V.P. Jolly Vattakkattu House, West Vengola P.O., Perumbavoor v. State of Kerala and The Superintending Engineer (Roads & Bridges), Central Circle, Aluva

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN TUESDAY, THE 22ND DAY OF MARCH 2016/2ND CHAITHRA, 1938 Arb.A.No. 21 of 2009 ( ) ------------------------- AGAINST THE JUDGMENT IN ARB OP7/1994 of SUB COURT, MUVATTUPUZHA DATED 31.10.2008 ## APPELLANT/RESPONDENT:: -------------------------------------- V.P.JOLLY VATTAKATTU HOUSE, WEST VENGOLA P.O., PERUMBAVOOR, REPRESENTED BY P.A.HOLDER, V.P.BEHANAN, VATTAKATTU HOUSE,, WEST VENGOLA, PERUMBAVOOR. BY ADVS. SRI.M.C.JOHN SRI.C.PRABIN BENNY ## RESPONDENTS/PETITIONERS 1 AND 2:: ------------------------------------------------------- 1. STATE OF KERALA REPRESENTED BY SECRETARY, PUBLIC WORKS DEPARTMENT,, THIRUVANANTHAPURAM. 2. THE SUPERINTENDEING ENGINEER (ROADS & BRIDGES), CENTRAL CIRCLE, ALUVA. BY GOVERMENT PLEADER SMT.ROSE MICHAEL THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 6-1-2016, THE COURT ON 22-03-2016 DELIVERED THE FOLLOWING: ## **P.R.RAMACHANDRA MENON & ANIL K.NARENDRAN, JJ. -----------------------------------------------------------------Arb. Appeal No.21 of 2009 -----------------------------------------------------------------Dated this the 22[nd] day of March, 2016** ## **JUDGMENT** ## Anil K.Narendran, J. The appellant is the respondent in O.P.(Arb.)No.7 of 1994 on the file of the Sub Court, Muvattupuzha. It was an application filed by the respondents herein under Section 17 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') for passing a decree in terms of the award of the arbitrator dated 23.6.1993. The appellant filed I.A.No.635 of 1994 for setting aside the award passed by the arbitrator. The court below, by the judgment and decree dated 31.10.2008 allowed O.P.(Arb.)No.7 of 1994, thereby accepting the award passed by the arbitrator and a decree was passed in terms of the said award. The court below has also dismissed I.A.No.635 of 1994 filed by the appellant for setting aside the said award. Aggrieved by the judgment and decree of the court below, the appellant is before this court in this appeal, under Section 39 of the Act. 2. We heard the arguments of the learned counsel for the Arb. Appeal No.21 of 2009 2 appellant and also the learned Government Pleader appearing for the respondents. 3. The appellant had entered into an agreement dated 9.12.1977 with the respondents in respect of the work of “improvements to road from 15/4 of A.C.Road to 2/3 of Kallil Temple Road”. The tender was accepted at 26% below the estimate rate. The agreed PAC was 3,16,123/-. As per the₹ agreement, the time for completion of the work was 15 months. The nature of the work consists of formation of road for a length of 3,300 meters mainly by filling earth, collecting and supplying broken stones, construction of culverts, etc. According to the appellant, as per the sanctioned estimate it was proposed to construct rubble retaining walls on either side of the earth filling. From Ch.1127 Mtr. to 1480 Mtr. the retaining wall was initially proposed with inside slope. But, considering structural safety, this was changed to retaining wall having outside slope, which necessitated additional land for construction. The additional land was made available only after the agreed time for completion of the work. Hence, the appellant was constrained to request for Arb. Appeal No.21 of 2009 3 extension of time and to execute supplemental agreements. The change in the construction of retaining wall was even approved much after the original time for completion of the work. Further, the gradient of the road from Ch.1127 Mtr. to 1480 Mtr. was originally proposed as 1/9. Since there was difficulty in negotiating vehicles through this sharp and steep gradient, the local people represented to the Superintending Engineer to ease the gradient and the gradient was unilaterally changed to 1/15, which change was effected in October 1980, i.e., after about 1½ years of the agreed time for completion of the work. According to the appellant, due to this change, the filling quantity of earth increased considerably and he was forced to bring additional earth from far away places incurring huge additional expenditure. Further, the original estimate was sanctioned as per 1976 Schedule of Rates. The Government revised the Schedule of Rates in 1978, 1980 and 1982, allowing substantial increase in the labour and material cost. As such, the appellant had to incur huge additional expenditure by way of increase in material cost and labour charges. Accordingly, claim (g) was made before the Arb. Appeal No.21 of 2009 4 arbitrator claiming compensation for the extra items of work undertaken. 4. The Chief Engineer (Arbitration), Thiruvananthapuram, passed an award dated 27.7.1983 awarding various sums under claims (a), (b), (c), (e), (g) and (n) amounting to 2,30,000/-,₹ out of which a sum of 85,000/- was under claim (g). On claims₹ (j), (k) and (l), the arbitrator directed the respondents to pay the final bill as per his award. The award was filed before the Sub Court, Thiruvananthapuram and a decree in terms of the said award was passed on 18.11.1983, in O.P.(Arb.)No.201 of 1983. Against the said decree, the State filed M.F.A.No.124 of 1984 before this Court. By judgment dated 15.11.1991 **[State v. Jolly (1992 (1) KLT 240)]** a Full Bench of this Court set aside the award of 85,000/- under claim (g) and remitted the award to₹ the arbitrator for reconsideration in accordance with law, so far as claim (g) is concerned. The rest of the decree in terms of the award passed by the arbitrator was confirmed. Paras.24 and 27 of the judgment read thus; “ **24.** Applying the above principles, we hold alternatively Arb. Appeal No.21 of 2009 5 that the action of the arbitrator in totally ignoring even to refer to the supplemental agreement in the award, let alone complying with its terms which prohibit grant of additional compensation and extra rates - the same must be held to amount to clear misconduct requiring the award to be set aside. **25.** xxx xxx xxx **26.** xxx xxx xxx **27.** Coming to the facts of the case, the contention for the contractor is that under claim (g) of Para.10 of the Claim Petition before the arbitrator he is entitled to 85,000/-₹ being 100% extra over the rate of compensation agreed to as per the original contract for delays on the part of the Government. The case of the appellant, on the other hand, is that the contractor was granted extension upto 31-121982 after taking into consideration all factors only on condition of his completing the works as per agreed rates and that in the supplemental agreement the contractor agreed to complete the work as per the terms and conditions of the original agreement and therefore ₹85,000/- was awarded under claim (g) contrary to agreed terms, and is liable to be set aside. We may point out that the arbitrator, having noted in his notes on the first and only date of hearing, 27.7.1983 (see pages 215-216 of the arbitrator's report) that the supplemental agreement and other factors were, in fact, relied upon for the Department at the hearing, erred in proceeding to deliver his award Arb. Appeal No.21 of 2009 6 without even adverting to the plea in paragraph 3, 6 and 10 of the defence statement based on the supplemental agreement. He does not even care to say in his award that the supplemental agreement was relied upon in the defence statement at the first hearing of the case on 27.7.1983. As per the notes, it is clear that the supplemental agreement was strongly relied upon by the appellants even at the first hearing. If the supplemental agreement precluded any extra compensation of higher rates, there can be no doubt that the arbitrator acted in excess of his jurisdiction and in awarding 85,000/- under₹ claim (g) the award is liable to be set aside under Section 16(1)(a), in view of the decision of the Supreme Court in Associated Engineering Co. Ltd. v. Government of Andhra Pradesh (1991 (4) SCC 93). In any event, the arbitrator committed technical or legal misconduct in not even referring to the objection raised in the defence statement in paragraphs 3, 6 and 10 based on the agreed terms in the supplemental agreement. Continental Construction Co. Ltd. v. State of Madhya Pradesh (AIR 1988 SC 1166). The award of 85,000/- under claim (g) is, therefore, liable to₹ be set aside under Section 30 of the Act for technical or legal misconduct of the arbitrator. In the circumstances, we set aside the award of 85,000/-₹ as per claim (g) and remit the award to the arbitrator for reconsideration in accordance with law so far as claim (g) is concerned. Appeal is allowed and the matter is remitted Arb. Appeal No.21 of 2009 7 to the arbitrator to that extent. Rest of the decree is confirmed. There will be no order as to costs.” 5. Pursuant to the above judgment of this Court, the arbitrator passed an award dated 23.6.1993 in which claim (g) was declined, holding that, the supplemental agreement stipulates only for extension of time and nothing else and that, if the supplemental agreement is considered along with the original agreement, claim (g) made by the appellant can only be declined. The arbitrator has dealt with claim (g) in page 2 of his award, which reads thus; “Claim (g): Going by the comments of the Hon'ble High Court about the consideration to be given to the matter and contents of the supplemental agreements and also considering the argument of the claimant that the Supplemental Agreement IV stipulates only “the extension of time” and nothing else, I am of the view that such a supplemental agreement, unless considered along with all previous supplemental agreements and the original agreement will leave the parties without any clear direction to follow as to the actual execution and connected monetary assessments. It follows, then, that the claims and liabilities of both parties are governed by the conditions stipulated in the original agreement and the Arb. Appeal No.21 of 2009 8 supplemental agreements that followed. Hence this claim is declined.” 6. Accordingly, the award was filed before the Sub Court, Muvattupuzha, declining claim (g). The respondents filed O.P. (Arb.)No.7 of 1994 praying for a decree in terms of the award. The appellant filed I.A.No.635 of 1994 praying for an order to set aside the award on claim (g). The court below by judgment dated 31.10.2008 passed a decree in terms of the award of the arbitrator and dismissed I.A.No.635 of 1994 filed by the appellant, holding that there is nothing to find fault with the arbitrator when he declined claim (g) and that, no grounds are made out either to set aside the award or to remit it back to the arbitrator. 7. Claim (g) made by the appellant relates to compensation for extra items of work undertaken. The fact that the appellant had to execute extra items of works due to variation in the design is not in dispute. It is also not in dispute that, those changes in the design were effected after the original agreed time for completion of the work. According to the Arb. Appeal No.21 of 2009 9 appellant, since the agreed rate was based on 1976 Schedule of Rates, which was revised by the Government in the year 1978, 1980 and 1982, by the time he was asked to execute extra items of work the material cost as well as labour charges increased considerably and he had to incur huge additional expenditure. Therefore, compensation for extra items of work undertaken was claimed under claim (g). 8. In paras.3, 6 and 10 of the statement of defence and counter claim, the respondents have admitted that, there was delay in getting approval for the working estimate. Similarly, there was delay in getting approval for certain extra items of work and for excess quantities under certain items. Further, there was also some delay in the supply of departmental materials like cement and M.S.Rods for undertaking the work. However, the respondents would contend that, as per the conditions stipulated in the original agreement the appellant cannot claim any compensation for the delay, if any, occurred in the supply of departmental materials. The only compensation in such cases is suitable extension of the time for completion of the work, which Arb. Appeal No.21 of 2009 10 was done by executing supplemental agreements between the parties, modifying the period for completion of the work specified in the original agreement. As such, the appellant had agreed to carry out the work during the extended period, subject to the terms and conditions contained in the original agreement. 9. In the statement of defence and counter claim, the respondents have admitted that, during the actual execution of the work the design of the retaining wall was changed as was found necessary. The gradient was also changed in view of the representation from the local people. However, the respondents would contend that, the Department has the right to effect such changes during actual execution of the work, as per the conditions in the notice inviting tender. The respondents would also contend that, for the additional earth filling undertaken, the appellant is not entitled to claim any amount in excess of the rate for such work provided in terms of the original agreement. In para.10 of the statement of defence, the respondents have contended that, as per the supplemental agreements the appellant has agreed to carry out the work during the extended Arb. Appeal No.21 of 2009 11 period as per the terms and conditions contained in the original agreement and that, there is no condition in the agreement enabling the appellant to claim enhanced rate for the excess quantities of work. 10. In the judgment dated 15.11.1991 in M.F.A.No.124 of 1984 this Court held that, the action of the arbitrator in totally ignoring even to refer to the supplemental agreement in the award, which prohibits grant of additional compensation and extra rates, amounts to clear misconduct requiring the award to be set aside. This Court observed that, if the supplemental agreement precluded any extra compensation of higher rates, there can be no doubt that the arbitrator acted in excess of his jurisdiction in awarding 85,000/- under claim (g) and the award₹ is liable to be set aside under Section 16(1)(a) of the Act, in view of the decision of the Apex Court in Associated Engineering Co. Ltd. v. Government of Andhra Pradesh (1991 (4) SCC 93). This Court has also held that the arbitrator committed technical or legal misconduct in not even referring to the objection raised in the defence statement in paragraphs 3, 6 and 10, based on the Arb. Appeal No.21 of 2009 12 agreed terms in the supplemental agreement, as such the award of the arbitrator is liable to be set aside under Section 30 of the Act. In the result, this Court set aside the award of 85,000/- as₹ per claim (g) and remitted the award to the arbitrator for reconsideration in accordance with law so far as claim (g) is concerned. 11. After the remand, the arbitrator passed an award dated 23.6.1993 in which claim (g) was declined, holding that, the supplemental agreement stipulates only for extension of time and nothing else and that, if the supplemental agreement is considered along with the original agreement, claim (g) made by the appellant can only be declined. The award passed by the arbitrator undoubtedly is cryptic. However, the award cannot be said to be devoid of reasons. A reading of the award would indicate that, the arbitrator declined compensation for extra items of work undertaken, since the supplemental agreement deals with only extension of time and nothing else. The arbitrator has also found that, if the supplemental agreement is considered along with the original agreement, the claim made by the Arb. Appeal No.21 of 2009 13 appellant for enhanced rate for the excess quantities of work can only be declined. 12. The learned counsel for the appellant would contend that, under the supplemental agreement there is no prohibition in the appellant claiming enhanced rate for the excess quantities of work undertaken during the extended time for completion of the work and as such, there is nothing wrong in the arbitrator awarding claim (g) made in that regard. The learned counsel would contend further that, the arbitrator declined claim (g) only because of the observations contained in the judgment of this Court in M.F.No.124 of 1984 and the fact that the arbitrator was carried away by those observations is discernible from the award itself. The learned counsel would also contend that, when the delay in execution of the work was not attributable to the appellant, but only to the department, the arbitrator ought to have allowed claim (g) and the award to the contra is vitiated by error apparent on the face of record. 13. As pointed out by the learned Government Pleader, the specific stand taken by the respondents in para.10 of the Arb. Appeal No.21 of 2009 14 statement of defence is that, as per the supplemental agreements the appellant has agreed to carry out the work during the extended period, as per the terms and conditions contained in the original agreement and that, there is no condition in the agreement enabling the appellant to claim enhanced rate for the excess quantities of work. The fact that the supplemental agreement does not contain any provision enabling the appellant to claim enhanced rate for the excess quantities of work is not in dispute. The learned counsel for the appellant fairly conceded that the supplemental agreement deals with only extension of time for completion of the work. The learned counsel for the appellant could not point out any provision in the original agreement which entitles the appellant to claim enhanced rate for the excess quantities of work undertaken during the extended time for completion of the work. 14. We also notice that, the appellant has no case that the supplemental agreements were executed on account of coercion or duress or on account of any threat meted out by the respondents. As per the supplemental agreements the appellant Arb. Appeal No.21 of 2009 15 has agreed to carry out the work during the extended time as per the terms and conditions contained in the original agreement. When there is no provision, either in the original agreement or in the supplemental agreements, entitling the appellant to claim enhanced rate for the excess quantities of work undertaken during the extended time for completion of the work, the mere fact that the delay in execution of the work was attributable to the department, would not entitle him to claim higher rate for the extra items of work undertaken, by way of compensation. In the absence of any provision, either in the original agreement or in the supplemental agreements, entitling the appellant to make such a claim, the arbitrator cannot be found fault with in declining claim (g). In that view of the matter, the court below also cannot be found fault with in concluding that, there is nothing to find fault with the arbitrator when he declined claim (g) and that, no grounds are made out either to set aside the award or to remit it back to the arbitrator. In the result, we find absolutely no grounds to interfere with the award of the arbitrator and also the judgment and decree of Arb. Appeal No.21 of 2009 16 the court below. The appeal fails and the same is dismissed. No order as to costs. Sd/- **P.R.RAMACHANDRA MENON, JUDGE** Sd/- **ANIL K.NARENDRAN, JUDGE** dsn True copy P.S.to Judge