CHANDIGARH CONSTRUCTION CO. PVT. LTD versus STATE OF PUNJAB & ANR. on 14 February 2020

[2020] 2 S.C.R. 825

CHANDIGARH CONSTRUCTION CO. PVT. LTD.

v.

STATE OF PUNJAB & ANR.

(Civil Appeal Nos.867-870 of 2013)

FEBRUARY 14, 2020

[R. BANUMATHI AND A.S. BOPANNA, JJ.]

Arbitration Act, 1940: Award by arbitrator – Claimant-contractor and opposite party entered into an agreement forconstruction of Sutlej Yamuna Link Canal and in that regard tocarry out earth work, drainage behind lining and cement concretelining – Estimated cost of project was Rs.31 lakhs and contractamount for the work was fixed at Rs.59.86 lakhs – Claimant raiseddemand for additional payment on the ground that during execution,the scope of work was considerably increased on account of variousdecisions by department regarding rebuilding of river banks andchanges in the strata encountered during excavation due to incorrectgeological data observations by department prior to inviting tender– Demand of additional payment led to arbitral dispute – Arbitratoraccepted claim and passed award with 18% interest – Awardpresented before Sub-judge for making ‘rule of court’ – Oppositeparty filed objection that no reason was indicated for giving theaward – Sub-judge accepted the objection to the extent of rejectionof Claim no.1 and reduction of interest to 12% p.a. and in otherrespects the Award was made ‘Rule of Court’ – First appellate courtrejected the claim in toto taking note of Clause 39 of the ContractAgreement which provided that the contractor was required to deliverin the office of the Executive Engineer every month duringcontinuance of the work, the return showing details of extra workdone with value of such work and if the details are not indicated, itshall be deemed that the contractor has waived all claims notincluded in such returns and will have no right to enforce any suchclaim not so included – In that light since the claim was ultimatelyfound as not included in the monthly statement, the First AppellateCourt held that the requirement of the conditions of the contractwas not adhered to and set aside the Award of the Arbitrator – HighCourt also took note of Clause 39 of the contract and declined the

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Aclaim except claim no.1 – In the instant appeal, it was contended byappellant-claimant that Note 6 to the schedule of work which formeda part of the contract provided that extra or other items of workshall be paid at the rate worked out on the basis of relevant PunjabCommon Schedule of Rates Basis Plus Sanctioned Premium at thetime of tendering – The difference between the estimated cost ofBRs.31 lakhs and contract amount of Rs.59.86 lakhs was thesanctioned premium which corresponded to the overall premium of93.12% on the work for computing the rates of extra items/quantityor work done – Insofar as the remaining claims, 93.12% wouldbecome applicable – It was contended that when the contractCagreement is explicit insofar as the value and the difference beingthe sanctioned premium and the percentage being evident at 93.12%,the decision of the Arbitrator not indicating any further reasons inthe Award would not be fatal – Opposite party (State of Punjab),referred to Clause 63 of the contract which provides for referenceof the disputes to arbitration – The said clause specified theDrequirement that all Awards shall be in writing and in case of awardsamounting to Rs.1 lakh and above, such Award shall state the reasonfor the amount awarded – Held: The quantum of the contract amountas against the estimated cost by itself could not have formed thebasis to conclude the claim as made by the claimant towardsEsanctioned premium – Claim No.8 related to the work carried outon Daldal land wherein the soil was marshy and extra constructionmaterial was required to complete the work – Arbitrator awardedRs.19.15 lakhs after indicating the amount for the said work on thesame basis and deducting the agreed rate – Clause 39, no doubt,prescribes a method by which the claim is to be put forth in theFstatement every month – The said requirement will have to beconstrued as being put in the agreement so as to ensure that theadditional work has actually been done, the claim is put forth alongwith details so that baseless claim is not made at a distant point intime when it will not be possible to determine – Though the ClauseGalso indicates that if such claim is not made, it would amount towaiver, in a circumstance where the claim is ultimately put forth inthe forum where an adjudication is made and based on the materialif the adjudicating authority is satisfied that the actual work hadbeen done and the contractor being entitled to the extra amountspent by him to carry out the work in an appropriate manner, itH

would not be just and proper to deny such claim only on the groundthat it had not been indicated strictly in the manner as provided inthe contract specially keeping in view the nature of work undertaken– When the fact remains that the Daldal land was situated in thearea, work was carried out and extra material was used, the claimcannot be rejected outright adopting a technical view of the matter– However, the claim for the extra item will have to be calculatedwith premium at the same rate of 35.02% over and above the agreedrate and not at 93.12% – Regarding Claim No.16, no reason tointerfere with the impugned orders – Further with regard to theinterest sought under Claim No.18 in the absence of agreement withregard to the rate of interest, the interest as awarded by the Arbitratorwas on the higher side and the First Appellate Court was justifiedin reducing the same to 12% p.a. – Claimant is entitled to the claimfor extra items as put forth under Claim Nos. 2, 3, 8 and 12 byworking out the difference of cost on the tender premium at 35.02%– On arriving at the quantum of the amount, the same shall bepayable with interest at 12% p.a. in the manner as ordered by theFirst Appellate Court – Claim No.1 ordered by the High Court issustained.

Partly allowing the appeals, the Court

Conclusion

Partly allowing the appeals, the Court

HELD: 1. The First Appellate Court as also the High Courtwas correct to arrive at the conclusion that the claim as put forthby the claimant in respect of Claims No.2, 3 and 12 at the premiumof 93.12% worked out only on the basis of difference of the amountbetween the estimated cost and the contract amount is notjustified. However, in that circumstance when the Arbitrator hasnot assigned any reasons but had unilaterally in a cryptic fashionawarded the claim at the premium of 93.12% and when the samewas disapproved as not sustainable, the appropriate course inthe normal circumstance ought to have been to set aside theAward and remit the matter to the arbitrator to make a freshconsideration to determine the percentage of premium at whichthe claim for the extra items would be sustainable, moreparticularly in a circumstance where the additional work carriedout was not in serious dispute but the premium for rate of paymentwas to be determined. The said course would be open even atthis stage, but in the instant case, the claim was under the Act, AB

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A1940 in respect of agreement dated 05.12.1985 and the claimbefore the Arbitrator itself was of the year 1994. In thatbackground, a perusal of the consideration as made by the FirstAppellate Court would indicate that it does not refer to the claimthat was admissible after working out the percentage of premiumthat is applicable. It has only arrived at the conclusion that theBworking out of the premium at 93.12% in respect of the extraitems on Claim Nos.2, 3 and 12 are set aside. The First AppellateJudge ought to have arrived at the conclusion of the admissibleclaim and in that regard a conclusion ought to have been reachedinstead of rejecting the claim outright since the course to remandCthe matter to the Arbitrator was not adopted. Instead of rejectingthe entire claim as made by the claimants, premium for the extraitems is to be determined at 35.02% and the claim based on thesame is required to be awarded. To that extent, the calculation isto be made by the opposite party and the amount be paid to the claimant. The said calculation with the premium at 35.02% shallDbe made in respect of the extra items indicated under ClaimNos.2, 3 and 12. [Paras 14-16][838-C-H; 839-A-C]

2. Insofar as the Claim No.8, it relates to the work carriedout on DALDAL land wherein the soil was marshy and extraconstruction material was required to complete the work. TheEArbitrator through the impugned Award had taken note of thesame and awarded the sum of Rs.19,15,143/- after indicting theamount for the said work on the same basis and deducting theagreed rate. Though the Sub-Judge had accepted the same formaking it the ‘Rule of Court’, the First Appellate Judge on takingFnote of the claim had arrived at the conclusion that the Arbitratorwas not justified in granting the claim. In that regard, the FirstAppellate Court had taken note of Clause 39 of the ContractAgreement wherein a provision was made for extra items. Thesecond paragraph therein which provides for the manner in which the contractor is required to submit the returns of the workGclaimed for extra items was referred to. The said requirementindicated that the contractor shall deliver in the office of theExecutive Engineer on or before the 10[th] day of every monthduring continuance of the work, the return showing details of anywork claimed for extra, and such return shall also contain theH

value of such work as claimed by the contractor. If the details arenot indicated, the Clause indicates that it shall be deemed thatthe contractor has waived all claims not included in such returnsand will have no right to enforce any such claim not so included.In that light since the claim was ultimately found as not includedin the monthly statement, the First Appellate Court was of theopinion that the requirement of the conditions of the contractwas not adhered to and, therefore, set aside the Award of thesaid amount by the Arbitrator and the same claim being made‘Rule of Court’ by the Sub-Judge was also set aside. The HighCourt while adverting to this aspect of the matter has held thatinsofar as the amount sought under Claim No.8 the question isnot whether the petitioner undertook this work but whether thepetitioner raised any claim for this extra amount in terms withthe contract. The High Court has also taken note of Clause 39 ofthe contract and has declined the claim. [Para 17][839-C-H; 840-A]

3. Clause 39 of the Contract Agreement no doubt prescribesa method by which the claim is to be put forth in the statementevery month. The said requirement will have to be construed asbeing put in the agreement so as to ensure that the additionalwork has actually been done, the claim is put forth along withdetails so that baseless claim is not made at a distant point intime when it will not be possible to determine. Though the Clausealso indicates that if such claim is not made, it would amount towaiver, in a circumstance where the claim is ultimately put forthin the forum where an adjudication is made and based on thematerial if the adjudicating authority is satisfied that the actualwork had been done and the contractor being entitled to the extraamount spent by him to carry out the work in an appropriatemanner, it would not be just and proper to deny such claim onlyon the ground that it had not been indicated strictly in the manneras provided in the contract specially keeping in view the natureof work undertaken. To that limited extent a perusal of the Awardpassed by the Arbitrator would indicate that the Arbitrator hadtaken into consideration the letter dated 14.11.1986 wherein theidentification of soil which was agreed to. The letter dated09.03.1987 submitting the test results identifying the strata AB

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Aencountered as DALDAL is referred therein. The work havingbeen completed during the March, 1988 was also taken note. Inthat circumstance when the fact remains that the DALDAL landwas situated in the area, work was carried out and extra materialwas used, the claim cannot be rejected outright adopting atechnical view of the matter. However, the claim for the extraBitem in that regard for the work of 1,33,181.00/- ‘Cum’ will haveto be calculated with premium at the same rate of 35.02% overand above the agreed rate and not at 93.12% as has been takeninto consideration by the Arbitrator for awarding the amount. The appropriate calculation in that regard shall however be workedCout in such manner so as to award the amount under the saidClaim No.8. Insofar as Claim No.16, there is no reason to interferewith the orders passed by the High Court or by the First AppellateCourt. Further with regard to the interest sought under ClaimNo.18, in the absence of agreement with regard to the rate ofDinterest, the interest as awarded by the Arbitrator was on thehigher side and the First Appellate Court was justified in reducingthe same to 12% per annum and the High Court was also justifiedin not interfering with the same. [Paras 18, 19][840-B-H; 841-A-B]

E4. The claimant is entitled to the claim for extra items asput forth under Claim Nos. 2, 3, 8 and 12 by working out thedifference of cost on the tender premium at 35.02%. On arrivingat the quantum of the amount, the same shall be payable withinterest at 12% per annum in the manner as ordered by the FirstAppellate Court. Claim No.1 ordered by the High Court isFsustained. The said exercise for calculating and paying the amountto the claimants on claim Nos.1, 2, 3, 8 and 12 shall be completedby the opposite party within the period of six weeks from thisdate. [Para 20][841-E-F]

Indian Oil Corporation v. Indian Carbon Ltd. (1988) 3GSCC 36 : [1988] 3 SCR 426; Ispat Engineering andFoundry Works, B.S. City, Bokaro v. Steel Authority ofIndia Ltd. B.S. City Bokaro (2001) 6 SCC 347 : [2001]3 SCR 1190; D.C.M Ltd. v. Municipal Corporation ofDelhi & Anr. (1997) 7 SCC 123; M/s Naraindas R.H

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Israni v. Union of India DRJ (1993) 25; RaipurDevelopment Authority & Ors. v. M/s ChokhamalContractors & Ors. (1989) 2 SCC 721 : [1989] 3 SCR144; Gora Lal v. Union of India (2003) 12 SCC 459 :[2003] 6 Suppl. SCR 1129 – referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 867-870 of 2013.

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From the Judgment and Order dated 08.04.2011 of the High Courtof Punjab and Haryana at Chandigarh in Civil Appeal No. 2958-2961 of2008.

Nakul Dewan, Sr. Adv., Aditya Swarup, Ajay Marwah, RohanNaik, Swaroopananda Mishra, Mukesh Sangwan, Advs. for the Appellant.

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Ms. Uttara Babbar, Ms. Bhavana Duhoon, Manan Bansal, Advs.for the Respondents.

The Judgment of the Court was delivered by

A. S. BOPANNA, J.

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1. The appellant is before this Court assailing the order dated08.04.2011 passed by the High Court of Punjab & Haryana at Chandigarhin Civil Revision No.2958/2008 which was disposed of along with CivilRevisions Nos. 2949, 2960 and 2961 of 2008. Through the said order theHigh Court allowed the Revision in part to the extent of allowing theClaim No.1 of the appellant by modifying the judgment passed by theTrial Court and the First Appellate Court, but insofar as the remainingclaims the judgments passed by the First Appellate Court was affirmed.Consequently, the Award passed by the Arbitrator stood modified to thatextent. The appellant, therefore, is aggrieved to the extent, the remainingclaim of the appellant was rejected. In that view the consideration in the G

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Ainstant appeal pertains to the Claim Nos. 2, 3, 8, 12 and 16 as put forthand also the issue relating to the grant of interest which arose forconsideration under Claim No.19.

2. For the purpose of convenience and clarity the parties wouldbe referred to in the rank assigned to them in the arbitration proceedings.BAccordingly, the appellant herein would be referred to as the claimant,while the respondents would be referred to as the opposite party.

3. The proceedings in question arises relating to an Award passedunder the Arbitration Act, 1940 (‘Act 1940’ for short). The claimant andthe opposite party had entered into a contract agreement dated 05.02.1985Cfor construction of Sutlej Yamuna Link Canal (Punjab) and in that regardto carry out the earth work, drainage behind lining and cement concretelining of Raech RD 71.50 to 72.50 kms. The estimated cost of the projectwas at Rs.31 lakhs and the contract amount for the work was fixedatRs.59,86,732/-. The work concerned was to be executed in eightmonths.D

4. In respect of the said contract, the claimant contended thatduring execution, the scope of work was considerably increased onaccount of substantial increase of earth work, sloughing of banks,rebuilding of banks with self-draining material, various decisions by thedepartment regarding rebuilding of banks and changes in the strataEencountered during excavation due to incorrect geological dataobservations by the department prior to inviting tender. In that view, theclaimant had raised a demand for the additional payment which wasdisputed by the opposite party, which led to an arbitral dispute. Since theagreement provided for resolution of disputes by arbitration the claimantFtook recourse to the same. In that background the claimant had soughtfor additional payment in the claim statement filed before the Arbitrator.The opposite party filed their objections disputing the claim put forth bythe claimant. The learned Arbitrator on considering the rival contentionspassed the Award dated 31.08.1994 and awarded the amount as claimedby the claimant to be paid by the opposite party with interest at the rateGof 18%per annum as also the future interest at 18% per annum from thedate of the Award to the date of payment. As required under Act, 1940thesaid Award was to be made a ‘Rule of Court’ for which purpose theAward was presented before the Court of the Senior Sub-Judge, Ropar.The opposite party filed objections in the said proceedings and contendedHthat the Award passed by the Arbitrator is not sustainable as the Arbitrator had misconducted himself by awarding the amounts which were notpayable as per the contract and the learned Arbitrator had not indicatedreasons for the decision. The learned Sub-Judge through the judgmentand decree dated 21.10.1995 accepted the objections to the extent ofrejection of Claim No.1 and reduction of interest to 12% per annum andin other respects the Award was made the ‘Rule of Court’.

5. The opposite party however continued to remain aggrievedinsofar as the non-interference with regard to other claims and, therefore,filed an appeal before the District Judge, Ropar in Civil Appeal No.9/3110 of 2006. The claimant preferred the cross appeal insofar as therejection of Claim No.1 by the learned Sub-Judge and reduction of interest.The learned District Judge through judgment dated 06.11.2007 rejectedthe cross appeal filed by the claimant and allowed the appeal filed by theopposite party (State of Punjab) and set aside the amount awarded underClaim Nos.2, 3, 8, 12 and 16. The claimant, therefore, contending to beaggrieved preferred the Revision Petitions before the High Court. It is inthe said proceedings the High Court has rejected the remaining claimexcept Claim No.1 as indicated above. It is in that circumstance theclaimant is before this Court in this appeal.

6. Shri Nakul Dewan, learned senior advocate appearing for theclaimant would contend that the First Appellate Court and the High Courtwere not justified in their conclusion to reject the Award passed by thelearned Arbitrator. It is contended that the basis on which the ClaimNo.2 would arise for consideration will be the same basis for the Awardof the amount under Claim Nos. 3 and 12. Even insofar as the ClaimNo.8 the additional amount will have to be calculated on that basis forthe extra items used. In that background, it is contended that under Note6 to the schedule of work which forms a part of the contract, it providesthat extra or other items of work shall be paid at the rate worked out onthe basis of relevant Punjab Common Schedule of Rates Basis PlusSanctioned Premium at the time of tendering, which is to be worked out.In that light it is contended that the estimated cost of the present contractis at Rs.31 lakhs while the contract amount has been worked out atRs.59,86,732/-. The difference between the estimated cost and thecontract amount is the sanctioned premium which corresponds to theoverall premium of 93.12% on the work for the purpose of computingthe rates of extra items/quantity or work done. Insofar as the remainingclaims the said 93.12% would become applicable. In that circumstance A

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Awhen the learned Arbitrator has taken note of this aspect and decidedthe Claim No.2, the same would be sustainable. It is contended thatwhen the contract agreement is explicit insofar as the value and thedifference being the sanctioned premium and thepercentage being evidentat 93.12% the decision of the learned Arbitrator not indicating any furtherreasons in the Award would not be fatal. When the obvious had beenBconcluded by the learned Arbitrator, the amount ultimately awarded issustainable and the claim put forth by the claimant is justified.

7. Ms. Uttara Babbar, the learned counsel for the opposite party(State of Punjab), would on the other hand contend that the learnedArbitrator has not indicated any reason whatsoever to arrive at theCconclusion that the claim made at 93.12% is admissible. The learnedcounsel would in that regard refer to Clause 63 of the contract whichprovides for reference of the disputes to arbitration. The said clauseafter referring to the manner in which the learned Arbitrator is to beappointed, has further specified the requirement that all Awards shall beDin writing and in case of awards amounting to Rs.1 lakh and above, suchAward shall state the reason for the amount awarded. In thatcircumstance it is contended that when the contract between the partiesis explicit with regard to the manner in which an Award is to be passedby the learned Arbitrator, theAward passed in such manner alone wouldbe sustainable. In that light it is contended that in the instant case theEAward does not indicate the reasons while answering Claim No.2,wherein it is only stated that as per agreement the premium works out to93.12% and has awarded the same without specifying the reasons forsuch conclusion. In that view it is contended thatsuch Award would notbe sustainable. The learned counsel refers to the schedule of throughFrate items for construction, in the tender form (Annexure P2) whereinNote 6 specifies that the Punjab Common Schedule of Rates would beapplicable. It is contended that as per the communication dated05.01.1987 addressed by the Executive Engineer to the claimant, itindicates that the percentage above the departmental rates has been approved at 35.02%. In that light it is contended that the calculationGtowards the claim in any event could not have exceeded the same. Inthat view it is contended that the learned Arbitrator had not consideredthese aspects nor does the Award indicate his mind. On the other hand,the learned First Appellate Court and the High Court having taken noteof these aspects has arrived at the conclusion which does not call forHinterference. With regard to the Claim No.8 relating to extra payment

for DALDAL (SWAMPYArea) the First Appellate Court and the HighCourt has taken into consideration that the claim had not been madewithin the time provided and has accordingly rejected the claim. In thatview it is contended that the order passed by the High Court does notcall for interference.

8. In the light of the above, a perusal of the appeal papers wouldindicate that there is no serious dispute between the parties with regardto the contract entered into for construction, the work performed andcertain additional work having been carried out by the claimant. Theissue is however as to whether the learned Arbitrator had appropriatelyconsidered the matter in its correct perspective and in that light whetherthe Award of the amount at the premium of 93.12% would be justifiedand the manner of consideration by the learned Arbitrator withoutassigning reasons for his Award is sustainable. In that view the issuewould be as to whether the First Appellate Court as also the High Courtwere justified in rejecting the claim raised by the claimant.

9. While considering these aspects it is noticed that as pointed outby the learned counsel for the opposite party, Clause 63 of the contractwhich provides for arbitration of all disputes or differences between theparties also indicates the requirement of the Award to be as follows:

“All awards shall, be in writing and in case of awards amountingto Rs.1 lakh and above, such awards shall state the reasons forthe amount awarded.”

Keeping this in view, if the Award passed in the instant case bythe learned Arbitrator (Annexure P6) insofar as Claim No.2 is perused,all that the learned Arbitrator has stated is as follows:

“As per agreement premium works out to 93.12% which isawarded.”

10. The said conclusion on Claim No.2 without appropriateconsideration is the basis of reckoning the premium at 93.12% in respectof the Claims No.3 and 12 as well. The learned senior advocate for theclaimant while seeking to contend that the Award would still be sustainableeven in that circumstance has relied on the decision of this Court in thecase of Indian Oil Corporation vs. Indian Carbon Ltd. (1988) 3 SCC36 to contend that it has been indicated therein that if the reason as tohow the Arbitrator has drawn the inference is apparent the same wouldbe sufficient. The decision in the case of Ispat Engineering and A

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AFoundry Works, B.S. City, Bokaro vs. Steel Authority of IndiaLtd.B.S. City Bokaro(2001) 6 SCC 347 is relied, wherein it is held thatin the event, however, there are reasons, interference would still not beavailable unless of course, there exist a total perversity in the Award orthe judgment is based on wrong proposition of law. In addition, the decisionin the case of D.C.M Ltd. vs. Municipal Corporation of Delhi &Anr.B(1997) 7 SCC 123 is relied upon to contend that even in case of a non-speaking Award if the Arbitrator has proceeded without overlooking anyterm of the contract, the same cannot be considered as an error apparenton the face of the Award. In an attempt to persuade us the learnedsenior counsel has with leave referred to the decision of the High CourtCof Delhi in the case of M/s Naraindas R. Israni vs. Union of IndiaDRJ (1993) 25 to point out that in respect of an agreement containing asimilar clause the learned Judge had held that the learned Arbitrator isnot required to give detailed reasons like a Civil Court but what is expectedof the Arbitrator is that he must give out the trend of his thought process

and it is not necessary for the Arbitrator to give any arithmeticDcomputation.

11. The learned advocate for the opposite party would howeverpoint outfrom the very decision in the case of Indian Oil CorporationLtd.(supra) relied upon by the learned senior counsel for the claimantthat this Court in the said decision has also held that where an authorityEmakes an order in exercise of a quasi-judicial function it must record itsreasons in support of the order it makes. It was further observed thatevery quasi-judicial order must be supported by reasons. It is thereforecontended that the bar would raise higher for a judicial order whichshould indicate reasons for the conclusion. The learned advocate wouldFfurther refer to the decision in the case of Raipur DevelopmentAuthority &Ors. vs. M/s Chokhamal Contractors &Ors. (1989) 2SCC 721 wherein it is held that though it is well settled that an Awardcan neither be remitted nor set aside merely on the ground that it doesnot contain reasons in support of the conclusion or decision reached in it except where the arbitration agreement or the deed of submission requiresGitto give reasons. In that light the learned advocate would point out thatin the instant case the agreement between the parties would require thatthe learned Arbitrator has to assign reasons for the Award and whensuch requirement is stipulated the Award passed without reasons wouldnot be sustainable being contrary to the explicit requirement in the contractHbetween the parties. The learned advocate for the opposite party has further referred to the decision in the case of Gora Lal vs. Union ofIndia (2003) 12 SCC 459 wherein it is held as hereunder:

“6. A perusal of the aforesaid clause would show that the arbitratoris required to indicate a finding along with the sum awardedseparately on each individual item of the dispute. While giving afinding, the arbitrator necessarily has to take into considerationthe disputes, claims and counterclaims of the parties and afterconsidering the evidence on such claims and the legal position,has to record his finding on each disputed item. In the presentcase what we find is that on each item the arbitrator has awardeda sum which according to us is not a finding but is merely aconclusion.”

12. In the background of contentions put forth and from the legalposition enunciated in the decisions relied upon, the position is clear thatin the instant facts the agreement between the parties required the learnedArbitrator to pass the Award in a particular manner whereunder thereasons were required to be assigned since that was the explicitrequirement under the contract. If in that background the Awardimpugned in the instant proceedings is taken note the learned Arbitratorhas not assigned any reasons for the conclusion reached on Claim No. 2which was also relevant for considering the Claim Nos.3 and 12 as well.If that be the position the only explanation that is sought to be put forthby the learned senior advocate for the claimant that the basis for suchconclusion is the difference of the value between the estimated amountat Rs.31 lakhs and the contract amount at Rs.59,86,732/- to work outthe premium would not be justified. The quantum of the contract amountas against the estimated cost by itself could not have formed the basis toconclude the claim as made by the claimant towards premium of extraitems, extra items for supply and laying of self-draining materials andtowards re-handling of earth work. In that regard the contention to thecontrary put forth by the opposite party was that the tender form providedfor that aspect under Note 6, which reads as hereunder:

“Extra other items shall be paid for each such items of work atthorough rate worked out on the basis of relevant Punjab CommonSchedule of Rates basis plus sanctioned premium (at the time oftendering), plus or minus percentage above or below worked outby the department by reference to department’s estimated costof tender.”

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A13. The said provision would indicate that the rate as prescribedunder the Punjab Common Schedule of Rates would be applicable. Inthat light it is noticed that the letter dated 05.01.1987 relied upon by thelearned advocate for the opposite party which was addressed to theclaimant indicates that the premium as agreed under the schedule is at35.02%. The said contention had been urged by the opposite party inBtheir pleadings. In fact, as pointed out by the learned advocate for theopposite party, the First Appellate Court has taken note of this aspectand has arrived at its conclusion to disapprove the Award of premium at93.12% for extra work.

14. In the above backdrop, we fully concur with the manner inCwhich the consideration was made by the First Appellate Court as alsothe High Court to arrive at the conclusion that the claim as put forth bythe claimant in respect of Claims No.2, 3 and 12 at the premium of93.12% worked out only on the basis of difference of the amount betweenthe estimated cost and the contract amount is not justified.However, inDthat circumstance when the learned Arbitrator has not assigned anyreasons but had unilaterally in a cryptic fashion awarded the claim at thepremium of 93.12% and when the same was disapproved as notsustainable, the appropriate course in the normal circumstance ought tohave been to set aside the Award and remit the matter to the learnedArbitrator to make a fresh consideration to determine the percentage ofEpremium at which the claim for the extra items would be sustainable,more particularly in a circumstance where the additional work carriedout was not in serious dispute but the premium for rate of payment wasto be determined.

15. The said course would be open even at this stage, but in theFinstant case we however take note that the claim was under the Act,1940 in respect of an agreement dated 05.12.1985 and the claim beforethe Arbitrator itself was of the year 1994. In that background a perusalof the consideration as made by the First Appellate Court would indicatethat it does not refer to the claim that was admissible after working outGthe percentage of premium that is applicable. It has only arrived at theconclusion that the working out of the premium at 93.12% in respect ofthe extra items on Claim Nos.2, 3 and 12 are set aside. The learned FirstAppellate Judge ought to have arrived at the conclusion of the admissibleclaim and in that regard a conclusion ought to have been reached insteadof rejecting the claim outright since the course to remand the matter toHthe Arbitrator was not adopted.

16. In that background since we have referred to thecommunication dated 05.01.1987 which is produced at Annexure R3with the additional documents and also on taking note of the contentionurged by the opposite party regarding the premium rates to be workedout at 35.02%, we are of the opinion that instead of rejecting the entireclaim as made by the claimants, premium for the extra items is to bedetermined at 35.02% and the claim based on the same is required to beawarded. To that extent, the calculation is to be made by the oppositeparty and the amount be paid to the claimant. The said calculation withthe premium at 35.02% shall be made in respect of the extra itemsindicated under Claim Nos.2, 3 and 12.

17. Insofar as the Claim No.8, it relates to the work carried out onDALDAL land wherein the soil was marshy and extra constructionmaterial was required to complete the work. The learned Arbitratorthrough the impugned Award had taken note of the same and awardedthe sum of Rs.19,15,143/- after indicting the amount for the said workon the same basis and deducting the agreed rate. Though the learnedSub-Judge had accepted the same for making it the ‘Rule of Court’, thelearned First Appellate Judgeon taking note of the claim had arrived atthe conclusion that the learned Arbitrator was not justified in grantingthe claim. In that regard, the First Appellate Court had taken note ofClause 39 of the Contract Agreement wherein a provision was made forextra items. The second paragraph therein which provides for the mannerin which the contractor is required to submit the returns of the workclaimed for extra items was referred to. The said requirement indicatedthat the contractor shall deliver in the office of the Executive Engineeron or before the 10[th] day of every month during continuance of thework, the return showing details of any work claimed for extra, andsuch return shall also contain the value of such work as claimed by thecontractor. If the details are not indicated, the Clause indicates that itshall be deemed that the contractor has waived all claims not included insuch returns and will have no right to enforce any such claim not soincluded. In that light since the claim was ultimately found as not includedin the monthly statement, the First Appellate Court was of the opinionthat the requirement of the conditions of the contract was not adhered toand, therefore, set aside the Award of the said amount by the learnedArbitrator and the same claim being made ‘Rule of Court’ by the learnedSub-Judge was also set aside. The High Court while adverting to thisaspect of the matter has held that insofar as the amount sought under AB

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AClaim No.8 the question is not whether the petitioner undertook thiswork but whether the petitioner raised any claim for this extra amount interms with the contract. The High Court has also taken note of Clause39 of the contract and has declined the claim.

18. In that background having taken note of Clause 39 of theBContract Agreement, it cannot be considered as a statutory limitation orbar for the claim in all circumstances. The said Clause no doubt prescribesa method by which the claim is to be put forth in the statement everymonth. The said requirement will have to be construed as being put inthe agreement so as to ensure that the additional work has actually beendone, the claim is put forth along with details so that baseless claim is notCmade at a distant point in time when it will not be possible to determine.Though the Clause also indicates that if such claim is not made, it wouldamount to waiver, in a circumstance where the claim is ultimately putforth in the forum where an adjudication is made and based on the materialif the adjudicating authority is satisfied that the actual work had beenDdone and the contractor being entitled to the extra amount spent by himto carry out the work in an appropriate manner,it would not be just andproper to deny such claim only on the ground that it had not been indicatedstrictly in the manner as provided in the contract specially keeping inview the nature of work undertaken. To that limited extent a perusal ofthe Award passed by the learned Arbitrator would indicate that the learnedEArbitrator had taken into consideration the letter dated 14.11.1986 whereinthe identification of soil which was agreed to. The letter dated 09.03.1987submitting the test results identifying the strata encountered as DALDALis referred therein. The work having been completed during the March,1988 was also taken note. In that circumstance when the fact remainsFthat the DALDAL land wassituated in the area, work was carried outand extra material was used, the claim in our opinion cannot be rejectedoutright adopting a technical view of the matter. However, the claim forthe extra item in that regard for the work of 1,33,181.00/- ‘Cum’ willhave to be calculated with premium at the same rate of 35.02% over and above the agreed rate and not at 93.12% as has been taken intoGconsideration by the learned Arbitrator for awarding the amount. Theappropriate calculation in that regard shall however be worked out insuch manner so as to award the amount under the said Claim No.8.

19. Insofar as Claim No.16 we see no reason to interfere with theorders passed by the High Court or by the First Appellate Court. FurtherH

with regard to the interest sought under Claim No.18 we are of theopinion that in the absence of agreement with regard to the rate ofinterest, the interest as awarded by the learned Arbitrator was on thehigher side and the First Appellate Court was justified in reducing thesame to 12% per annum and the High Court was also justified in notinterfering with the same.

20. As already indicated above the unreasoned award on beingset aside by the First Appellate Court, the matter in a normal circumstanceought to have been remitted to the learned Arbitrator to redo theproceedings afresh in accordance with law. Such course ought to havebeen adopted by us as well.We had proceeded to examine the matterwith regard to the validity of the claim keeping in view the time lapseand since the validity of the claim was to be taken note at the appropriatepremium if not at the percentage of premium at 93.12% as determinedby the learned Arbitrator. In view of our conclusion relating to the claimbeing sustainable to the extent as indicated by us above at the premiumof 35.02%, under Claim Nos.2, 3, and 12 the calculation based on theextent and measurement of the extra items is an exercise which cannotbe undertaken herein and as such the opposite party keeping in view thedirections herein shall work out the actual amount payable in respect ofthe extent, measurement, quantity and price based on which the claim ismade. In that regard we hold that the claimant is entitled to the claim forextra items as put forth under Claim Nos. 2, 3, 8 and 12 by working outthe difference of cost on the tender premium at 35.02%. On arriving atthe quantum of the amount, the same shall be payable with interest at12% per annum in the manner as ordered by the First Appellate Court.The claim No.1 ordered by the High Court is sustained. The said exercisefor calculating and paying the amount to the claimants on claim Nos.1,2,3,8and 12shall be completed by the opposite party within the period of sixweeks from this date. In the event of there being delay in paymentbeyond the said period, the same shall carry interest at the rate of 18%per annum till the date of payment.

21. In the result we pass the following:

O R D E R

(i) The order dated 06.11.2007 of First Appellate Court and theorder dated 08.04.2011 by the High Court in Rev. No.2958/2008are modified.

A

B

C

D

E

F

G

H

842SUPREME COURT REPORTS

A(ii) It is ordered that in addition to the Claim No.1 allowed by theHigh Court, the claimant is also entitled to the amount under ClaimNos. 2, 3, 8 and 12, however, to be calculated at the premium of35.02%. The same shall be calculated with interest at 12% perannum and paid in six weeks from this date failing which thesame will carry interest at 18% per annum.B

(iii) The appeals are,accordingly, allowed in part with costs.

(iv) The Registry is directed to draw up the decree/award in termsof the directions contained hereinabove.

(v) Pending applications if any, shall also stand disposed of.C

Devika Gujral

Appeals partly allowed.

D

E

F

G

H