred to the sole Arbitrator as mentioned above. 4. The respondent raised in all 16 claims and later on claim No.14 was withdrawn. The learned Arbitrator allowed as per award claim No.1, 6, 7, 8, 9, 10, 12, 13, 15 and 16 and claim No.2, 3, 4, 5, 11 and 12 have been rejected. The respondent did not challenge the award for rejection of his claims. 5. The findings of the learned Arbitrator, claimwise arrived ....
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....y of 1435 days the Superintending Engineer admitted the delay of 1309 days and levied compensation for 126 days 24th November, 1999 to 28th March, 2000 to the tune of Rs.28,979/- extension for 1309 days was granted without levy of compensation from 24th May, 1996 to 23rd November, 1999. iii) During the period of last four months i.e. 24th November, 1999 to 28th March, 2000 (126 days) the respondent executed the work to the tune of Rs.41 lac as admitted by the petitioner. iv) Entitlement of compensation and quantum of compensation are altogether different as per law. Finding out entitlement is not excepted matter and it is to be decided by the arbitrator. Only fixing of quantum by the Superintending Engineer is excepted matter. v) Under para 13 of his office note regarding levy of compensation the Project Manager (SE) stated as under :- "The total justified hindrance works out of 1309 days out of the total delay of 1435 days. The extension of time is granted upto 23rd November, 1999 without levy of compensation. As there has been delay on the part of the department as they could not supply the drawing in time, rather it was issued after more than two years. The underp....
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....hall only be under clause 2 of the agreement. Moreover, the clause 25 of the agreement specifies that in case something otherwise is provided in the agreement clause 25 will not be operative. Therefore, the finding of the learned Arbitrator on the issue of levy, holding if redundant, is against the agreement provisions and as such without jurisdiction who has also enlarged the scope of levy imposed for a period from 24th November, 1999 to 28th March, 2000. 7. Claim No. 8 is based on the finding given for claim No. 7 vide which levy has been held to be redundant for the period 24th November, 1999 to 24th March, 2000. Thus, the finding of the Ld. Arbitrator to claim No. 7 is erroneous and also awarded payment under clause 10cc for the period for which levy was imposed is bad in law. The learned Arbitrator allowed claim No. 10 ignoring the undertaking given by the contractor on the false plea that the same was given under coercion and duress. 8. The learned Arbitrator awarded interest @ 12% per annum on the awarded amount with effect from 3rd May, 2002 to the date of award and also till realization. It is alleged by the petitioner that Section 3 of the Interest Act, 1978 provide....
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....e to the petitioner and hence, levy of compensation under clause 2 was inequitable and redundant. d) As per law, entitlement of recovery of any compensation under clause 2 is to be decided by the learned Arbitrator. Once the entitlement is decided and found that the petitioner was entitled to recover compensation under clause 2 of the agreement, the concerned Superintending Engineer can decide the quantum of compensation and this action of the Superintending Engineer is an excepted matter and it can not be questioned in arbitration. In the present case the learned Arbitrator came to the conclusion that all delays are attributable to the petitioner and hence the petitioner is not entitled to recover any compensation. As per own admission, by the concerned Superintending Engineer the respondent was not responsible for any delay. i) In State of Karnataka Vs. Shree Rameshwara Rice Mills, Thirthahalli And State of Karnataka Vs. K. Krishnappa Naidu and Co. And The Executive Engineer, Thungabhadra Reservoir Division, Munirabad and Another Vs. S. Thippa Reddy; AIR 1987 Supreme Court 1359. It was held as under : "7. On a consideration of the matter we find ourselves unable to accep....
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.... for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed." ii) Rambal Company Vs. Kerala State Science and Technology Museum, 2000 (3) Arb. LR 212 (Kerala). Relevant para reads as under : "5. On a consideration of Ext. R l(c) and Ext. P3, we are of opinion that the petitioner cannot be said to have admitted breach of contract on its part. Even where the power of the State or its instrumentality under an agreement entered into by it with a private Individual expressly provided for assessment of damages for breach of conditions of the agreement and recovery of damages, that power can be exercised only in cases where the breach of conditions is admitted or is not disputed. It is, by now, well settled that one of the contracting parties cannot adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. As already noticed, the petitioner has alleged in Ext. P3 reply notice that they have not committed breach of contract and the delay was due to lapses on the part of the first respondent against whom the petition....
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....erms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case, the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand ....
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..... The party assessing the damage can straightway seek to recover the amount and if that party is the Government, it can have recourse to the remedy available under the Kerala Revenue Recovery Act." iii) Bharat Sanchar Nigam Ltd. & Anr. Vs. Motorola India Pvt. Ltd., AIR 2000 Supreme Court 357. Relevant paras read as under :- "9. Having heard the learned Counsel for the parties and after examining the judgment of the High Court and the other materials on record, we are of the view that this appeal must be dismissed. Clause 20 is the arbitration clause and provides that any question, dispute or difference arising under this agreement or in connection therewith would be referred to arbitration. To this, an exception is also provided which lays down that the matters, the decision to which is specifically provided under this agreement, would not be referred to arbitration. From a bare reading of Clause 16.2 of Section III of the tender document, it is clear that if the tenderer fails to deliver the goods and services on turnkey basis within the period prescribed, the purchaser shall be entitled to recover liquidated damages and the quantum of the liquidated damages assessed and lev....
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....n the agreement, apparent on the face of it, relating to a decision made by any specified authority on the issue of levy of Liquidated Damages, as is contemplated under Clause 20.1 of the agreement which is excepted from the purview of arbitration. No decision coming within the scope of excepted matters under Clause 20.1 is envisaged by any portion of the agreement regarding the liability of the supplier to liquidated damages. Quantification of liquidated damages may be an excepted matter as argued by the appellant, under Clause 16.2, but for the levy of liquidated damages, there has to be a delay in the first place. In the present case, there is a clear dispute as to the fact that whether there was any delay on the part of the respondent. For this reason, it cannot be accepted that the appointment of the arbitrator by the High Court was unwarranted in this case. Even if the quantification was excepted as argued by the appellant under. Clause 16.2, this will only have effect when the dispute as to the delay is ascertained. Clause 16.2 cannot be treated as an excepted matter because of the fact that it does not provide for any adjudicatory process for decision on a question, d....
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....y not entertainable. In view of the discussions made hereinabove, we hold that the disputes raised by the respondents are arbitrable and not excepted from scope of arbitration. 16. Further, CGM Kerala Circle has already taken a decision as is evident from his letter dated 25th of April, 2006, that the appellant was right in imposing the liquidated damages and therefore, the question of such a person becoming an arbitrator does not arise as it would not satisfy the test of impartiality and independence as required under Section 12 of the Arbitration and Conciliation Act, 1996. Moreover it would also defeat the notions laid down under the principles of natural justice wherein it has been recognized that a party cannot be a judge in his own cause. The judgment of this Court in State of Karnataka v. Shree Rameshwara Rice Mills (1987) 2 SCC 160, is significant in this matter. The Court had stated: "...Even assuming that the terms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, adjudication by the officer regarding the breach of the contract can not be sustained unde....