State of Kerala Vs. E.A Cheriyan Kunju [Kerala High Court, 05-06-1996]

Arbitration Act, 1940 – In this case, the respondent asked for Rs. 2,25,000/- and the arbitrator has granted an amount of Rs. 2,19,678/- making a show of application of mind by reducing the amount by paltry amount of Rs. 5,322/-. This would really show the dishonest way in which the arbitrator behaved while passing the award.

ILR 1997 (1) Ker. 14 : AIR 1997 Ker. 1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

T.V. Ramakrishnan and K.A. Mohamed Shafi JJ.

State of Kerala and another Vs. E.A Cheriyan Kunju

M.F.A. No. 809 of 1995

05-06-1996

Advocates: For Appellant: S.Narayanan Poti. For Respondent: S.Sreekumar

JUDGMENT

Ramakrishnan,J.

1. This is an appeal filed under

Section 39 of the Arbitration Act

(for short, ‘the Act’). As per the impugned judgment, the learned sub-Judge, Thiruvananthapuram has refused to set aside an award passed in favour of the respondents by a sole arbitrator and has passed a decree in terms of the award under Section 17 of the Act. The State of Kerala and the Superintending Engineer, Kallada Irrigation Project (Right Bank) Circle, Kottarakkara are the appellants. The sole respondent in the appeal is the Contractor in whose favour the decree has been passed in terms of the award.

2. The appellants have entrusted to the respondent the work of Kallada Irrigation Project (K.I.P.)-RBC-SBC-Lining the Ivarkala Distributory No. 1 from Ch. O to 4085 m. Sub-channel No. 1 from Ch. O to 3300 m and channel No. 11 from Ch. O to 2140 m pursuant to Agreement No. 27/SE/KP/85-86 dated 10-2-1986. Certain disputes and differences arose between the contracting parties in the execution of the above work. In view of the provisions contained in Clauses 51 and 52 of the Local Competitive Bidding Specification (for short ‘LCB’ specification) forming part of the agreement, those disputes and differences were referred to a sole arbitrator with the consent of both parties. The arbitrator accordingly entered on reference received statements as pleadings from the parties, took evidence from both sides and passed and published his award on “23-6-1993. The arbitrator has filed the award in court on 1-7-1995. On filing the award in Court, suo motu proceedings were initiated under Section 17 of the Act. The respondent contractor prayed for a decree in terms of the award. The appellant on the other hand filed a detailed objection and prayed for setting aside the award under Section 30 of the Act. The learned sub-Judge has overruled the objections and has passed a decree in terms of the award except in respect of the rate of interest and granting interest on the amount awarded at 16.5% per annum from 23-12-1988 till 23-6-1993 and 12% from 1-7-1993 to the date of the decree and 9% thereafter till payment.

3. Some more facts are relevant and necessary and can be stated thus : Regarding certain factual details of the case, there is no dispute and they can be stated first : The tender for the work in question was one invited in accordance with LCB specification. The P. A. C. (Probable Amount of Contract) shown in the tender notification was Rs. 6,80,230/-. The respondent submitted his tender on 27-12-1985 with the increased P. A. C. of Rs. 9,10,500/-. The tender as submitted by the respondent was accepted and selection notice was issued on 30-1-1986. The original agreement entrusting the work of the respondent on the basis of his tender was executed on 18-2-1986. The period of the works was 5 months from the date of issue of work order. The work order was issued on 7-3-1986. As per records, the initial levels seems to have been finalised by the Executive Engineer (E. E.) only on 12-9-1986. It was approved by the Superinteding Engineer (S. E.) on 29-3-1987. As the work was not completed in time, the period of completion was extended on three occasions as per three supplementary agreements executed between the parties till 30-6-1987. Supplementary agreement Nos. 1, 3 and 4 were agreements executed only for the purpose of extending the period from time to time. They were respectively executed on 30-9-1986, 31-1-1987, and 8-6-87. All extensions were for a period of three months each. On 30-9-1986, supplementary agreement No. 2 was executed entrusting certain extra items of work for a like amount of Rs. 2,34,968/- at the rates mentioned therein. The respondent ultimately abandoned the work with effect from 31-3-1987. Thereafter, the contract was terminated on 1-3-1988, as per the order passed by the S. E. The work was thereafter completed by entrusting it to a new contractor at the cost of the respondent. It is the common case of the parties that substantial quantity of work was carried out before the work was abandoned, though there is dispute regarding the exact extent of the work done. According to the appellants, work done will only be about 75%. But, according to the respondent, it is 90%. There is no dispute regarding the quantity of cement supplied and the part payment made to the respondent as indicated In the schedule given below :

Sl No. Date Quantity of cement in bags
1. 12-3-1996 600
2. 8-4-1986 600
3. 23-4-1986 400
4. 13-6-1986 400
5. 30-6-1986 400
6. 22-7-1986 600
7. 20-7-1986 -70 (Transferred 70 bags as per departmental order to a different work site)
8. 22-8-1986 400
9. 8-10-1986 600
10. 17-10-1986 400
11. 4-11-1986 600
12. 21-11-1986 600
13. 1/1987 400
14. 3/1987 400
15. 3/1987 400
16. 9/1987 350
7150-70
7080

Details of part payment indicating the quantity of cement used and earth removed

Sl.Number Particulars of part bills Total amount of bill Quantity of cement treated as used and materials value including that of cement Cheque amount after deducting all recoveries Rs. Quantity of earth removed
1 2 3 4 5 6
1 CC I & part/
22-3-1986
76,708 575 bags 19,800 52,155 605 cubic metre
2 CC II & part/
30-9-1986
3,49,606 2715 bags 55,148 2,30,289.60 1406 cubic metre
3 CC III &part/
26-12-1986
1,82,308 1536 bags 75,742 84,577.45 606 cubic metre
4 CC IV & part/
3-3-1987
67,164 560 bags (No recovery) 65,542 505 cubic metre
5 CC V & part/
27-3-1987
87,341 647 bags 26,400 59,001 659 cubic metre
Total 7,63,127 6033 bags 1,77,090 4,91,565.05 3781 cubic metre

4. The nature of the work entrusted as detailed in the schedule attached to the original agreement can generally be indicated thus; (1) Clearing grass and over-growth of vegetation and small trees and removal of rubbish up to a distance of 150 meters etc. outside the periphery of the area cleared; (2) Earth work excavation in the classes of soil (silt clearance) from the bottom of the canal and depositing the spoil on bank or at places pointed out by the Engineer in charge; (3) Earth work filling with suitable earth available from silt clearance and lining excavation; (4) Supplying and laying 100 micron LDPE Black heavy duty film of suitable width; (5) Lining the bottom and sides of the canal with vibrated cement concrete; (6) Plastering with cement mortar 1:3:9 mm. thick over lining concrete floated hard and trowelled smooth adding scot No. 1 water proofing compound 2% by weight of cement; (7) Forming transverse contraction joints wherever necessary filled with bitumen mastic filler etc. The extra works entrusted as per supplementary agreement No. 2 were stripping benching or treching and preparing the foundation of embankment by removing objectionable soil, earth work filling with suitable earth cut and conveyed from borrow pit etc., Turfing the slopes of embankment with sods including trimming, dressing and all leads and lifts, and Trimming dressing and sectioning canal bed and side slopes to receive the lining as per specification. The schedules attached to the original agreement would indicate that the machineries necessary and shown as readily available with the contractor are Cement Mixtures, Pump Sets and other small tools. The materials to be supplied by Government are Cement. Bitumen and Water Proofing compound (free of cost).

5. On abandoning the work, the contractor has put forward claims for various amounts under different heads alleging that as a result of abnormal delay in finalising and approving the initial levels, supply of departmental materials, non-availability of departmental staff to supervise the work, entrustment of additional extra works, non-measurement of work done and non-payment of amount for such works, draught and blockage of money due to him on the basis of the orders of the S. E., K. I. P. Circle, Quilon. The work got considerably protracted resulting in huge loss to him for which the department alone is responsible. The respondent has alleged that in spite of such defaults and omissions on the part of the department, he has completed 90% of the work. He was disabled from completing the work due to non-payment of value of the work done and non-sanctioning of sufficient time for com-petition. Though all authorities subordinate to S. E. has recommended sanctioning of extension of the period, the S. E. has refused to extend the period and has passed orders terminating the contract illegally. The claims put forward by the respondent were rejected and thereafter the respondent has sought for appointment of an arbitrator in accordance with the terms contained in LCB specification. Pursuant to the request of the respondent, originally, the sole arbitrator was appointed on 23-12-1988. However, the said arbitrator for his own reasons returned the records to the Chief Engineer, K. I. P., Kottarakkara and thereafter the present arbitrator who has passed the award was appointed on 12-7-90. Before the arbitrator, the respondent has put forward in paragraph 12 of his claim statements, claims (a) to (r), under various heads. In support of his claims, the respondent has produced Exts. C1 to C34 documents. On their side, the appellants have produced Exts. R 1 to R 8 and certain other documents in response to the directions issued by the arbitrator apart from producing the original as well as supplementary agreements and the correspondence file kept in connection with the work entrusted to the respondent. No oral evidence was adduced by the parties before the arbitrator. The arbitrator has conducted an inspection of the site on 23-1-93 along with parties. In the award, the arbitrator has specifically referred to the documents and papers submitted by both parties before him specifically in the introductory part of the award. Before the arbitrator, the appellants have disputed the right of the contractor to get any amount as claimed in the claim statement. They have in the objection filed made a counter claim alleging that it was only due to the default or neglect of the respondent that the work was not completed within the time originally fixed and extended from time to time till 30-6-1987. The appellants have justified the action of termination of the contract and completing the balance work by entrusting the work to a new contractor at the cost of the respondent. The appellants have also raised a counter claim against the respondent. Preliminary objection regarding the jurisdiction of the arbitrator to conduct the proceedings and to pass an award was also raised on the basis that the original appointment of the arbitrator itself was beyond the time specified in Clause 52 of the LCB specification and as such bad in law.

6. The arbitrator was bound and has passed a reasoned award. As per the award, even before going into the different claims, the arbitrator has rejected the preliminary objection and upheld the validity of the order appointing the arbitrator and his jurisdiction to conduct the proceedings and pass the award. The arbitrator has fully allowed claim (m), partly allowed claim Nos. a, c, g, h, o, p, q and rejected in full the claim Nos. b, d, e, f, i, j, k, l, n, r as per the award in question. The counter claim put forward by the appellant was also rejected based upon the award passed with reference to the claim (m).

7. Before the learned Sub Judge, the appellants have prayed for setting aside the award alleging that the sole arbitrator has misconducted himself and the proceedings. It was also submitted that the award is liable to be set aside on the ground of errors apparent on the face of the award. Further, they have also contended that the rejection of the preliminary objection by the arbitrator is illegal.

8. The learned Advocate General Shri S. Narayanan Potti has before us reiterated all the contentions raised by the appellants before the learned Sub Judge. In support of the contention that the decree and judgment under appeal are liable to be set aside as unsustainable in law. On behalf of the respondent, learned Counsel Shri S. Sreekumar has fully supported the award and decree passed in favour of the respondent.

9. Before considering the merits of the separate awards passed on various claims by the arbitrator and made part of the decree, we may proceed to consider the sustainability of the preliminary objection.

10. As already indicated, the preliminary objection raised was that since the arbitrator in this case was originally appointed beyond the time specified in Clause 52 of the LCB specification which exclusively governs the matter, his appointment is bad and he has no jurisdiction to conduct the proceedings and to pass an award. The relevant part of Clause 52 of the LCB specification is as under: ;