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TaxTMI 
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1996 (3) TMI 550
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....decree in terms of the Award. The O.P. filed by the Government was dismissed and the suit filed by the Contractor was decreed. In other words, the award was upheld by the learned Subordinate Judge and it was made a rule of the Court. Aggrieved by the said Judgment, the State has filed this appeal and the revision. 3. Pursuant to a tender notification issued by the Superintending Engineer, Kakinada Circle calling for tenders for undertaking the work of forming approaches to railway over-bridge at level crossing No. 118 on Bhimavaram - Palakol Road, the respondent submitted the tender and the same was accepted on 16-8-1986. The total value of the contract was ₹ 125.93 lakhs. An Agreement was entered into between the contractor and the Government on 24-10-1986. The stipulated time for completion of the work was 24 months from the date of handing over the site. 4. On 4-12-1986, the site was: handed over, though not the entire site. The progress of work to be maintained for every four months has been specified in the agreement. The contractor, executed the work some time up to December, 1987. By that time, the respondent did the work of the value of ₹ 26.59 lakhs which wor....
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....26.50 lakhs which works out to 423% of the value of the work expected to be done in a period of one year. After one year, no further work was done. As per the contractor, site was available only for 25% of the viaduct portion and 33 1/3% of the remaining wall portion as on the date of commencement of the work. The contractor by his letter dated 4-3-1987 sent up within three months after the site was handed over represented about the delay in handing over the site and also the obstructions existing in the portions already handed over. In sum and substance, the case of the contractor was that for want of full site, he was compelled to stop the work after the first year. The basis on which the claim towards loss of productivity was laid was that he hired the lorries and equipment and employed labour and technical personnel on the footing that he would be able to achieve the progress to the extent of 62 lakhs in one year, as per the programme stipulated in the agreement. But, on account of the default on the part of the department in handing over the entire site free from obstructions, he could not achieve sufficient progress with the result that the men and material deployed by him re....
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....77; 67,800/- as compensation for the delayed payment of the amount due towards loss of productivity. 10. The learned Government pleader appearing for the appellant has contended that the contractor is not entitled for any compensation even if there was delay in handing over the balance site or clearing the obstructions over the site and he was only entitled to ask for extension of time as contemplated by Clauses 58 and 59 of the APDSS. It is also contended that in view of what is provided by Section 55 of the Contract Act, the respondent can claim no compensation as he unconditionally proceeded with the work without reserving the right to claim compensation. On the other hand, it is strenuously contended by the learned counsel for the respondent Mr. D.V. Reddy that neither Clauses 58 and 59 of the Agreement nor Section 55 of the contract Act bars the respondent's claim for compensation in the form of loss of productivity. It is pointed out that full site was not handed over to him by the date of determination of the contract and in view of premature termination of the contract, there was no opportunity to seek extension or claim compensation. It is submitted by the learned cou....
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....rward by the appellants in the arbitration proceedings. It is well settled that the arbitrator is bound by the contract between the parties and to decide the claims referred to him in the light of the contractual provisions. If the award is found to be contrary to the I plain terms of the contract, it is liable to be set aside, vide Ch. Ramalinga Reddy v. Superintending Engineer 1995 (3) SCALE 67. Rejecting the argument that the Court should be circumspect in interfering with an award reached by an arbitrator, it was observed in the same case: "we agree, but circumspection does not mean that the Court will not intervene when the arbitrator has made an award in respect of a claim which is, by the terms of contract between the parties, plainly barred." It is a different matter if there is some doubt about the construction or interpretation of a clause in the Agreement and the arbitrator chooses to take one of the possible views - whether it be right or wrong, vide M/s. Hind Builders v. Union of India, [1990]2SCR638 Food Corporation of India v. Joginder Paul, AIR1989SC1263 etc. But that is not the situation here. A crucial term of the contract which bars the claim for compe....
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....s asked for, and granted on more than one occasion. (The penalty levied for completing the work beyond the extended period of contract has been waived in this case). The contract was not avoided by the contractor, but he chose to complete the work within the extended time. In such a case, the claim for compensation is clearly barred by Clause 59 of the APDSS which is admittedly, a term of the agreement between the parties." At paragraph 28, the learned Judges expressed the view that in awarding compensation despite the prohibition contained in Clause 59 of the Agreement, the jurisdiction - a view which finds support from M/s. Sudarshan Trading Co. v. The Govt. of Kerala, [1989]1SCR665 ; Associated Engineering Company v. Govt. of A.P., [1991]2SCR924 and Ramalinga Reddy v. Superintending Engineer (1 supra). 12. As regards the claim for compensation pertaining to the original period of contract, the learned Judges referred to another Division Bench Judgment in Superintending Engineer, Somasila Project v. Badala Balaiah, A.A.O. No. 786/1986, dated 1-12-1988, in which Jeevan Reddy and Y. Bhaskar Rao, J., held that a claim for compensation arising out of delays or defaults on the ....
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....that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so." The claim for compensation was negatived by this Court in State of A.P. v. Associated Engineering Enterprises (5 supra), relying upon the concluding clause of Section 55 of the Contract Act. At paragraph 21, it was observed: "According to this section, it was open to the respondent to avoid the contract on account of the Government's breach of promise to deliver the sites at a particular time, but, he did not choose to do so, and accepted the delivery of sites at a time other than what was agreed upon between them earlier. If so, he is precluded from claiming compensation for any loss occasioned by such delay, unless, of course, at the time of such delayed acceptance of the sites, he had given notice to the Government of his intention to claim compensation on that account. It must be remembered that this provision of law was specifically referred to, and relied upon in the counter filed by the Government to the respondent's claim be....
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....trators as against a sum of ₹ 19.86 lakhs claimed by the contractor. The basis for the claim is almost the same as Claim No. 1 which we have just now considered. It is the case of the contractor that although he had deployed the required men, machinery and equipment so as to complete the work within the agreement period, he was prevented from continuing the work and completing the same for no fault of his. The main reason for the inability to carry out the work is -attributed to the Department' s inability to hand over the site in full free of obstructions and the unilateral determination of the contract under Clause 61. The respondent asked for compensation towards loss of profit @ 20% on ₹ 99.32 lakhs which is the estimated value of the work he was allegedly prevented from carrying out. In other words, a sum of ₹ 19.86 lakhs claimed by him is the notional profit he could have made had he executed the balance work. The appellants, in answer to the claim, contended that the claimant did not possess the adequate infrastructure and machinery and did not carry out the work even in places where the site was handed over and could not complete the piers etc., the co....
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....about 2.40 M. over sill level for the piers and stopped raising them to full height and for taking up further works such as laying bed blocks, bracing and deck slabs which are less profitable items and require more initial investments for procuring & centering materials and skilled labour which reveals his intentions and inefficiency. On Palakol side, though site was handed over to the claimant in full to tackle eleven piers P-2 to P-12 he laid foundations only to 3 piers P-10 to P-12 and left over them at ground level. Balance 8 locations were left over without doing even foundations work." In fact, the learned Arbitrators took note of this plea in their award while dealing with claim Nos. 1 and 3 though the details in support of the plea were not adverted to. Prima facie, there is no apparent reason why the contractor could not achieve any progress in respect of the piers which he has already taken up. We cannot, however, delve deep into this aspect. But there are certain questions which needed an answer, which remained unanswered by the Arbitrators. These questions are: What was the reason for not proceeding beyond foundations for the piers on Bhimavaram and Palakol side a....
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.... obstruction-free site affected the vertical progress of the work already undertaken by the respondent. It is significant to note that in the rejoinder filed by the contractor, he tried to explain away the failure on his part by contending that the Department did not make available the required steel and failed to supply the designs in time. Thus, the non availability of site was not the ground on which the contractor resisted (sic. rested) the plea aforementioned. The failure of the Department to provide steel and designs is not the ground on which the award was passed. In these circumstances, it must be said that the arbitrators committed a legal misconduct either by reason of non-application of mind or by an unwarranted assumption in coming to the conclusion that but for the failure of the Department to hand over the entire site free of obstructions on the date of execution of the agreement itself, the entire balance of work could have been completed by the contractor within the stipulated time. The award which does not consider the crux of the issue or an award bordering on perversity is liable to be struck down Under Section 30 read with Section 31 of the Arbitration Act. In s....
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....awarded by the arbitrators, the respondent claimant shall be entitled for a sum of ₹ 7.45 lakhs towards damages in the form of loss of profit. 19. The next point is whether the award of compensation under head 'B' on the amount awarded towards loss of profit is in accordance with law. We are of the view that the arbitrators committed a patent error of law in awarding a further amount under claim No. 3B as compensation for the 'delay in payment of claimed amounts'. The relevant portion of the award on this disputed item reads as follows: "Claim 3 The amount admitted under claim 3 is ₹ 14,90,000/-. Payment of compensation is allowed on this amount @ 12% per annum for 2 years i.e., from 4.1.89-4.1.91. This works out to ₹ 14,90,000 x 12/100 x 2 = ₹ 3,57,600/-. We direct that the respondents shall pay the claimant ₹ 3,57,600/- under this claim." In our view, by awarding the said amount, the arbitrators have either allowed damages on damages which is not permissible in law or allowed interest by way of damages which is equally impermissible. 20. That the award of interest by way of damages is not recognised in law is a proposition....
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.... 11 and 12 is set aside." The above observations apply with equal force to claim 3-B in respect of which the arbitrators awarded a sum of ₹ 3,57,600/-. We hold that the lower court ought to have set aside the award on this item. 22. As regards claim No. 5A, the arbitrators allowed ₹ 1,56,494/- on the finding that withholding the refund of EMD and FSD and encashment of Bank Guarantee was illegal. A compensation of ₹ 11,900/- was also awarded under claim 5B for the illegal detention of the said amounts. We find no illegality in the award as far as these claims are concerned and no arguments worth mentioning have been advanced to challenge the award in this respect. 23. The respondent- contractor has filed Cross-objections claiming interest from the date of decree. The arbitrators awarded interest at 18% on the amounts admitted against each claim from the date of award to the date of actual payment or date of decree, whichever is earlier. The trial Court confirmed the award but it did not direct payment of interest from the date of decree till the date of actual payment As per the award, interest is payable only till the date of decree but not beyond that dat....