TaxTMI 
TaxTMI 
1989 (3) TMI 392
X X X X Extracts X X X X
X X X X Extracts X X X X
....e period of contract was extended twice. The first letter of the contractor requesting for extension was addressed on 17-12-1973. Extension was granted up to 31-5-1974. By another letter dated 22-7-1974 the contractor requested another extension till the end of August, 1974. It was granted subject to imposition of penalty of ₹ 50/- per day, after 1-9-1974. 3. After the work was completed, disputes arose between the parties with respect to the amount payable to the respondent. They were referred to the sole arbitration of the Superintending Engineer, R & B, Cuddapah Circle, in accordance with the agreement. The arbitrator made his award on 25-3-1981. Apart from interest and costs, the respondent had preferred eight claims. The arbitrator awarded some or other amount under each claim. Claim No. 9 related to interest. The arbitrator awarded interest at the rate of 15% per annum from the date of award till the date of payment. So far as costs are concerned (claim No. 10), he directed the parties to bear their own costs. 4. The award is a non-speaking one. It does not give reasons for the several amounts awarded under each of the claims. It reads as follows :-- "Now, I, S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: This comprises of Waiver of refund of fines imposed to an extent of ₹ 13,500.00. Award : I award that the respondents shall pay claimants ₹ 13,500.00 (rupees thirteen thousand five hundred only) towards this claim. Claim No. 7 : This comprises of ₹ 2,000/-being the refund of fine imposed for absence of Site Engineer on Rajahmundry side. Award: I award that the respondents shall pay the claimants ₹ 2,000/- (rupees two thousand only) towards this claim. Claim No. 8: This comprises of ₹ 72,645.42 towards refund of recovery made for excess steel consumed. Award : I award that the respondents shall pay the claimants ₹ 72,645.42 (Rupees seventy two-thousand six hundred and forty five and paise forty two only) towards the claim. Claim No. 9: This comprises of ₹ 1,32,359.00 towards interest on amounts claimed and disputed. Award : This claim is rejected. However, after careful consideration of all the factors, the claimants are awarded interest on the awarded amounts from the date of this award, i.e., 25th March, 1981 till the date of payment at 15% (fifteen per cent) per annum. Claim No. 10 : This refers to costs of the claimants....
X X X X Extracts X X X X
X X X X Extracts X X X X
....towards excess steel consumed by him. The arbitrator allowed the claim in full. Claim No. 9 pertains to grant of interest from the date of the award till the date of realisation. 8. For the sake of convenience we may take up claim No. 9 first. Following the principle of the decision of the Supreme Court in Executive Engineer (Irrigation) Galimala v. Abnaduta Jena [1988]1SCR253 it has been held by two Benches of this Court in (i) CM.A. No. 292/1988 disposed of on 15-11-1988 (consisting of Jeevan Reddy & Y. Bhaskar Rao, JJ.), and (iii) C.M.A. No. 993 /1984 and batch, disposed of on 17-3-1989 (consisting of Jeevan Reddy & V. Neeladri Rao, JJ.), that the arbitrator has no power in law to award interest even for the period subsequent to the date of award. In this case, the arbitrator has not awarded interest for the period prior to the date of reference, nor has he awarded interest for the period the dispute was pending before him. He has awarded interest only from the date of the award. Since the reference to arbitration in this case is governed by Chapter II, i.e., without the intervention of the Court, the arbitrator was not competent to award the said interest. It must, accordingly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....used to the contractor on account of delay in supply. In case of delay, the contractor shall be eligible only for suitable extension of time. The scrap or cut pieces of steel left over shall not be taken back by the department. The loss, if any, on account of these scrap or cut pieces shall be borne by the contractor. The recovery of steel supplied by the Department shall be made for the quantities issued. The rates to be quoted by the contractor shall be for the supply and fabrication of steel including probable wastage up to 5% over the requirement as per schedule. Recovery for any excess quantity used over 5% wastage; shall be made at the market value plus 10% or supply rate whichever is higher. The contractor shall get binding wire required for use on the work at his own cost.....". 12. The preceding conditions in the same Section say that the cement, steel, and bitumen required for the work shall be supplied by the department at the specified rates, and that the cost thereof shall be recovered from the contractor's bills and other dues. The contractor was obligated to use the material exclusively for the purpose of the work, and to make good any loss, damage, or wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(7.4%) 10,627-00 K9 6/73 1/72 6 months 13 (6.9%) 9,909-00 K8 6/71 4/72 10 months 19 (9.79%) 14,059-30 K1 to K3 1/72 1/72 to complete foundations and 5/73 to do substructure and superstructure 17 months 34 (15.31%) 21.987-00 K4 & K3 1/72 9/73 21 months 39 (17.18%) 24,672-00 K5 & K6 1/72 10/73 22 months 45 (19.3%) 27,716-00 K7 1/72 2/74 26 months 60 (24.19%) 34,739-00 Rs.1,61,790-00 (b) ADD 5% for Establishment and Overheads on ₹ 33,03.000/- Rs.1,65,150-00 (c) ADD for removing and re-erecting ty. sheds, fencing etc. of Railway contractors as per ANNEXURE I. Rs.14,330-00 (d) Add for removing caves in earth and forming Temporary Road : Rs.2,000-00 (e) Add compensation paid to owners of buildings, huts, etc. in the area and dismantling the same on Rajahmundry side. Rs.30,000-00 Rs.3,73,270-00 OR ₹ 3,73,271-00 14. The Government disputed the respondent's claim. It relied upon the letters of the respondent dated 23-1-1970 and 13-3-1970, and the letter of the Chief Engineer dated 8-3-1970 in this behalf. Under these letters the time for delivering the several sites/piers was postp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, nevertheless, to the provision of extension of time, mentioned in the next Clause. Clause 59, which is relevant for our purposes, read thus:-- "59. Delays and extension of time : No claim for compensation on account of delays or hindrances to the work from any cause whatever shall lie, except, as hereinafter defined. Reasonable extension of time will be allowed by the Executive Engineer or by the officer competent to sanction the extension, for unavoidable delays, such as may result from causes, which, in the opinion of the Executive Engineer, are undoubtedly beyond the control of the contractor. The Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty five per cent in excess of the actual working period so lost. In the event of the Executive Engineer failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the Superintending Engineer of the Circle whose decision will be final and binding. The contractor shall lodge in writing with the Executive Engineer a statement of claim for any dela....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... handed over to the contractor within three months. 18. The third letter is dated 13-3-1970 from the respondent to the Chief Engineer, In this letter it was stated, inter alia, "(12)(a) : We note that the site for piers 14 to 21 on Kovvur side will be handed over in the beginning of 1972. Since there is a delay of 6 months in handing over the site, the time of completion of the work on Kovvur side will have to be extended by 6 months.....". This letter shows that the site for piers 14 to 21 on Kovvur side was to be delivered in the beginning of 1972, which meant a delay of six months over the time agreed earlier, and in lieu thereof it was agreed that the period of contract shall be extended by six months. 19. Now, the contention of Sri P. Ramachandra Reddy, learned counsel for the respondent-contractor, is that inasmuch as, admittedly, there was delay in handing over the sites on Kovvur side, the cost of work went up and the contractor is entitled to be compensated therefore. According to him, the consumer price-index went up by 24.19% between June 1971 and February J974. It is on this basis that he claimed ₹ 1,61,790/- by way of compensation. To this he added es....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion from the promisor for any Joss occasioned to him by such failure. If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than 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". 21. 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 Gov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use 59 has no application to the present case. The words "from any cause whatever", occurring in clause 59, are wide enough to take in delays and hindrances of all types, caused by the department, or arising from other reasons, as the case may be. Thus, by virtue of clause 59, the contractor is precluded from claiming any compensation on account of delays or hindrances arising from any cause whatever, including those arising on account of the acts or omissions of the departmental authorities.....". 23. In this context, we must refer to two conflicting decisions of this Court, though they are not strictly relevant in the facts of this case. Since they are relied upon by the parties before us, it would be appropriate to refer to them briefly. In these cases the question arose whether a contractor is entitled to claim escalation charges on account of delay on the part of the Government in handing over the site. The first decision is in Chief Engineer, Panchayat Raj Department v. B. Balaiah (1985) 1 APLJ 224. The Bench held that inasmuch as the contract between the parties does not provide for payment of escalation charges, awarding an amount on account of escalation ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is no such clause in the present agreement. It is not a case of escalation of rates. Here the major portion of the site was handed over beyond the period of agreement during which period the cost of labour and other materials have gone up. Without the site it was impossible for the contractor to complete the work and what the arbitrators have done is only to permit the contractor to claim the rates prevalent as per the S.S.Rs. in force. In our view, it is not prohibited either under the APDSS Rules or by any clause in the agreement.....". 24. We must clarify that, so far as the case before us is concerned, the claim of the respondent-contractor is not for escalation of rates, nor is it a claim for payment of rates as per the standard specification rates in force for the period beyond the originally agreed contract period. If so, the decision in State of A.P. v. S. Shivraj Reddy, 1988 (2) APLJ 465 has no application herein. In the case before us, the claim is a pure and simple claim for compensation. The amount claimed has been worked out on the basis of the rise in consumer price-index, and also on account of establishment and overhead charges. It would, therefore, be a c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... simply because it does not suit him to abide by it. The decision of this Court in M/s. Alopi Parshad v. Union of India, [1960]2SCR793 may be examined. There it was observed that a contract is not frustrated merely Because the circumstances in which the contract was made altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncomtemplated turn of events, the performance of the contract may become onerous.....". When it was argued by the appellant that since the award was a non-speaking award and no mistake of law was apparent on the face of the record, the Supre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 27. Mr. P. Ramachandra Reddy, learned Counsel for the respondent-contractor, however, relied upon certain decisions as laying down a contrary proposition, to which we should now refer. The first decision relied upon is in P. M. Paul v. Union of India [1989]1SCR115 . In this case, the appellant-contractor urged that there was delay on the part of the respondent-Government in handing over the site, and that, on that account, he has incurred extra cost which he must be reimbursed. His claim was rejected, as also his request to refer the same to arbitration. Thereupon, it is said, the appellant-contractor abandoned the work. The dispute was thereafter referred to the arbitrator. One of the claims put forward by the appellant-contractor and allowed by the arbitrator -- related to the loss caused to the contractor due to increase in prices of material, cost of labour and transport during the extended period of contract. The respondent-State submitted that no such claim is contemplated, or provided for. by the agreement between the parties, and h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reme Court referred to the decision of the Privy Council in Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd.. AIR 1923 PC 66 and held that an award can be set aside on the ground of an error apparent on the face of the award only where the award, or any document incorporated therein contains some legal proposition which constitutes the basis of the award, and which is erroneous. It was observed that in the case of a non-speaking award it is not open to the Court to probe the mental! process of the arbitrator and speculate as to what impelled the arbitrator to arrive at the conclusion which he did. In this connection, the Court referred to its earlier decision in M/s. Alopi Parshad v. Union of India, [1960]2SCR793 , wherein it was held that an award can be set aside on the ground of an error apparent on the face of it, when the reasons given for the decision, either in the award or in any document incorporated in it, are based upon a legal proposition which is erroneous. The other principle enunciated in the said decision to the effect that "an award which ignores express terms of the contract, is bad" was also affirmed. It was pointed out that the groun....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decisions cited, viz. Sudarsan Trading Co. v. The Govt. of Kerala [1989]1SCR665 . Further, as held by the Supreme Court in Continental Construction Co. Ltd. v. State of Madhya Pradesh, [1988]3SCR103 , where the agreement bars a particular claim, the arbitrator has no jurisdiction to award any amount towards such a claim, and that any such award would be incompetent and void. 31. There is yet another objection to the competency of the arbitrator to award any amount under claim No. 1 in this case. As would be evident from the claim of the respondent-contractor (extracted hereinbefore), the claim for compensation pertains (except in the case of one pier K7) to the period of contract. The period of contract stipulated in the agreement expired on 21-12-1973. Out of 9 items, mentioned in the Table (containing particulars of compensation claimed), 8 items pertain to the original period of contract itself. Moreover, in this case, it was agreed between the parties even before the formal agreement was executed that the period of Contract shall be extended by six months, which is evident from the respondent's letter dated 13-3-1970 referred to above. (The formal contract was execute....