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CASE NO.:

Appeal (civil) 5489-5490 of 1995

PETITIONER:

Bharat Coking Coal Ltd.

RESPONDENT:

L.K. Ahuja

DATE OF JUDGMENT: 12/04/2004

BENCH:

S. RAJENDRA BABU & BHAN.

JUDGMENT:

JUDGMENT

RAJENDRA BABU, J. :

In respect of certain contracts of work assigned

by the appellant certain disputes having been arisen,

the matter was referred to arbitration. Two awards

were made and the same were filed in the court of the

Civil Judge in two Title (Arbitration) Suits Nos. 37/86

and 40/86. By a common order, the trial court made

the awards rule of court in entirety and decrees were

drawn in terms thereof. An appeal was filed against

the said common order before the High Court. The

High Court having dismissed the said appeal, the

matter was carried to this Court.

On February 21, 2001 by an order made by this

Court, the awards were set aside after quashing the

orders made by the High Court and the trial court and

the matter was remanded to the arbitration for a fresh

consideration of all points by appointing a new

arbitrator Shri Justice Uday Sinha, former Judge, High

Court of Patna. He made an award and on

25.01.2002 sent the copies of the award and on

12.02.2002 minutes of the proceedings before the him

to the Court. Report in this regard was placed before

this Court on 18.02.2002, copies of which were served

upon the concerned advocates. Objections to the

award and application to set aside the award have

been filed on 11.04.2002. Now, an objection is raised

on behalf of the respondents that the application filed

for setting aside the award in terms of Article 119(b)

of the Limitation Act should have been filed within a

period of 30 days from the date of filing of the award

into the Court; that inasmuch as the office report had

been served upon all the parties, it must be deemed

that the said office report gives sufficient notice of

filing of the award in the Court; that the period of

limitation of counting 30 days commenced on

18.02.2002; that, therefore, the objections filed on

11.04.2002 are hopelessly barred by limitation. It is

further submitted that the Court itself may order a

notice of filing of the award or even the Registry can

take steps to issue such a notice and reliance is placed

on certain decisions of this Court as to how in

situations of this nature 30 days limitation period is to

be computed in Indian Rayon Corporation Ltd.

vs. Raunaq and Company Pvt. Ltd., 1988 (4) SCC

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31; Food Corporation of India & Ors. vs. E.

Kuttappan, 1993 (3) SCC 445, and State of Bihar

vs. Hanuman Mal Jain, 1997 (11) SCC 40. In our

view, none of these decisions can have any

application to the situation arising in the present case.

The office report was prepared on 18.02.2002

and the matter was listed before this Court on

11.03.2002 when this Court ordered that "call after

four weeks". On 02.04.2002 the learned counsel for

the respondents filed a separate application in both

the appeals under Section 17 of the Arbitration Act,

while on 11.04.2002 the appellant filed an application

under Section 15 read with Section 30 of the

Arbitration Act raising objections to the passing of

decree in terms of the award.

Article 119(b) of the Limitation Act has been

enacted to fix a definite time limit within which the

validity of the award can be challenged after the

award is filed in the court. The said provision

prescribes a period of limitation of 30 days for making

an application after the required notice regarding filing

of the award in the court is given to the parties. If

there is no material to show that a notice of filing of

the award has ever been given to the parties, any

period of limitation as prescribed in Article 119(b)

loses its significance. The law is clearly to the effect

that mere knowledge of passing of an award is not

enough. The period of limitation will commence as

provided in Article 119(b) of the Limitation Act only

upon notice as to filing of the award in the court has

been given to the parties concerned.

In the present case the situation has arisen in

very special features. This Court made an order

appointing a new arbitrator who was directed to file an

award in the Court and he submitted the award in the

Court after publishing the same to the parties. Though

on 18.02.2002 the Registry notified the submission of

the award in the Court by way of an office report, but

the same cannot be treated to be in the nature of a

notice. The noting made by the Registry in the office

report merely brought to the notice of the Court as to

what had transpired and as the matter was being

listed before the Court, a copy was served upon the

parties concerned. It is only thereafter it can be said

that the Court directed issue of notice to the parties

regarding filing of the award which has been sent by

the Registry. The Registry on its own could not have

issued a notice without a direction from the Court in

this regard. In that view of the matter, we do not

think, there is any notice of filing of the award in the

Court to the parties as contemplated in Article 119(b)

of the Limitation Act. Further, on 11.03.2002 when

the matter was listed before the Court, the parties

concerned took notice of the same and thereafter,

objections have been filed by the parties. In these

circumstances, we think that the first contention

urged on behalf of the respondents that the objections

raised by the appellant are barred by limitation is

incorrect and the same stands rejected.

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In the view we have taken, it is unnecessary to

refer to the various decisions relied upon by the

learned counsel for the respondent.

Further, it may be useful to refer to one decision

of this Court, which was not cited by either party, in

which the effect of non-service of notice was

considered by this Court. In Dewan Singh vs.

Champat Singh & Ors., AIR 1970 SC 967, it is

observed by this Court "that if a party files an

objection before the service of notice, the question of

limitation does not arise at all. But also in the

absence of clear proof to the effect that notice of the

filing of the award had ever been given to the

applicant, application filed by him cannot be rejected

on the ground of limitation."

Originally, though the respondent had made

large claims totalling to a sum of Rs. 78,41,350.00,

the same got slashed to Rs. 32,03,755.10p. Now, the

subsisting claims are :-

"Claim No. Rs.

1. Payment of final bill 2,18,862.42

2. Payment of P.O.L. escalation 18,417.31

3. Compensation for making late

Payment of running account bill 3,75,500.00

4. Payment of labour escalation 2,66,321.55

5. Refund of sales tax 35.050.95

6. Payment of extra items 8,77,115.82

7. Payment of material escalation 4,12,487.46

8. Keep back account N I L

9. Payment of compensation to loss

arising out of turn over due to

prolongation of work 10,00,000.00

-------------------

Total 32,03,755.10

-------------------"

The arbitrator took notice of the fact that the

difference in the original claim and the subsequent

claim is to the order of Rs. 45,62,376/- which casts

serious doubt as to the nature of the claim and the

veracity of quantum of the claim.

Out of the claims mentioned above, Shri Mukul

Rohtagi, learned Additional Solicitor General who

appears for the appellant, did not contest the award

made by the arbitrator in respect of claim Nos. 2 and

3. However, serious contest has been raised in regard

to interest awarded by the arbitrator.

There are limitations upon the scope of

interference in awards passed by an arbitrator. When

the arbitrator has applied his mind to the pleadings,

the evidence adduced before him and the terms of the

contract, there is no scope for the court to reappraise

the matter as if this were an appeal and even if two

views are possible, the view taken by the arbitrator

would prevail. So long as an award made by an

arbitrator can be said to be one by a reasonable

person no interference is called for. However, in

cases where an arbitrator exceeds the terms of the

agreement or passes an award in the absence of any

evidence, which is apparent on the face of the award,

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the same could be set aside.

The learned Additional Solicitor General

submitted that in the present case the arbitrator found

that there was delay in execution of the contract of

work for which both the parties were liable and

apportioned the same between them without clearly

examining whether there was any material for that

claim at all. His contention is that there is absolutely

no evidence to sustain any of the claims and in the

absence of the same, it is not permissible for the

arbitrator to have made the award.

Shri V.A.Mohta, learned Senior Advocate

appearing for the respondent, submitted that the

material on record clearly indicated that there were

certain joint statements before the arbitrator and they

were all based on the measurement books or other

material and if that piece of material is treated as

evidence, there cannot be serious doubt that the view

taken by the arbitrator is justified and no interference

would be call for.

On the first claim regarding non-payment of the

final bill, reliance was placed by the parties before the

arbitrator on a joint statement and the entries made

in the measurement book. On the question whether

reliance could be placed on the joint statement, the

arbitrator held that he cannot attach any

conclusiveness to the joint statement. However, he

would examine the claims on their intrinsic merit.

One of the contentions raised was that the final bill

had been fully paid inasmuch as 13th and 14th running

account bills having been passed, the arbitrator relied

upon a letter sent on 14.3.1986 by Sri Srinathan,

Deputy Chief Engineer [Civil] that the final bill had not

been paid and that clinched the matter in favour of

the claimant. Thereafter having held that the final bill

is yet to be paid, he proceeded to examine the

quantum of the same. The final bill disclosed that as

per the agreement, the value of the work is

Rs.86,43,730/- as against this amount, the actual cost

of the work was Rs.90,46,842.14, out of which a sum

of Rs.89,97,311.12 had been paid. Thus a balance of

Rs.49,531/- had not been paid. Therefore, he held

that this part of the claim is allowed.

In addition to this, he also stated that certain

work had been done by him by way of extra works

and made a claim of Rs.91,013.72. There is a

separate claim made by the claimant under claim No.6

as claim for extra work done. Claim made therein is

to the extent of Rs.1,02,350/-. On this aspect of the

matter, the contention advanced on behalf of the

appellant is that separate claim for extra works of

items under claim No.6 includes the claim of

Rs.91,013.72 and the claim for extra items of work

can be made only on the written order of the

Engineer-in-Charge in terms of clause 11 of the

agreement and, therefore, the contractor will not be

entitled to make any claim unless he has received

such an order for substituted or altered work in terms

of clause 11 of the agreement. On this aspect while

dealing with the claim for extra works under claim

No.6, the arbitrator adverted to the decision of this

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Court in State of Bihar & Ors. vs. Hanuman Mal

Jain, 1997(11) SCC 40, wherein this Court interpreted

a similar clause as laying down the procedure as to

how a claim could be lodged and not to oust the

jurisdiction of the arbitrator in deciding the dispute on

merits. It is not clear from the pleadings raised on

behalf of the appellant before the arbitrator whether

the claim covered by the final bill as extra items to the

tune of Rs.91,013.72 is included in the extra item of

works which had been rejected by the arbitrator. The

arbitrator adverted to this aspect of the matter while

deciding claim No. 6 and held that out of the claim of

Rs.1,02,517/-, Rs.11,503/- had been paid leaving a

balance of claim of Rs.91,013/- which has been clearly

allowed by him while consider claim No.1 regarding

non-payment of final bill and having claimed

Rs.91,013.72 which had been allowed by him the

contractor could not once again claim the same

amount under another head and the arbitrator

rejected this claim on two grounds, namely, that there

is no order in writing by the Engineer-in-Chief and

secondly even if it had been executed, it had been

paid for. The contention put forth on behalf of the

appellant that there is absolutely no material to make

a claim by the contractor in this regard cannot be

accepted because these extra items have been

mentioned in the measurement book and which

clearly indicated that the work had been executed and

he treated that the entry in the measurement book

will itself amount to order in writing in terms of clause

11 of the agreement and, therefore, allowed the

claim. In these circumstances, it cannot be said that

the item claimed for extra works referred to in the

final bill is the same as the claim under claim No.6 for

extra works wherever such a situation has arisen the

arbitrator has examined the same, say for example, in

regard to petrol, oil and lubricant, he has separately,

treated the same. If appropriate pleadings had been

raised, the arbitrator would have certainly considered

this aspect and in the absence of the same we think

that the view taken by the arbitrator in this regard

cannot be interfered. Only two items which had been

allowed by the arbitrator which have been adverted to

by us as a sum of Rs.49,513.02 which was still to be

paid and a sum of Rs.91,013.72 as extra items of

works which was disclosed in the measurement book.

Therefore, we find no infirmity on this aspect of the

claim.

Claim Nos. 2 and 3 not having been disputed

before us, we now proceed to consider claim NO.4.

The arbitrator considered various aspects made under

this head for claim for payment of labour escalation.

The arbitrator took the view that the appellant alone

was not responsible for prolongation of the works and

there were lapses on the part of the contractor as well

and both were responsible for the delay. The

arbitrator, after into consideration that there was

definitely a escalation between April 1983 and April

1984 in regard to wage bill of the claimant, took the

view that as against a claim of Rs.2,66,343/- awarded

a sum of Rs.1,30,000/-. When on the basis of the

pleadings and overall view of the situation arising as

to the rise in the cost of wages, having awarded a

lumpsum amount under this head, we do not think it

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is necessary to interfere with the award on this aspect

of the matter.

The claim for refund of sales tax in a sum of

Rs.35,050/- has been upheld by the arbitrator on the

basis that in terms of a notification issued by the

Government which lays down that if the works had

been handed over prior to 1.4.1984, sales tax was not

leviable but the works having been executed on

31.5.1984, it cannot be said that the terms of the

notification had been complied with and, therefore, no

claim could have been made by the claimant and,

therefore, an award of Rs.35,050/- based on the

notification dated 19.2.1985 would not be correct and,

thus, this amount of award in a sum of Rs.35,050/-

stands allowed. There is a clear error apparent on the

face of the award in having allowed this claim by the

arbitrator.

Claim No. 6 consists of four items. So far as the

first item regarding extra work is concerned, the claim

has been rejected by the arbitrator which we have

adverted to while considering claim no. 1 under final

bill. The second item under this claim relates to watch

and ward expenses. The arbitrator, after examining

various aspects of the matter, took the view that the

expenditure over watch and ward staff could not be

more than Rs.10,000/- per month for 14 months and

the bill on that account would come down to

Rs.1,40,000/-. However, taking all the factors in

respect of this claim, the expenditure under this head

would not come to more than Rs.84,000/- for the

whole period and taking a lenient view of the matter,

the arbitrator awarded a sum of Rs.1,25,000/- under

this head.

The arbitrator considered the fact that the

appellant took possession of the quarters for two days

on 30.4.1984 and 1.5.1984 to accommodate

delegation for the All-India Labour Union Congress but

it was not in dispute that the same was handed over

after a couple of days. Thereafter the quarters were

allotted to employees in stages and actual delivery of

possession was made on 10.3.1986. While the

arbitrator considered that the claim on account of

watch and ward to the tune of Rs.7,09,000/- is

fantastically high and in the written submissions it had

been claimed that the building had to be maintained

at a cost of Rs.5,500/- per month, he doubts as to

whether the claimant had retained any watch and

ward staff to the extent of 18 members, he held that

three watch and ward staff would have been enough

and the period for which the same had been

maintained comes down to 18 months and with

reference to the pleadings raised in this Court on

earlier occasion took note of the fact that possession

had not been given since April 1984. Therefore, he

reduced the period to 14 months. He rejected the

claim that for the whole period from April 1986 it had

retained the services of plumber, electrician,

carpenters, supervisory, etc. and watch and ward staff

and he held that the flats were not in such a condition

that the appellant could have taken possession and,

therefore, the entire claim cannot be justified. Having

taken into consideration the fact that the watch and

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ward staff could be three, he awarded a sum @

Rs.10,000/- per month for 14 months.

The learned Additional Solicitor General

submitted that there is absolutely no basis for

awarding this item as no material had been placed

before the arbitrator. We cannot say that in assessing

such a situation, the arbitrator has exceeded his

jurisdiction or that there was no material at all before

him in assessing the situation that there was some

delay in handing over the flats and watch and ward

had to be maintained, he has awarded for a reduced

period of 14 months @ Rs.10,000/- per month.

Therefore, we cannot hold this conclusion as suffering

from an error apparent on the face of the award.

Next two items regarding rolling margin and

refund of security deposit had been rejected by the

arbitrator and, therefore, do not require any

consideration.

On the question of material escalation, the

arbitrator considered the claim made in a sum of

Rs.4,12,487.46 under this head. The arbitrator took

note of the situation that it was not the contention of

the appellant that the material referred under this

head had not been used for the completion of the

project but having secured a sum of Rs.17,70,085/-

by way of advance, the escalation would get off-set by

the advance paid and further running accounts

payments had been made from month to month which

must have taken into consideration the rise in prices.

He held that there was no evidence on record as to

the nature of the purchases made by the claimant

during the extended period although some purchases

had been made attracting escalation in the prices.

Secured advance was only made to the extent of 60 to

75%. Therefore, he held that 25% of the escalation

has to be compensated on that basis and allowed half

of the claim of the contractor. When there was no

dispute as to the fact that materials had been used for

the purpose of the project and the value thereof, the

claim made by the appellant having been duly

examined by the arbitrator and after giving due

allowance to the advances that have been made the

award made by the arbitrator cannot be stated to be

as one suffering from any error apparent on the face

of the award. Therefore, this conclusion also cannot

be interfered with.

Claim No. 8 has been rejected by the arbitrator.

Now we proceed to consider claim No. 9 for loss

arising out of turnover due to prolongation of work.

The claim made under this head is in a sum of Rs.10

lakhs. The arbitrator rightly held that on account of

escalation in wage and prices of materials

compensation was obtained and, therefore, there is

not much justification in asking compensation for loss

of profits on account of prolongation of works.

However, he came to the conclusion that a sum of

Rs.6,00,000/- would be appropriate compensation in a

matter of this nature being 15% of the total profit

over the amount that has been agreed to be paid.

While a sum of Rs.12,00,000/- would be the

appropriate entitlement, he held that a sum of

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Rs.6,00,000/- would be appropriate. He also awarded

interest on the amounts payable at 15% per annum.

Here when claim for escalation of wages bills and

price for materials compensation has been paid and

compensation for delay in the payment of the amount

payable under the contract or for other extra works is

to be paid with interest thereon, it is rather difficult for

us to accept the proposition that in addition 15% of

the total profit should be computed under the heading

'Loss of Profit'. It is not unusual for the contractors to

claim loss of profit arising out of diminution in turn

over on account of delay in the matter of completion

of the work. What he should establish in such a

situation is that had he received the amount due

under the contract, he could have utilised the same

for some other business in which he could have

earned profit. Unless such a plea is raised and

established, claim for loss of profits could not have

been granted. In this case, no such material is

available on record. In the absence of any evidence,

the arbitrator could not have awarded the same. This

aspect was very well settled in Sunleyn (B) & Co.

Ltd. vs. Cunard White Star Ltd., [1940] 1 K.B. 740,

by the Court of Appeal in England. Therefore, we

have no hesitation in deleting a sum of Rs. 6,00,000/-

awarded to the claimant.

So far as interest that is payable is concerned,

the arbitrator has appropriately considered the same

and no real objection can be raised in this regard. As

regards arbitration costs also there cannot be any

serious dispute. Therefore, except for the sums

coming under the heading No. 5, that is, Refund of

Sales Tax and claim for payment of losses arising out

of turn over due to prolongation of work, other part of

the award having been upheld by us, the award made

by the arbitrator shall stand modified accordingly.

In similar terms in respect of second contract,

for the very reasons stated in this part of the order,

we disallow the claim for refund of sales tax and

compensation for losses arising out of on account of

prolongation of work. In other respects, we maintain

the award made by the arbitrator.

The civil appeals stand disposed of in the

aforesaid terms.