SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN versus THE SUPERINTENDING ENGINEER T.B.P.H.L.C. CIRCLE ANANTAPUR on 27 March 2019

SUPREME COURT REPORTS

[2019] 5 S.C.R.

ASRI K. MARAPPAN (DEAD) THROUGH SOLE LR.BALASUBRAMANIAN

v.

THE SUPERINTENDING ENGINEER T.B.P.H.L.C.CIRCLE ANANTAPUR

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(Civil Appeal Nos.159-170 of 2010)

MARCH 27, 2019

[RANJAN GOGOI, CJI, SANJAY KISHAN KAUL ANDK.M. JOSEPH, JJ.]

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Arbitration Act, 1940: Respondent- State invited tender forcarrying out irrigation works – Appellant quoted the lowest ratesand entered into three agreements – Under the agreements, appellantraised 9 claims – Arbitrator rejected claim Nos.6 and 8 whereas heawarded various sums in regard to the other claims – Respondent-DState filed the applications for setting aside the award under ss.30and 33 of the Act – Appellant moved suits for making the awarddecree of the Court under the Act – Certain claims which wereawarded by the Arbitrator, however, did not meet with approval ofthe sub-Judge and he agreed with the respondent-State – High Courtfound that the arbitration awards were totally unsustainable in viewEof clause 59 of the Agreement – In the instant appeals, the appellantraised claim no.1, 3, 4, 7 and 9 only – Claim No.1 was made towardsextra lead of 4 kms/6 kms - stone and metal – The case of theappellant-contractor was that contractor was to quarry and takestones and metal from a specified quarry which was located at aFshorter distance than from where the contractor had to actuallyquarry the stones and metal and thereafter transport the materialsto the work site, which resulted in extra rate and extra expenditureand, therefore, claimed Rs. 15 per cubic meter – Held: Under clause59 while extension of time on account of delay or hindrance wasallowed, any claim for compensation on account of delay orGhindrance on account of any cause did not lie – Since Claim no.1was based on the expenditure which the contractor had purportedto incur on this score, he was entitled to difference in the rate – Theclaim for Rs.15/- per cu.m. was based on abnormal increase intransport charges due to increase in cost of fuel, automobile spare H

parts etc – If escalated rates are claimed then it may attract thewrath of Clause 59 – The amount must be awarded on the basis ofthe cost of conveyance being calculated at the rate of Rs.13.75 –The decision of sub-court is sustained exercising power underArt.142 under this claim.

Claim No.3 – Non-supply of food grains as per the conditionsof the agreement – Under the food for work programme of theCentral Government, food grains were to be made available by therespondent and part of the wages of the works was to be suppliedby the appellant in food grains as part of the contractual obligation– It was the case of the appellant that the food grains were notsupplied though it was available – Consequently, the appellant hadto supply food grains to his workers by procuring the food grainsat higher prices from the open market – The arbitrator noted theargument of the State that the relevant clause only contemplatedmaking available food grains, if it was available – The arbitratorproceeded to award various sums under the three contracts on thebasis that the appellant was constrained to expend money forsupplying his workers by purchasing food grains from the openmarket – Held: In terms of agreement, the appellant was to supplythe food grains only if the food grains were made available by theGovernment – Therefore, it is totally untenable for the appellant toset up a case that attracted by the clause which resulted from therepresentation and negotiation, he submitted his tender – Appellantwas not bound to pay the fair wages to the workers and he was notalso liable to offer food grains apart from fair wages – A perusalof the clause would make it clear that what was contemplated wasif the food grains were available and supplied, the appellant was tomake use of the same, supplied it to the workers ‘in lieu of wages’.

Claim No.4 – Reimbursement of short supply of cement – Itwas the case of the appellant-contractor that in order to achieveprogress, he procured cement from outside – The departmentcontended that cement was in fact supplied as per the contract andthe contractor was not authorized to purchase cement from outsideand further contractor did not produce any vouchers – Departmentfurther relied on Clause 10 of the contract which provided that noclaim for compensation for non-supply of cement would lie – Thearbitrator, however, rejected all the contentions of the department A

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Aand relied on s.70 of the Contract Act – The non-production of thecement issue register and unstamped receipt by the department ledthe arbitrator to raise an adverse inference against the department– The arbitrator proceeded to award varying sums under the threecontracts – Held: The correspondence between the appellant andthe department showed that the officers proceeded on the basisBthat there was a shortage of cement – Therefore, this appeared tobe a case where sufficient cement may not have been supplied tothe appellant – The sub-court on the other hand found that none ofthe correspondence by the officers indicated that the appellant wasgiven permission to buy cement from outside – There was noCindication in any of the letters written by the appellant which werethe other sources from which he was procuring cement – The mostimportant obstacle for the appellant was the clause in the contractnamely, for procuring cement by the contractor, he must maintainledger and which may be open to scrutiny by the officer as andwhen demanded – In this case, the appellant did not produce anyDledger/voucher showing purchase of cement from other sources –There was no written permission produced to purchase cement fromother sources – The fact that there were neither vouchers nor anyledger entries nor bills produced warrant interference with the award– Claim is not accepted – Contract Act, 1872 – s.70.

EClaim No.7 – Claim on account of stock of materialsaccumulated by the contractor for work in the project – The claimof the appellant was that he had purchased various materials andstocked at the work site for carrying out the work but the departmentprevented appellant from carrying out the work and, therefore, theFappellant was entitled to the value of the materials which he hadcollected at his expense – Appellant raised a claim for enhancedcompensation – He alleged that there was delay on the part of therespondent on various grounds – This is apart from alleging otherfactors like breakout of malaria, unfavourable weather and delayin taking decision by the departmental officers, which contributedGto escalation in cost – Held: Insofar as the appellant did not useany of the materials to carry out the work and set up the claim onlyon the basis of assurance which was not admitted, the action of theappellant in purchasing the materials would not result in establishinghis claim for compensation – Clause 59 prevents the Court from H

awarding compensation on account of any factor relating to thedelay which may be due to any cause whatsoever – In suchcircumstances, the appellant did not make out any cause forcompensation in regard to this claim.

Conclusion

Claim No.9 – Interest of 18% p.a. under the Interest Act –Under Claim No.9 which related to interest at 18% under the InterestAct, the interest was awarded @ 12% p.a. on all claims from thedate of the claim petition namely 23.11.1983 – The court took thedate on which the arbitrator entered upon the reference as 26.4.1988and the date of the awards as 23.8.1988, and held that for the saidperiod, the arbitrator did not have the power to grant interest onthe amount found due – Therefore, the Court set aside the award ofinterest for the period 26.4.1988 till 23.8.1988 and in regard to therest the award of interest was sustained by the Court – Correctness– Held: The arbitrator awarded interest at 12% from the date of theclaim but excluded interest from commencement of proceeding tilldate of award – As long as the agreement between the parties doesnot prohibit grant of interest and the matter is referred to thearbitrator, arbitrator would have power to grant interest pendentelite – The sub Court was not justified in setting aside interest andthe interest as awarded by the arbitrator is restored – Interest.

Partly allowing the appeals, the Court

HELD: 1.1 In terms of Clause 59 of the Agreement, itwas not open to a contractor to claim compensation which aroseon account of the fact that the work was delayed or hindrancewas caused to the work from any cause whatsoever. The clauseinterdicts raising claim for compensation by the contractor if theemployer poses hindrance to the work. If work gets delayed onaccount of the contractor himself, it is axiomatic that he cannotclaim compensation as it would amount to a person takingadvantage of his own wrong. Delay from any cause cannot founda claim for compensation. It may also happen that the work mayget delayed not due to the fault of the employer. There may benatural causes such as natural calamities which may cause delayin carrying out the work. Even in such cases, Clause 59 cast anembargo against a claim by the contractor. This interpretationwould give full play to the words ‘delays from any cause A

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Awhatsoever’. Equally, if there is hindrance to the work from anycause whatever, a claim for compensation would not lie. Whilecompensation on account of delay and hindrance is impermissible,what Clause 59 provides however, is that reasonable extensionof time be allowed. Request for extension of time must arisefrom causes beyond the control of the contractor.B[Paras 26, 27] [171-C-G]

1.2 Claim No.1 relates to claim for extra lead for carryingout the work of quarrying stone and metal from a quarry locatedat a greater distance from the work site. As far as the said claimis concerned, it cannot be associated with a delay to the work forany cause whatever within the meaning of Clause 59. The claim,on the other hand is, on account of the appellant carrying outwork of quarrying from a site which was located further away thanthe site which was specified under the contract. [Paras 29, 30][172-D-E; 173-D]

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1.3 The claim for Rs.15/- per cu.m. was based on abnormalincrease in transport charges due to increase in cost of fuel,automobile spare parts etc. If escalated rates are claimed then itmay attract the wrath of Clause 59. The claim of extra lead cannotbe denied. The claim of Rs.15/- per cu.m., if it is over and aboveEthe amount which is already received will be in the teeth of thecontractual provision which is relied on by the sub Court for whichhe has not taken any exception to in which case the amount asordered by the sub Court is to be awarded to him under thisclaim. This means the amount is to be worked out as provided inthe letter dated 13.11.1982. In other words, the amount must beFawarded on the basis of the cost of conveyance being calculatedat the rate of Rs.13.75 and the amount must be calculated andpaid by exercising power under Article 142 to sustain the decisionof the Sub Court under this claim. [Para 41] [177-G-H; 178-A-C]

2. Non-supply of food grains as per the conditions of theGagreement 2.1 The original tender conditions contemplated supply ofwheat at Rs.115/- per quintal, if available. The appellant was to supply the food grains only if the food grains were made availableby the Government. Therefore, it is totally untenable for theappellant to set up a case that attracted by the clause whichresulted from the representation and negotiation, he submittedhis tender. May be at the time of entering into the contractfollowing his representation and negotiation the clause wasincorporated which provided for supply of rice or wheat and otherterms. In other words, at the time when appellant submitted histender which may have been lesser than the estimated rate byabout 10 to 12%, the negotiated clause was not there. On thisscore, the case sought to be built up around the clause beingattractive cannot be accepted. [Para 53] [184-G-H; 185-A-B]

2.2 As regards the supply of food grains, the appellant isnot correct in having contended that the appellant was duty boundto supply food grain even if the food grains were not supplied bythe department. A perusal of the clause relating to supply of foodgrain would show that food grains would be supplied, if available.Again, the words “if offered” is conspicuous. The words in theclause which provided that the appellant shall supply food grainto the labourers is not to be considered in isolation.[Para 54] [185-B-D]

2.3 The sub Court was right in holding that thecorrespondence referred to by the arbitrator did not show thatthe food grains were actually available with the department anddepartment was only trying to get the food grains from theadministration with which the food grains was available. No doubtthe contractual provision which provides that the appellant is tokeep accounts and produce accounts relating to receipts anddistribution may assume relevance when appellant receives foodgrains from the department and distributes. But at the sametime the appellant is putting up the claim for compensation andthat too a claim which runs into a fairly large sum. There wouldcertainly be material to evidence the actual purchase and furtheractual supply to the workers or payment as alleged. Evenassuming everything that the appellant says is correct about thefact of the negotiated settlement, there is virtually no material A

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Aexcept the appellants statement that the appellant paid for theprice of food grains to the workers. Further, the claim involvespayment of price of rice at escalated rates for period beyond thecontract also and it invites the wrath of Clause 59. The award ofthe claim by the arbitrator cannot be sustained. [Para 63][188-G-H; 189-A-C]B

3. Reimbursement of short supply of cement.

3.1 The claim is not hit by Clause 59 as the appellant wasnot claiming compensation for any delay. The Sub-Court whilesetting aside the award had held that Cement is a controlledCcommodity and it could not be purchased from outside, withoutvalid permit. It was found that the appellant did not produce anydocument to show that cement was actually purchased fromoutside. The source was not mentioned. The appellant did notproduce any permission from the Department for purchasingcement from outside. Even if purchased, it was to be checked byDcheck measure but there was no check measurement. The tabularstatement shown by the appellant, only represents the theoreticalrequirement in the quantity of cement. In the letters of theOfficers, there is no reference about the use of cement by theappellant which was brought from outside. The letters written byEthe appellant also complained only of inadequacy of supply ofcement and there is no mention of use of cement which he broughtfrom outside. More importantly, he referred to the contractualprovision to find that the Government is entitled to recover thecost of theoretical quantity which is not used and use of any lesseramount in comparison to theoretical amount would only enure toFthe Department. The contract provides that cement will besupplied at cost by the Department inter alia and the cost of cementissued will be recovered from the contractor’s bill at the ratespecified. The contract also contains the theoretical requirementof important materials which include cement. The rate of recoveryGis shown as Rs.416/- per metric tonne.[Paras 67-69] [191-A-G]

3.2 A perusal of the contractual provisions yields thefollowing inevitable result. Cement is a scarce material to besupplied by the Department. The appellant was to maintainseparate ledger for the item for which cement was supplied byHthe Department. The issue price was Rs.416/- per metric tonne.

The cost of cement at the said rate was to be recovered from theappellant’s bill at the issue rate. Thus, if the value of the work isRs.100/- and the value of the cement is Rs.5/-, the appellant wouldget only Rs.95/-. There are theoretical requirements in regardto the use of cement. It is not unnatural for the Department toprescribe for the theoretical requirement. This is to ensure thatit is used exactly as per the theoretical requirement so that thestructure on the one hand is built in a safe manner and at thesame time nothing in excess is used so as to avoid wastage ofscarce material. There are three situations which arecontemplated. In the first situation, it is provided that if materialsare drawn according to the schedule and are short used then theexcess quantity is to be returned to the Department in goodcondition and for the same the contractor will not get any payment.Furthermore, if the short-used material is not returned to theDepartment, their cost will be recovered at the market rate or atthe issue rate which is greater plus wastage charges and salestax. The second situation is where the materials are drawn inexcess of theoretical requirements. The contract contemplatesthat in such a situation, the excess drawn quantity must bereturned to the Department in good condition and otherwise therewill be recovery at the issue rate plus 100% surcharge or marketrate whichever is higher plus storage and taxes. The thirdsituation contemplated is that if the materials are short drawn orshort used it is specifically provided that in such a situation, thesaving due to short drawal/ use should be secured to theGovernment by recovering the cost thereto at issue rate fromthe contractor. Further, the contract contemplates that if materialsare required to be procured by the contractor, he must maintainseparate ledger for each of the item which are so required to beprocured by the contractor. [Paras 71-74] [193-C-H; 194-A-E]

3.3 In respect of short used material, though, properlydrawn the recovery would be in addition to the recovery for thecost of materials which is returned. This would mean that if theappellant had indeed secured cement from outside, the appellantwas obliged under the Contract to maintain a separate ledger.Further the Contract contemplates that there could be recoveryfrom the bill of the Contractor for the cost of cement which is

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Aactually not supplied to the contractor and it will be based on thetheoretical requirement. Thus, the mere fact that there has beenexcess recovery meaning thereby that without issuing the cementto the appellant the amounts have been recovered would not meanthat the appellant would be able to substantiate his claim thatthere was inadequate supply of cement. That is a matter whichBmust be substantiated with reference to other material. Fromthe correspondence, it would appear that the officers proceededon the basis that there is a shortage of cement. Therefore, thisappears to be a case where sufficient cement may not have beensupplied to the appellant. However, under Clause 10 of theCagreement no right to compensation lies for short supply ofcement. There is no indication in any of the letters written by theappellant which the other sources were from which he wasprocuring cement. The most important obstacle for the appellantis the clause in the contract namely, for procuring cement by thecontractor, he must maintain ledger and which may be open toDscrutiny by the officer as and when demanded. In this case, theappellant has not produced any ledger showing purchase ofcement from other sources. There is no written permissionproduced to purchase cement from other sources. No voucherhas been produced by the appellant to establish purchase ofEcement from outside. [Paras 74, 75, 80, 82] [174-D, F-H;196-F-G; 197-D-F]

3.4 A party is supposed to produce the best evidence orrather the evidence which under the contract is contemplated.The failure on the part of the appellant to produce the ledger hasFfatal consequences. The matter becomes further aggravated bythe failure on the part of the appellant to even produce vouchersor bills in support of the claim to purchase the cement from outsidesources. A contractor may have without written permission butfor the purpose of the work purchased cement from outside. Butcertainly, the fact that there are neither vouchers nor any ledgerGentries nor bills produced to hold that the matter may warrantinterference with the award under Section 30. The claim is notaccepted. [Para 86] [198-G-H; 199-A-C]

4. Claim on account of stock of materials accumulated bythe contractor for work in the project.H

As regards this claim, the claim appears to be that appellantcollected materials and it was lying at the site. Admittedly, theappellant has not used this material for the purpose of doing thework. Only the case set up by the appellant is that he was givenan assurance that he will be permitted to carry out the work andtherefore, since he has spent money for the same, he must getthe amount which is claimed for having spent on the material.Insofar as the appellant has not used any of the materials to carryout the work and sets up the claim only on the basis of assurancewhich has not been admitted, the action of the appellant inpurchasing the materials cannot result in establishing his claimfor compensation. The appellant raised a claim for enhancedcompensation. He alleged that there was delay on the part of therespondent on various grounds. This is apart from alleging otherfactors like breakout of malaria, unfavourable weather and delayin taking decision by the departmental officers, which contributedto escalation in cost. Correspondence was exchanged with theExecutive Engineer and the Superintending Engineer, theSuperintending Engineer and the Chief Engineer and finallybetween the Chief Engineer and the Government. It appearsthat at that stage appellant invoked the arbitration clause and apanel of arbitrators gave their award. In fact, the work itself wasstopped. Clause 59 prevents the Court from awardingcompensation on account of any factor relating to the delay whichmay be due to any cause whatsoever. In such circumstances, theappellant has also not made out any cause for compensation inregard to this claim. [Para 87] [199-C-H]

5. Interest of 18% perannum underthe Interest Act.

As far as the question relating to interest is concerned, thearbitrator has awarded interest at 12% from the date of the claimbut excluded interest from commencement of proceeding till dateof award. As long as the agreement between the parties doesnot prohibit grant of interest and the matter is referred to thearbitrator, arbitrator would have power to grant interest pendentelite. The sub Court was not justified in setting aside interest andthe interest as awarded by the arbitrator is restored.[Paras 88, 89] [200-A-C; 201-C]

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AAssam State Electricity Board & Ors. v. Buildworth (P)Ltd.(2017) 8 SCC 146 : [2017] 7 SCR 123 ;JugalKishore Prabhatilal Sharma v. Vijayendra PrabhatilalSharma (1993) 1 SCC 114 : [1992] 2 Suppl. SCR118; The National Highways Authority v. Afcons-ApilJoint Venture (2017) 8 SCC 146 – relied on.

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Smt. Aruna Kumari v. Government Of Andhra Pradeshand Anr.AIR 1988 SC 873 : [1987] SCR 624 ; GujaratWater Supply & Sewerage Board v. Unique Erectors(Gujarat) (P) Ltd. & Anr. AIR 1989 SC 973 : [1989] 1SCR 318 – referred to C

Case Law Reference

ECIVIL APPELLATE JURISDICTION: Civil Appeal Nos.159-170 of 2010.

From the Judgment and Order dated 31.12.2007 of the High Courtof Andhra Pradesh at Hyderabad in Civil Misc. Appeal Nos. 479, 93, 94,F480, 481 and 95 of 1990, CRP Nos. 303, 304, 305, 1039, 1040 and 1041of 1990.

Ramamoorthy, Sr. Adv., Mrs. Revathy Raghavan, PerumalMuthukumar, S. Muthukrishnan,, Advs. for the Appellant.

GMs. Prerna Singh, Guntur Prabhakar, Advs. forthe Respondent.

The Judgment of the Court was delivered by

K.M. JOSEPH, J. 1. These appeals are directed against thejudgment rendered by the High court in Civil Miscellaneous AppealNos.479, 93, 94, 480, 481 and 95 of 1990 and Civil Revision PetitionsNos.303, 304, 305, 1039, 1040 and 1041 of 1990. The appeals arise outof arbitration proceedings conducted under the Arbitration Act, 1940hereinafter referred to as ‘the Act’. By the impugned judgment, theHigh Court set aside the orders passed by the Sub-Court granting thedecree in terms of the Arbitration Award though in a modified way inrespect of certain claims raised by the appellant. The Court also rejectedthe petitions filed by the appellant challenging the decision of the sub-Court refusing to make the Award decree of the Court in regard tocertain claim. In short, by the impugned judgment the High court foundthat the arbitration awards were totally unsustainable in view of Clause59 of the Agreement.

2. A tender was invited on 18.9.1978 by the respondent- State forcarrying out irrigation works. The appellant having quoted the lowestrates which ranged between about 10-12% less than the standardsspecified rate, appellant entered into Agreement No.10/78-79 on10/03/1979. Equally, the appellant entered into Agreement No. 11/78-79on 10/03/1979. He also entered into Agreement No.14/79-80 on28/06/1979. The work was to be completed within 18 months from thedate of handing over the possession. It would appear that the site washanded over to the appellant in regard to Agreement No.10/78-79 on16.11.1979. As far as the Agreement No.11/78-79 is concerned, the sitewas handed over on 21.4.1979. The site was handed over to the appellantin regard to Agreement No.14/78-79 on 28.06.1979. Under theagreements, raising various claims, the appellant originally filed claim on28.11.1983 before a panel of three arbitrators. The panel rendered itsawards. The awards came to be challenged by the appellant and theawards were set aside. An arbitrator came to be appointed on petitionfiled by the appellant. He entered upon reference on 26.4.1988 and passedthree awards on 19.8.1988. The appellant had, in fact, raised 9 claims.The arbitrator rejected claim Nos.6 and 8 whereas he awarded varioussums in regard to the other claims. Claim No.9, no doubt, related tointerest. The respondent-State filed the applications for setting aside theaward under Section 30 and 33 of the Act. The appellant moved suitsfor making the award decree of the Court under the Act. Certain claims A

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Awhich were awarded by the Arbitrator, however, did not meet withapproval of the learned sub-Judge and he agreed with the respondent-State. It is this judgment which generated the appeals and revisionpetitions before the High Court which stand decided by the High Courtby completely agreeing with the contentions of the respondent-Stateand holding mainly that the awards are in the teeth of clause 59 of theBContract.

3. We heard Mr. Ramamoorthy, the learned senior counsel forthe appellant and we also heard Ms. Prerna Singh, learned counsel forthe respondent.

C4. Though various claims have been raised in the appeals, theappellant has finally chosen to press before us only the contentions inregard to Claim Nos.1,3,4,7 and 9. The awards relate to 3 differentagreements entered into by the appellant with the respondents but theclaims are all identical in their content in regard to all the three agreementsthough different amounts have been awarded under the same. Therefore,Dwe may set out the claims with which we are to deal with.

Claim No.1 -towards extra lead of 4 kms/6 kms- stone and metal.Claim No.3 – Non-supply of food grains as per the conditions ofthe agreement.

EClaim No.4 – Reimbursement of short supply of cement.

Claim No.7 – Claim on account of stock of materials accumulatedby the contractor for work in the project.

Claim No.9 – Interest of 18% per annum under the Interest Act.

F5. Learned senior counsel for the appellant would contend thatthe appellant is certainly entitled to the amounts as awarded by theArbitrator under these claims. He would submit that the award of thearbitrator is immune from judicial interference unless it be that thearbitrator has misconducted himself or it be that an error apparent onthe face of the record is betrayed by the award. It is for the arbitrator toGconstrue the contract and sift the materials before him. His finding onfacts cannot be rendered vulnerable in proceedings under Sections 30and 33 of the Act. As far as Clause 59 is concerned it is his contentionthat the said Clause would not stand in the way of the claims as awardedand which are pressed before us being countenanced in law.

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6. Per contra learned counsel for the respondent would supportthe judgment of the High Court and would contend that Clause 59 of theagreement would bar the claims canvassed by the appellant. Before wedeal with Clause 59 it is appropriate to appreciate what happened beforethe arbitrator, the sub-Court and finally in the High Court.

PROCEEDING BEFORE THE ARBITRATOR

Claim No.I-Extra lead

7. The case of the appellant was that the appellant was to quarryand take stones and metal from a specified quarry which was located ata shorter distance than from where the appellant contractor had to actuallyquarry the stones and metal and thereafter transport the materials to thework site. This resulted in extra rate and therefore extra expenditure.The claim of the appellant was Rs. 15 per cubic meter. The arbitratorrejected the arguments of the respondent that the appellant on his ownwent ahead and carried out quarrying from the quarry located furtheraway. The arbitrator also found that the claim was tenable under Section70 of the Contract Act. It is accordingly that the arbitrator awardedcompensation at the rate of Rs.15 cubic meter for the amounts as claimed.

Claim No.III

8. Claim No.3 related to default on the part of department in makingsupply of food grains. In short, under the food for work programme ofthe Central Government, food grains were to be made available by therespondent and part of the wages of the works was to be supplied by theappellant in food grains as part of the contractual obligation and it is thecase of the appellant that the food grains were not supplied though itwas available. Consequently, the appellant had to supply food grains tohis workers by procuring the food grains at higher prices from the openmarket. The arbitrator noted the argument of the State to be that therelevant clause only contemplated making available food grains, if it wasavailable. The arbitrator relied on the correspondence to arrive at theconclusion that though food grains were available it was still not suppliedto the appellate. The arbitrator proceeded to award various sums underthe three contracts on the basis that the appellant was constrained toexpend money for supplying his workers by purchasing food grains fromthe open market.

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AClaim No.IV

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AClaim No.IV

9. As far as claim No.4 is concerned, it related to short supply ofcement. Under the contract the arbitrator noted that the departmentwas to supply cement to the contractor. The value of the cement wasfixed at Rs.416/- per tonne. It was the case of the appellant-contractorBthat in breach of its contractual obligation, the department however did not make sufficient supply of cement. In order to achieve progress inthe works it is the case of the appellant that he procured cement fromoutside. He also appears to have pointed out recoveries were made asthough supply of cement was effected by the department when it wasnot the case. The department contended that cement was in fact suppliedCas per the contract and the contractor was not authorized to purchasecement from outside. Department further contended that contractor didnot produce any vouchers. Department further relied on Clause 10 ofthe contract. Clause 10 provided that no claim for compensation fornon-supply of cement would lie. The arbitrator, however, rejected all theDcontentions of the department and relied on Section 70 of the ContractAct. The non-production of the cement issue register and unstampedreceipt by the department led the arbitrator to raise an adverse inferenceagainst the department. The arbitrator proceeded to award varying sumsunder the three contracts.

EClaim No.VII

10. Claim No.7 which is pressed before us related to a claim onaccount of material accumulated by the appellant for the work in theproject was particularly awarded by the arbitrator. The claim of theappellant was that he had purchased various materials and stocked atFthe work site for carrying out the work but the department preventedappellant from carrying out the work and, therefore, the appellant wasentitled to the value of the materials which he had collected at his expense.The arbitrator after excluding sand awarded certain sums under the 3contracts.

Claim No.IXG

11. Finally, under Claim No.9 which related to interest at 18%under the Interest Act, the interest was awarded at the rate of 12% perannum on all claims from the date of the claim petition namely 23.11.1983.

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Proceedings before Court under Sections 30/33 and 17 of theAct.

12. The sub-Court held inter alia as follows:

As far as Claim No.I is concerned, namely, extra lead, the sub-Court proceeded to agree with the arbitrator that the appellant is entitledto extra lead. As far as the quantum of extra lead is concerned, the courtfound that the arbitrator was not correct in fixing the extra lead at Rs.15per cubic meter. The reasoning in this regard was that there was nomaterial in support of the same. On the other hand, the Court reasonedthat there was a procedure for settling such claims for extra items. Asper correspondence, the court found that the difference would only beRs.3.23 whereas it was found that the arbitrator has awarded at the rateof Rs.15 which would amount to giving Rs.24 for extra lead of 6kilometers. This was found to be an error apparent and having regard tothe fact that the matter was pending for a long time and the presentproceedings constituted the second round of litigation, the court proceededto modify the amount and direct that the extra lead would be calculatedas per the procedure extant.

13. As far as Claim No.III is concerned namely, the breach foundby the arbitrator in the matter of supply of food grains, the courtproceeded to set aside the award of the arbitrator. It was found that themisconstruing the contract, the arbitrator had awarded a sum of Rs.93lakhs in all the three contracts put together which is without anyjustification as the arbitrator has exceeded his jurisdiction. Contrary tothe finding recorded by the arbitrator the court found that there was noevidence to show that the food grains were available. The Courtreappraised A-22 and A-25 and took the view that it did not support thefinding by the arbitrator that the food grains were actually available. Itwas further found that there is no evidence to show that the appellanthad given extra wages for non-supply of food grains by the department.There is no evidence according to the court to show that the appellanthad purchased food grains at the open market rates as the appellant hadnot produced the register to show that he had procured and suppliedfood grains from outside. The appellant was bound to pay fair wages.

14. As far as the claim No.IV is concerned, which related toshort supply of cement to the appellant, the Court set aside the awardpassed by the arbitrator.

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A15. It was found inter alia by the Court that the appellant did notmention the source through which he had obtained the cement. Therewas no evidence before the arbitrator to show that the appellant waspermitted to bring his own cement and use it in his work. As per theterms of the agreement the appellant was not allowed to use the cementother than the cement supplied by the Government. There is no evidenceBbefore the arbitrator to show any check/measurement taken at the timeof alleged use by the Contractor. The tabular statement produced beforethe arbitrator by the appellant was found to be only theoreticalrequirement of the quantity of cement for such work.

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16. The contractual provisions were ignored by the arbitrator. InCnone of the letters written by the officers referred to by the arbitrator inthe awards, the Engineers admitted about the alleged use of cementbrought from outside by the appellant.

17. There was no clause in the contract permitting the contractorto use his own cement and claim reimbursement. The arbitrator exceededDhis jurisdiction.

18. As regards Claim No.VII is concerned, which related to claimfor value of the material stored by the appellant at his site, the courtproceeded to set aside the award. The case of the appellant appears tohave been that he collected the materials on the basis of the assuranceEof the department that further construction work will be entrusted to himbut no letter of assurance was produced. The provisions of the agreementwere only for finished work. The Additional Advocate General’s argumentthat the Government had no objection in the contractor selling awaymaterial after paying royalty charges etc. to the Government was noted.FUnder Section 70 of the Contract Act, the Government has got optioneither to pay compensation or restore the material to the contractor.

19. As far as the claim for interest is concerned, the court relyingon the judgment of this Court in Gujarat Water Supply & SewerageBoard vs. Unique Erectors (Gujarat) (P) Ltd. & Anr. reported in AIRG1989 SC 973 and taking the date on which the arbitrator entered uponthe reference as 26.4.1988 and the date of the awards as 23.8.1988, itwas found that for the said period, the arbitrator did not have the powerto grant interest on the amount found due. Therefore, the Court setaside the award of interest for the period 26.4.1988 till 23.8.1988 inregard to the rest the award of interest was sustained by the Court. TheH

net result was the Court, partially, allowed the suits and passed modifiedawards in favour of the appellant whereas it also allowed the petitionsfiled by the respondent for setting aside the awards in the manner whichwe have indicated above.

The findings of the High Court

20. In the impugned order, the Court has proceeded to allow theappeals filed by the respondent-State and dismiss the revisions filed bythe appellant.

21. As far as Claim No.III is concerned which related to non-supply of food grains, it was found as follows:

“Apart from the fact that there is no such total liability on thepart of the Government to supply the food grains without whichhe could have proceeded with. The very clause which has beenrelied upon by the contractor for supply of the food grains reducedto the effect that clearly such supply would be made only ifavailable, and therefore, it is not the case of the Contractor thatthough food grains were available it is not supplied by Government.There is no mention or any evidence in this regard let in on behalfof the contractor. Therefore, it is again the compensation whichcomes within the bar of Clause 59.”

22. In regard to Claim No.IV, the following is the finding by theHigh court:

“In the Claim No.4 the reimbursement of non-supply of cementis again is similar such obligation as the one stated to be in theearlier claim and even on this account, nothing has been pointedout on behalf of the contractor on facts or in details as to how itcan be taken out from the claim for compensation as barred underClause 59.”

23. As regards Claim No.I relating to extra lead, the High Courtproceeded to hold as follows:

“The Claim No.1 relates to extra lead of 4 K.m for stone andmetal is again attributable to the alleged delays, laches and breachon the department as complained by the contractor and therefore,such claim once again amounts to a compensation within theparameters of the bar as provided under Clause 59. Since we

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have found that the claims under item 2,5,3,4 and 1 exfacie squarelycome under the bar of Clause 59 in view of the very maintainabilitywhich go to the very root itself, these claims are squarely barredunder Clause 59 as held in the aforesaid decision of the SupremeCourt in the case of Ramnath International Construction Pvt.Limited (2 Supra).”

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24. It is found that claim No.2,5,3,4,1 is ex-facie case under thebar of Clause 59 and finally it was held as follows:

“Having regard to the reasons as given, especially, theauthoritative pronouncement by the Apex Court on the veryCquestion, we hold that the claims of the contractor are notsustainable and accordingly both the awards of Arbitrator dated19-06-1985 and 19-06-1968 and the judgement and decree in O.P.No.118 of 1988 dated 07-10-1988 to the extent of awarding claimsin respect of the Claims Nos.1,2,3,4,5,7 are set aside andconsequently we hold since the very claim being held to be notDentitled, question of awarding any interest does not arise.”

Decisions and Findings

25. Since the impugned decision is based on Clause 59, it is nownecessary to refer to the same. It reads as follows:

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“59. Delays and extension of time: No claim for compensation onaccount of delays or hindrances to the work from any causewhatever shall lie, except, as hereinafter defined. Reasonableextension of time will be allowed by the executive Engineer or bythe officer competent to sanction the extension for unavoidabledelays, such as may result from causes, which, in the Opinion ofthe Executive Engineer, are undoubtedly beyond the control ofthe contractor. The Executive Engineer shall assess the period ofdelay or hindrance caused by any written instructions issued byhim, at twenty five per cent in excess of the actual working periodso lost.

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In the event of the Executive Engineer failing to issue necessaryinstructions and thereby causing delay and hindrance to thecontractor, the latter shall have the right to claim an assessmentof such delay by the superintending Engineer of the Circle whosedecision will be final and binding. The contractor shall lodge in H

writing with the Executive Engineer a statement of claim for anydelay or hindrance referred to above, within fourteen days fromits commencement, otherwise, no extension of time will be allowed.

Whenever authorized alterations or additions made during theprogress of the work are of such a nature in the opinion of theExecutive Engineer as to justify an extension of time inconsequence thereof, such extension will be granted in writing bythe Executive Engineer or other competent authority when orderingsuch alterations or additions.”

26. It is our view that it will not be open to a contractor to claimcompensation which arises on account of the fact that the work is delayedor hindrance caused to the work from any cause whatsoever. Todemystify this further, it means that should the work be delayed on accountof reasons which are attributable either partially or entirely to the employernamely the respondent herein, the claim for compensation is barred.Equally, the clause interdicts raising claim for compensation by thecontractor if the employer poses hindrance to the work. If work getsdelayed on account of the contractor himself, it is axiomatic that hecannot claim compensation as it would amount to a person takingadvantage of his own wrong. Delay from any cause cannot found aclaim for compensation. It may also happen that the work may get delayednot due to the fault of the employer. There may be natural causes suchas natural calamities which may cause delay in carrying out the work.Even in such cases, in our view, Clause 59 would cast an embargo againsta claim by the contractor. This interpretation gives full play to the words‘delays from any cause whatsoever’. Equally, if there is hindrance tothe work from any cause whatever, a claim for compensation would notlie.

27. The heading of Clause 59 is ‘delays and extension of time’.While compensation on account of delay and hindrance is impermissible,what Clause 59 provides however, is that reasonable extension of timebe allowed. Request for extension of time must arise from causes beyondthe control of the contractor. It is further provided in clause 59 that ifdelay or hindrance is caused by any written instruction by the ExecutiveEngineer then the period of the delay or hindrance is to be assessed at25% in excess of the actual working period so lost. It is further providedthat if delay and hindrance is caused to the contractor as a result of the

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AExecutive Engineer failing to issue necessary instructions, the contractorwill have the right to claim and assessment of the delay by theSuperintending Engineer of the Circle. The contractor is to lodge astatement of claim for any delay or hindrance within 14 days from itscommencement, failing which no extension for time will be allowed. Stillfurther Clause 59 declares that whenever authorised alterations orBadditions which are made during the progress of the work are of such anature which justify an extension of time, extension can be granted inwriting by the Executive Engineer or other competent authority whenordering such alterations or additions. In short, under clause 59 whileextension of time on account of delay or hindrance can be granted.CClaim for compensation on account of delay or hindrance on account ofany cause will not lie.

28. Now that we have elucidated the true scope of Clause 59, wemust ponder whether the High Court was right in placing Clause 59 sideby side with Claim No.I and find that claim is in the teeth of Clause 59.D

29. Claim No.I as we have already noted relates to claim forextra lead for carrying out the work of quarrying stone and metal from aquarry located at a greater distance from the work site. As far as thesaid claim is concerned, we would think that it cannot be associated witha delay to the work for any cause whatever within the meaning of ClauseE59. What is involved in the claim is the right to claim compensation byreason of the fact that the appellant-contractor though had to quarryfrom the specified quarry under the contract which was located nearerto the work site was compelled to carry out the work of quarrying, bothstone and metal, from a quarry located at a greater distance and totransport the same to the work site. The claim is based on the expenditureFwhich the appellant had purported to incur on this score. Though case ofdelay within the meaning of Clause 59 is sought to be set up, there is nosupport sought to be drawn from the second limb of Clause 59 whichdeals with hindrance to the work from any cause whatsoever. Therefore,we can safely confine our focus on the question whether the claim standsGbarred by virtue of Clause 59 on account of it arising out of delay. In thiscase, we must further notice that, in fact, before the arbitrator apparentlyClause 59 was not as such pressed or at any rate seriously pressed.Before the civil court, in the counter affidavit filed, the State did not laystore by the said contention. It is in the additional counter affidavit filedthat the contention based on Clause 59 was apparently raised by the H

State. Be that as it may, since the arbitrator is the creature of the contract,and therefore, he is bound by the contract, though late in the day, it maybe, that the objection was raised, we cannot rule out the said contentionas it is a matter that goes to the root of the matter. In fact, we wouldapprove of the view taken by the High Court in regard to effect ofClause 59 qua Claim Nos.2 and 5. The appellant has, also, not pressedthese claims before us. The only aspect which remains is the contentionwhich is urged on behalf of the respondent that Clause 59 would beinfringed as escalated amounts are given beyond original period arecanvassed by the appellant.

30. We would think that while it is true that the case under ClaimNo.I extends to the period beyond the original period of the contract(namely 18 months from the date of handing over of site), the claimcannot be one which is on account of delay from any cause whatsoever.The claim, on the other hand is, on account of the appellant carrying outwork of quarrying from a site which was located further away than thesite which was specified under the contract. Be it for the original periodof the contract or for the period beyond the contract, the appellant hashad to quarry from the site located further away. Necessarily in regardto expenses, he must be paid for the difference in the rate. The last areaof inquiry would be whether having regard to the fact that the civil courthas agreed with the arbitrator that appellant is entitled to extra lead atwhich rate it should be paid? It is here that we must remind ourselves ofthe jurisdiction to interfere with an award under the Act. In calculatingcompensation at the rate of Rs.15/- per cubic meter, has the arbitratoracted without any material? Has he overlooked any contractualinjunction? Does the Civil Court have the power to re-appraise thematerials in substituting or modifying the award on merits?

31. In this regard, we must notice the provisions in the Act relatingto the power of the court when an award is challenged. Section 15 ofthe Arbitration Act, 1940 reads as follows:

“15.Power of Court to modify award. The Court may by ordermodify or correct an award-

(a) where it appears that a part of, the award is upon a matter notreferred to arbitration and such part can be separated from theother part and does not affect the decision on the matter referred;or AB

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174SUPREME COURT REPORTS

A(b) where the award is imperfect in form, or contains any obviouserror which can be amended without affecting such decision; or

(c) where the award contains a clerical mistake or an error arisingfrom an accidental slip or omission.”

32. Section 16 of the Arbitration Act deals with the power toBremit the matter. We may straight away rule out the question of remittingthe award having regard to the efflux of time and also improbability thearbitrator being available even otherwise for the purpose of redoing thematter. Coming to Section 15 of the Act, the power available to theCourt to modify the award was available inter alia when a part of theCaward is not referred to arbitration and such part can be separated fromthe other part and clearly Clause (a) is applicable as it is not the case ofeither party that the matter relating to the amount to be paid by way ofextra lead was not a matter which was referred to arbitration.

33. Under Clause (c), an award can be modified if it contains aDclerical mistake or there is an error which arises from an accidental slipor omission. There cannot be any doubt that this is not a case wherethere is clerical mistake or an error arises from an accidental slip oromission. Lastly, the power of the court to modify extend to a casewhere the award is imperfect in form. Certainly, it is not the situation inthe facts of the case. Of course, where the award contains an obviousEerror which can be amended without affecting such decision. Court haspower to modify. When the Sub court modified the sale at which theamount is to be calculated would affect the ‘decision’ of the ‘arbitrator’.It is not the sale of Rs. 15/ C.M., not an essential part of the ‘decision’ ofthe arbitrator.

F34. In the light of the above discussion and proceeding on thebasis that there is no power to modify the award we would consider thelegality and correctness of the civil court decreeing the claim in regardto Claim No.1 by modifying the award of the arbitrator.

35. In the award, it is the case of the appellant that the ExecutiveGEngineer has clearly given the rates and arbitrator has found as follows:

“2.4 the claimant has claimed Rs.15/ cu.m. The Ld. Arbitrator atvol.2 page 283 has noted:

“In fact the Department itself recommended to the Governmentvide 87 letter of C.E. to Government for sanctioning enhancedH

rates because of escalation of costs. The Department had notdisputed correctness of extra rate claimed by contractor. Onthe other hand by its representation and conduct it has acceptedthe rate as workable rate. The claim is also tenable and legallytenable and legally grantable, applying the principles of Sec.70of the Contract Act. Hence I find the claim of the contractorfor higher rates at Rs.15/ C.M. is just reasonable and legal..”

For Agreement No.10, Rs.7,68,825/- is awarded.

For Agreement No.11, Rs.12,38,250 is awarded and For Agreement No.14, Rs.9,59,325 is award.

The total is Rs.29,66,400/-”

36. The further case of the appellant is that the standard rate forthe period stated by the Executive Engineer is Rs.13.75 cu.m. and thecontractor has claimed Rs.15/-cu.m. which is accepted by theDepartment. It is contended by the appellant that as per the finding ofthe arbitrator the sub-Court, the extra lead would relate to beyond theagreement period.

37. He had claimed at the rate of Rs.15/- cu.m. which wasaccepted by the department as is clear from letter dated 23/11/1982written by the Executive Engineer to the Superintending Engineer.

38. Appellant drew support from letter dated 23.11.1982 writtenby the Executive Engineer to the Superintendent Engineer. We may alsonotice the following statement however in the said letter.

“After gaining practical experience it has been found possible toutilize this quarry only for major quantities of two contracts of SriDV. Krishna Reddy & Co., against the total No. of seven worksfor which the stone from that quarry is proposed to be utilized.The quarry from which the stone is being obtained by Sri K.Marappan is at a distance 3.45 KM MR + 1.447 KM CT. He isobtaining the entire metal and stone totally from this quarry.”

39. The sub Court, on the other hand, has found that the assumptionmade by the arbitrator about Rs.15/- cu.m. over and above the quotedrates is without any basis. The sub-Court relied on the provisions in theagreement relating to the manner in which the rates were to be derived.

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AThe sub Court proceeded to make reference to the clause in theagreement.

The Clause reads as follows:

“VII. a) Procedure for working out rates for supplemental items:

The contractor is bound to execute all supplemental items thatare found essential, incidental and inevitable during execution ofmain works at the rates to be worked out as detailed below:- B

i) Supplemental items directly deducible from similar items inthe original agreement:- C

CThe rates shall be derived by adding to or subtracting from theagreement rate of such similar items, the cost of difference inquantity of materials or labour between the new item and thesimilar item in the agreement worked out with reference to theschedule of rates adopted in the sanctioned estimate with whichDthe tenders were compared plus or minus overall tenderpercentage.

ii) New items (a) similar items, the rates of which cannot bedirectly deduced from the original agreement.

b) Purely new items which do not correspond to any item in theEagreement.

The rates shall be estimate rate plus or minus overall tenderpercentage.

NOTE: The term estimate rate used in (i) and (ii) and (a) & (II)(b) above means the rate of sanctioned estimate with which theFtenders were compares, or if no such rate is available in theestimate the rate derived with reference to the scheduled of ratesadopted in the sanctioned estimate with which tenders arecompared.

Whether the need for execution of excess quantity beyondthe quantities stipulated in the agreement is noticed, the contractorshould give notice in writing to the Exe. Engineer, who will in turnshall obtain orders of the competent authority before commencingexecution of the excess quantity of work.

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For all items of work in excess of the quantities shown in Schedule‘A’ of the tender the rate payable for such item shall be eithertender rate or SS rates for the items plus or minus overall tenderexcess accepted by the competent authority whichever is less.The SS rates means the rates with which estimate is prepared forcomparing the tender.

40. Thereafter, the sub court referred to the actual calculationmade in Exhibit B.3 the letter dated 23.11.1982 written by the ExecutiveEngineer to the Superintending Engineer which is in fact relied upon bythe appellant himself. The sub Court proceeded to find that the differencein rates for 2 kms and 6 kms works out to 3.23 per cu.m. and that thecost of conveyance of material of all kinds RR stones and spass asprovided in the estimate is Rs.9.81 per cu.m. which was in accordancewith the standard schedule rate for 2 km. lead. The rate fixed for 6 kmslead was Rs.15/- over and above the quoted rates of Rs.8.80 which isarrived apparently after deducting actual rate by which the appellanthad quoted his rates which was nearly 10-12% less than the estimatedrates. The result was that the arbitrator gave Rs.24/- per cu.m. as againstRs.13.75 which is without deduction. In the written submission beforeus, the appellant has not questioned the applicability of the clause relatingto supplemental item in regard to the extra lead. Therefore, we need notbe detained by the question whether the provision as such is applicablein respect of claim based on extra lead. If that be so, the question wouldbe whether it is a case whether arbitrator has awarded Rs.15/- in placeof Rs.13.75 in which case we would be inclined to agree with the appellantthat the award in this regard should be sustained in its entirety. But thequestion is whether the arbitrator has actually awarded Rs.15/- cu.m.over and above the amount which the appellant already received on thebasis of the actual lead in the contract.

41. The arbitrator, in fact, found that the claim of the appellant forhigher rates at Rs.15/- per cu.m. is reasonable and legal and on the basisof the tabular statement which was prepared by the appellant andawarded different sums under the three different contracts. It wouldappear that the claim for Rs.15/- per cu.m. is based on abnormal increasein transport charges due to increase in cost of fuel, automobile spareparts etc. If escalated rates are claimed, then it may attract the wrath of AB

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AClause 59. We would think that the claim of extra lead cannot be denied.The claim of Rs.15/- per cu.m., if it is over and above the amount whichis already received will be in the teeth of the contractual provision whichis relied on by the sub Court for which he has not taken any exception toin which case we would think that the amount as ordered by the subCourt is to be awarded to him under this claim. This means the amountBis to be worked out as provided in the letter dated 13.11.1982. In otherwords, the amount must be awarded on the basis of the cost ofconveyance being calculated at the rate of Rs.13.75 and the amountmust be calculated and paid. Mindful though we are of the limitationunder Section 15 (b) of the Act to modify, we would in the facts of theCcase, rely on Article 142 to sustain the decision of the Sub Court underthis claim.

CLAIM NO.III

CLAIM NO.III

42. Coming to Claim No.III, namely, on account of non-supply offood grain, we have already found that while the arbitrator has awardedDthe amount of compensation, the sub Court has set aside the award. Themain contention of the State which found favour with the sub Court isthat the clause actually provided for supply of food grain provided it isavailable. The arbitrator found that food grains were not supplied despitethe fact that they were available and this finding by the arbitrator wasEfound to be perverse. The claim of the appellant was that under theagreement, the appellant was to supply the labourers a certain quantityof foodgrains as part of the wages. The labourers were also makingsuch demand as it would be beneficial to them also. The appellanttherefore had to supply food grains from the market at the market valuewhich led him to incur extra expenditure. The labourers according toFappellant were not willing to work otherwise. It is necessary to advert tothe actual contractual provisions in relation to supply of food grain. Theclause in one of the contract relating to food grains reads as follows:

“FOOD GRAINS:

G1. The cost of the work is estimated to be Rs.1,16,15,713/-approximately. Against this estimate 17,500 quintals of wheat atRs.115/- per quintal, if available, will be supplied to the contractorfor being issued as wages to labourers employed on the work.

2. The tenderer shall bear the transport and other incidental chargesfor the transportation of wheat from nearest F.C.I. Wheat godownto the site of the work. He shall be responsible for the safe custodyand storage of wheat at his own cost and ensure issue to thelabourers of the quantity of wheat calculated at a price notexceeding Rs.1-25 per K.G. in lieu of the amount of wages payableto them.

3. The contractor shall be responsible to produce the Accounts ofreceipts, distribution etc., of what to the labourers as and whenrequired by the Engineer incharge of the work.

4. The supply of wheat to the contractor for issue to the labourerswill be regulated from time to time according to the assessmentof the Engineer in-charge of the work.

5. The department is not liable for any compensation on accountof any fluctuation of market price of wheat or deterioration inquality of the wheat. The contractor is bound to accept the agreedquantity of wheat at the stipulated rate, if offered. Similarly, heshall have no claim for the supply of extra quantity of wheat onthe ground of excess or enlarged scope of work and where theDepartment declines to supply extra wheat, no claim forcompensation on this account shall be entertained by theDepartment.

6. The tender will be deemed to have satisfied himself about theavailability of wheat and the rates quoted by him in the tendershould take into account that aspect for completing the workaccording to the specifications and conditions incorporated in theagreement.”

43. It was further provided that the labourers were to be suppliedwheat at a rate not exceeding Rs.125 per quintal but the quantity to besupplied to the labourers and rates are subject to the approval of theExecutive Engineer.

44. The appellant relied particularly on the contents under theheading ‘Negotiation’. It reads as under:

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A“NEGOTIATIONS.

During further investigation I do hereby agree for the supply ofrice in place of wheat. I also agree to receive either wheat or riceor both to the quantity of 17,500 quintals. I also agree for a rate ofRs.115/- per quintal of coarsed rice and Rs.130/- per quintal forBfine rice. I also agree to supply coarsed rice at a rate not exceedingRs.125/- and fine rice not exceeding Rs.140/- per quintal to thelabourers. The other conditions and clauses covered by the tenderrelating to the supply of food grains remain unchanged.

In case of short supply of either wheat or rice compared to theCquantity of 17,500 quintals, I shall have claim for compensation onthis account.”

45. The first thing we have to deal with is whether the High courtwas wrong in rejecting the said claim. The reason for rejecting the claimby the High Court are as follows:

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1. There is no such total liability on the part of the Government tosupply the food grains without which he (apparently theappellant) could proceeded with.

2. The very clause which has been relied upon by the contractorfor supply of food grains reduced to the fact that such supplyEwould be made only if available and therefore it is not the caseof the contractor that though foodgrains were available it is notsupplied by the Government.

3. There is no mention of any evidence in this regard let in onbehalf of the contractor. It is thereafter that the High CourtFholds that therefore it is again the compensation which comeswithin the bar of Clause 59.

46. At first blush, the claim relating to food grain even as understoodby the High court does not appear to have anything to do withcompensation for delay. The case based on hindrance also does notGappear to be made. We shall, however, consider the matter in somedetail.

47. The High Court has not adverted to the clause in the contractunder the heading ‘negotiation’ which we have referred to. Instead theHigh court has proceeded on the clause which undoubtedly contemplated H

supply of food grain only subject to availability. The clause after thenegotiation was carried out however brought about the following changes:

In place of wheat, the appellant agrees to take either wheat orrice and the price at which it was to be supplied to the workers was alsostipulated. The other conditions in the contract relating to the food grainremained unchanged. This means that it could be said that it was subjectto availability and we have also referred to clause which provides thatappellant is bound to accept the quantity at the stipulated rate, if offered.However, a significant change which was brought about was that incase of short supply of either wheat or rice compared to a specificquantity of 17,500 quintals, the appellant was given the right to claim forcompensation. Therefore, this clause, in our view, brings about the changewhich has not been considered by the High court. Since the sub Courthas given other reasons, it may be necessary to consider what sub Courthas held.

48. The sub Court takes note of the provisions under the heading‘negotiation’ which we have referred to except the condition that incase of short supply the appellant will have the right to claim compensationon this account. The sub Court proceeds to hold the conditions areincorporated with a view to cast a duty to receive a particular quantityof food grain in lieu of cash and to supply them to labourers at a stipulatedrate and it is for the benefit of the State as the State would receive thefood grains under the food for work programmes under the Governmentof India scheme free of cost. Further, it is for the benefit of the labourers.The sub Court proceeded to further hold that the purpose of the food forwork programme was to create employment and the contractor is not toget any benefit out of this condition. The contractor is bound to makerecord of the food grains received from the Government and supplied tothe labourers at the specified rate. He cannot sell the food grains at themarket rate. He is the happiest person and need not discharge the burdencast under the condition relating to food grains if food grains are notsupplied. The appellant was trying to take advantage of this. There is nopromise to supply a particular quantity of food grain. The appellant hasno obligation to supply food grains to the labourers if the Government didnot provide him food grains. The Sub Court also did not find favour withthe contention of the appellant that taking the attractive clause of supplyat subsidized rate, he quoted lesser rate and, therefore, for non-supplyhe is entitled to be compensated. It is found that the appellant is not A

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Aentitled to compensation as it is not an attractive clause. The Court furtherfound that the arbitrator was carried away by the letters written by theEngineers wherein they have opined that the contractor quoted lesserrates on account of this attractive clause. It would become an attractiveclause only if the Engineers concerned permitted the appellant to misutilisethe grain by selling the food grain by the contractor in the open market.BThe appellant is bound to pay fair wages under the contract (It is truethat under the contract clause the appellant shall not pay less than thefair wages).49. It is found that department officers misunderstood the foodfor work in their letters. The arbitrator relied on such letters as if theCEngineers are the master to interpret the term of the contract. It wasfurther found that there is absolutely no basis that food grains were inplenty with the Government. The sub Court further finds that the relianceplaced by the arbitrator at Exhibit A.22 for availability was not justified.He referred to Exhibit A.22 with annexure also. The contention of theDappellant was that he promised to the labourers that he would pay aportion of their wages by way of food grain at specified rate and he hadto supply the food grains at the subsidized rates as promised by purchasingthe food grains at higher rates. The sub Court finds that there is noevidence produced before the arbitrator to show that he purchased food

grains from the open market and supplied those food grains to theElabourers at the subsidized rates. In case of supply of food grains, theappellant was bound to maintain record of proper distribution but theappellant has not produced any such register, it is reasoned by the subCourt. Next it is found that the appellant even it is true that he agreedthat the workers are to be supplied a certain portion of the wages in foodFgrains, he cannot fix wages in such a manner that the contractor wouldget any advantage out of it as it is not contemplated under the scheme.He has to pay the fair wages and besides fair wages he had to provideadditional facilities by providing food grains at the subsidized rates. Thequestion of supply of food grains to worker by appellant in the event ofnon-supply of the same by the Government did not arise. It is furtherGfound that there is no provision in the agreement to the effect that incase of failure to supply food grains the Government is liable tocompensate the loss that may be sustained on account of failure of thedepartment to supply food grains, and the arbitrator patently exceededjurisdiction.H

50. The first thing that stands out in the reasoning of the sub-Court is the absence of any reference to the clauses specifically underthe heading ‘negotiation’ which specifically confers a right ofcompensation in case of short supply of either wheat or rice comparedto the quantity of 17,500 quintals (Agreement No.11/78-79). This meansthat while the parties contemplated that a part of the wages was to bepaid by way of supply of food grains at the stipulated price, the obligationof the appellant was to take the food grain supply from the FoodCorporation godown and carry it to the work site. He was to furthersupply the said food grains to the workers at a higher specified rate inview of the fact that he would incur certain expenses. This undoubtedlywas subject to availability. But introduction of the clause in the contractthat in case of short supply of either wheat or rice in comparison to theactual quantity which was agreed to be supplied, the appellant will havea claim for compensation on the said count has been missed by the subCourt as also the High Court.

51. The sub-court has proceeded to find that the case of thecontractor appellant that the clause providing for supply of food grainswas an attractive clause, was not correct. We are inclined to agree withthe said finding. In the claim filed by appellant what is stated inter aliais as follows:

“(ii)…………The tender documents provided for supply of wheatat the quantities mentioned above. It also provides that the chargeson account of the storage, transportation, the cost of the containeras fixed by the Government, and sales tax have to be borne by thecontractor. The contract condition also further stipulates that thecontractor has to supply the wheat to the labourers consistentwith their requirement and at the rates not exceeding Rs.125/-per quintal. It is also mentioned in the contract that a particularquantity of wheat at Rs.115/- per quintal, will be supplied to thecontractor for being issued as wages to labourers employed onthe work. On the representation made by the contractor on thisclause there was negotiation and agreement was arrived atbetween the contractor and the Department to the effect that thecontractor will receive the quantity of grains to be supplied eitheras wheat or as rice or both, further stipulating the rate at which itis to be supplied fixing the rate at Rs.115/- per quintal for coursedrice and at Rs.130/- per quintal for fine rice and also stipulating ABC

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the rates at which the contractor is to pay to the labourers, retainingthe other conditions and clauses covered by the contract relatingto the supply of food grains.

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(iii) In short the agreement stipulates that the food grains will besupplied by the Department to the contractor at the specific rates,Bwhich of course are competitive rates as against the rates of thegrains to be acquired from the open market. The contractor tookthis important and attractive aspect into consideration and submittedhis tender at the most competitive rate only on account of theadvantage he would derive from the department supplying thefood grains at specific rates which he would pass on to theClabourers.”

52. A perusal of the aforesaid averments will reveal that the tenderdocument contemplated supply of wheat of a particular quantity at Rs.115/- per quintal and the contractor was to supply at Rs.125/- per quintalto workers. Thereafter, it is stated that on a representation made by theDcontractor there was negotiation and an agreement was arrived atbetween the contractor and the department. The contractor was toreceive the quantity of food grains either as wheat or rice or both. Inother words, reference is made to the clause coming under negotiation.It is thereafter stated that in short, the agreement stipulated that the foodEgrains will be supplied at specific rate which were competitive rates asagainst the rates in the open market. It is further alleged that thecontractor took this important and attractive aspect into considerationand submitted his tender at the most competitive rate only on account ofthe advantage he would derive from the department.

F53. It is to be noted that even according to the appellant, the tenderdocuments provided for supply of wheat. The contract was settled bycalling tenders. The appellant submitted his tender which turned out tobe the lowest. At the time of submitting his tender the condition relatingto the negotiated settlement could not have been there. If that is so, theoriginal tender conditions contemplated supply of wheat at Rs.115/- perGquintal, if available. The appellant was to supply the food grains only ifthe food grains were made available by the Government. Therefore, it istotally untenable for the appellant to set up a case that attracted by theclause which resulted from the representation and negotiation, hesubmitted his tender. May be at the time of entering into the contractHfollowing his representation and negotiation the clause was incorporated which provided for supply of rice or wheat and other terms. In otherwords, at the time when appellant submitted his tender which may havebeen lesser than the estimated rate by about 10 to 12%, the negotiatedclause was not there. On this score, the case sought to be built up aroundthe clause being attractive cannot be accepted.

54. Secondly, as regards the supply of food grains, the appellant isnot correct in having contended that the appellant was duty bound tosupply food grain even if the food grains were not supplied by thedepartment. The sub-Court is correct in concluding that appellant wasduty bound to supply food grains only if it was supplied to him by thedepartment. This is because despite the clause resulting from negotiation,the other conditions remained intact. A perusal of the clause relating tosupply of food grain would show that food grains would be supplied, ifavailable. Again, the words “if offered” is conspicuous. The words inthe clause which provided that the appellant shall supply food grain tothe labourers is not to be considered in isolation.

55. The sub-Court is not correct in coming to the conclusion thatthe appellant was bound to pay the fair wages to the workers and hewas also liable to offer food grains apart from fair wages. A perusal ofthe clause makes it clear that what was contemplated was if the foodgrains were available and supplied, the appellant was to make use of thesame supplied it to the workers ‘in lieu of wages’.

56. There are a few aspects which remain. Firstly, what is urgedbefore us is that the under the negotiated clause the department agreedto supply a definite quantity of food grains. In agreement No.11, it was17500 quintals. We proceed on the basis that in other two agreements,different quantities as claimed by the appellant was mentioned. We noticethat in the claim while the appellant has referred to the negotiated clauserelating to supply of rice and also providing for the quantity, there is noreference to the clause that appellant will be entitled to compensation ifthere is short supply of food grains. This clause is also not consideredeither by the sub court or by the High Court. Very interestingly this iswhat the arbitrator has said.

“It is argued for the Department that agreement clause is thatcontractor is not entitled for compensation even if there is nonsupply of food grains. I do not agree with this submission becausethe words used in the agreement are ‘short supply’. The agreement A

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Adoes not state that the contractor has no claim in case of nonsupply of food grains. The counsel for the contractor submits thathis clause was subsequently negotiated because intention of theparties was that contractor cannot insist on wheat alone or ricealone and if there is short supply either of rice or wheat, then forthat short supply contractor has no claim for compensation. I amBinclined to agree with the submission of the counsel of thecontractor that so called clause in the agreement does not applyand it is not a bar to the contractor claiming compensation.”

57. However, in the contractual provision which we have extracted,we notice that right to claim compensation is reserved to the contractorCin case of short supply. But then, the case of the appellant is not of shortsupply but of non-supply. The appellant in his written submission also inparagraph 3 stated as follows:

“The Agreement at Vol.3, Pg.71, 72 refers to this head. At Pg.72after the head ‘Negotiations’ the clause reads as under:D

“….In case of short supply of either wheat or rice compared tothe quantity of 17,500 quintals, I shall have claim for compensationon this account.”

58. Further, it is relevant for us to notice the discussion by theEarbitrator regarding the quantum of compensation. The arbitrator reliesupon the Statement No.3 appended to claim No.III wherein he has shownthe prevailing rate of rice in the open market during the period November1979 to October 1982. The amount which he has paid for the labourersfor purchase of food grain on the basis of rates in the open market, theprice of food grain payable to labourers for purchase of food grain asFper the agreement condition and the extra amount involved due to nonsupply of food grain by the department. The arbitrator found that thestatement shows that the extra amount paid varies between Rs.162/-and Rs.211/- per quintal in the said period. On striking an average, itcame roughly to about Rs.185/- per quintal which the appellant paid toGthe workers for non supply, finds the arbitrator. Further the arbitratorfound that the labourers cannot purchase rice from the fair price shopsbecause they were not rice card holders. The arbitrator referred to thecommunication to the Executive Engineer dated 23.7.1987 wherein hehas stated that 1000 to 1200 workers work daily in each works and therates for the food grain in the open market are increasing day by day, H

therefore he has no hesitation in awarding price increase by restricting itto 180% though the contractor’s statement shows 185%. Thereafter,the arbitrator awarded as follows:

“The quantity agreed to be supplied by the Department namelyrice to the contractor under agreement No.10 is 13,200 quintals,under agreement No.11, it is 17,500 quintals and under agreementNo.14, it is 20,000 quintals. In the tabular statement contractorclaimed difference of rates for 15,521 quintals under agreementNo.10 and 20,804 quintals under agreement No.11 and 22,195quintal under agreement No.14. Thus he claimed higher rates for58,520 quintals where as the Department agreed to supply him atotal quantity of 50,700 quintals is multiplied by Rs.180.00 beingthe difference in price he has incurred an additional expenditureof Rs.91,26,0000.00. Accordingly he is entitled to compensationfor Rs.23,70,000.00 under agreement No.10/1978-79 andRs.31,50,000.00 under agreement No.11/1978-79 andRs.26,00,000.00 under agreement No.14/1979-80.”

59. The arbitrator refers to Exhibit P.1 to P.4 letters. Arbitratoralso refers to Exhibit B.3 to B.7 letters wherein it is stated that contractorwas suffering as he has incurred expenditure on this account as therewas a condition in the agreement to give food grains as part of thewages and his aspirations and objectives were not fulfilled because hehas quoted less rates. The arbitrator make reference to the negotiationswhere rice took the place of wheat and thereafter the arbitrator entersthe finding that the rice was available. He relies on Ex.A-27 where theExecutive Engineer speaks about 1000 to 1200 workers working daily ateach work and the rates for food grains in the local market was increasingday by day. According to the arbitrator, there is correspondence thatabundant quantity of food grains was available but no adequatearrangements were made to supply the food grains to the contractor. Inthe letter written by the Chief Engineer to the State Secretary, he notesthe case of the appellant that the appellant has quoted lesser rates relatingto supply of food grain at stipulated issue rates. The quantum in thethree contracts is noted as also the rate and the amount, the value inrupees is noted. The Superintending Engineer has agreed that the foodgrain could not be supplied since allotment was not received even thoughthere is stipulation in the agreement to supply food grain if available. Theaspirations of the appellant could not be fulfilled, it is stated. It is noted A

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Athat the price structure of various materials is increased from the date oftender i.e. 10.11.1978. In relation to wheat it is shown an increase of147%. There is an increase in the case of rice to the extent of 178%.This letter is written on 30.11.1982 Exhibit B-7.

60. First letter written by appellant is dated 30/06/1979. In theBsaid letter this is what he says:

“I had requested on several times for the supply of food grainsbut so far no food grains were supplied to me. I request to makearrangement for the early supply of food grains. In this connection,I wish to state that I had engaged labours on the term that foodCgrains will be supplied to them as a part of their wages and I amsupplying food grains to them by purchasing in the local market.Hence, urgent action may be taken for the supply of food grainsearly otherwise, I have to invest extra finance…”

61. Therefore, the case set up by him is that he has purchasedDfood grains from local market and supplied. In the letter dated27/08/1980 he states inter alia that he had engaged labourers on termsthat rice or wheat will be supplied to them as a part of their wages. Hecomplains that no food grains was supplied. Then he says on the termsagreed to by him he had paid the price of the quality of rice that wascheapest in the market. As can be seen in the second letter the caseEappears to be that he was paying the labourers the price of rice and heis departing from the case that he was supplying the food grains.

62. In the next letter dated 16/07/1981 he states that he had to goin for additional finance on account of non-supply of food grains. Herepeats the same complaint about huge financial outlay on account ofFnon-supply at the specific rate of Rs.115/- per quintal which was actuallyavailable, in the last letter dated 07/10/1982.

63. We are of the view that the sub Court is right in holding thatthe correspondence referred to by the arbitrator did not show that thefood grains were actually available with the department and departmentGwas only trying to get the food grains from the administration with whichthe food grains was available. As long as there is some material whichsubstantiated appellants claim before the Arbitrator, the Court hearingthe petition under Article 30 and 32 would not reappraise the material tocome to the conclusion that the arbitrator went wrong in arriving at afinding of fact. At the same time, if virtually there were no material thenH

it becomes a case of no evidence. No doubt the contractual provisionwhich provides that the appellant is to keep accounts and produce accountsrelating to receipts and distribution may assume relevance when appellantreceives food grains from the department and distributes. But at thesame time the appellant is putting up the claim for compensation andthat too a claim which runs into a fairly large sum. There would certainlybe material to evidence the actual purchase and further actual supply tothe workers or payment as alleged. Even assuming everything that theappellant says is correct about the fact of the negotiated settlement,there is virtually no material except the appellants statement that theappellant paid for the price of food grains to the workers. Further, theclaim involves payment of price of rice at escalated rates for periodbeyond the contract also and it invites the wrath of Clause 59. We wouldtherefore think that the award of the claim by the arbitrator cannot besustained.

CLAIM NO.IV

64. As regards, claim No. 4 is concerned, it arises from allegedshort supply of cement. First of all, we have to find as to whether it is hitby the embargo contained in Clause 59 and also advert to the finding ofthe High Court. In this regard, the High Court holds that the obligation issimilar in nature to the earlier claim, namely, claim no. 3 and nothing ispointed out on behalf of the appellant on facts or in details as to how itcan be taken out of Clause 59. We have to ascertain what exactly is theclaim raised by the contractor.

65. The claim in brief is as follows:

Cement is one of the items to be supplied by the Department atspecific issue rates. The appellant, accordingly, perceiving the same asattractive quoted 10 to 12% lesser than the estimate rate. Cement wasto be supplied at the issue rate of Rs.416/- per metric tonne. Right fromthe beginning, there was short supply. The appellant had no other optionbut to get cement from other sources. Large quantities were so broughtfrom other sources. The Department being aware agreed specificallyand by conduct that they will recoup the cement. The appellant had nointention to give cement free to the Department. The quantity of cementused by the contractor for the project had been quantified and noted inthe measurement book and the USR (Unstamped Receipt). The quantityof cement supplied by the Department is correctly noted in the cement ABC

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Aissue register maintained by the Department. Recoveries had beeneffected without the actual issue of such quantity by the Department asevidenced by the document like USR and other entries. The appellantappended a tabular statement of quantity of cement used for the work,the quantity which was issued by the Department and the balance quantitywhich constituted the basis of the claim.B

66. The arbitrator in regard to the said claim finds inter alia that inthe letter dated 17.08.1980, the Engineer had stated that there is shortsupply and he was bringing cement from other sources and action maybe taken to return the extra quantity of cement. He notes that in thecounter of the Department, there is no denial about the quantity of workCdone by the appellant and also the quantity of cement used by him bybringing from other sources. He further finds that it is stated that theexact short supply of cement can be shown only after taking allmeasurements. The details in the claim statement which also include,apparently, the tabular details was not denied in the counter. Though, theDcement issue register and the USR were called for by the appellant,they were not produced. Adverse inference was drawn. The arbitratorfurther noted that in the bill the quantity of cement used has beenrecovered, though the quantity has not been issued and in the last bill,more quantity was given representing part reimbursement. The lettersof the Department were also found to support the case of the appellant.EReferring to the objection in the counter that no vouchers were producedby the appellant, it was brushed aside as immaterial as it is found that itis proved that he was bringing cement from other sources to completethe work except a small quantity under Agreement No.14. Reliance isplaced on Section 70 of the Contract Act. The argument without a pleaFin the counter by the Government pleader that the appellant was savingcement out of the quantity supplied by the Department was founduntenable on the basis that engineers would not have permitted it. As faras, clause 10 of the Agreement prohibiting any claim for compensationfor non-supply or delayed supply, the arbitrator found that appellant isonly asking for return of cement brought by him and used in theGconstruction on the assurance of the Department that it will bereimbursed. In total 3790 metric tonnes of cement were found to bebrought by the appellant. Rejecting the claim of the appellant for marketrate and applying the departmental issue rate of Rs.416/- per tonnedifferent amounts were awarded under the three different contracts.

H

67. We would think that this claim cannot be said to be hit byclause 59 as appellant is not claiming compensation for any delay. Onthe other hand, his case is that, contrary to the agreement that he wouldbe supplied the cement it was not supplied and he had to use cement byspending money from his pocket and he only wanted that cement actuallyused which is in excess of the cement issued to be given to him. Moreimportantly, the amount awarded is at the rate fixed in the original contractand no escalation is given.

68. The Sub-Court, however, set aside the award. The Sub-Courtfinds as follows: -

Cement is a controlled commodity and it could not be purchasedfrom outside, without valid permit. It was found that the appellant did notproduce any document to show that cement was actually purchasedfrom outside. The source was not mentioned. The appellant did notproduce any permission from the Department for purchasing cementfrom outside. Even if purchased, it was to be checked by check measurebut there was no check measurement. The tabular statement shown bythe appellant, only represents the theoretical requirement in the quantityof cement. He referred to the contractual provisions in this regard whichwe will refer to. In the letters of the Officers, there is no referenceabout the use of cement by the appellant which was brought from outside.The letters written by the appellant also complained only of inadequacyof supply of cement and there is no mention of use of cement which hebrought from outside. More importantly, he referred to the contractualprovision to find that the Government is entitled to recover the cost oftheoretical quantity which is not used and use of any lesser amount incomparison to theoretical amount would only enure to the Department.

69. We must refer to the contractual provision which has not beenreferred to by the Arbitrator. The contract provides that cement will besupplied at cost by the Department inter alia and the cost of cementissued will be recovered from the contractor’s bill at the rate specified.The contract also contains the theoretical requirement of importantmaterials which include cement which are set out. The rate of recoveryis shown as Rs.416/- per metric tonne. However, the important aspectswhich weighed with the Sub-Court are contained in the followingprovisions relating to the scarce materials like cement. It reads as follows:-

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“The contractor is expected to use the scarce materials like cementand steel as per the theoretical requirements shown above.

A schedule of quantities of important materials like steel cementetc., required for execution in accordance with the requisitespecifications is appended hereto for which recovery will beaffected. If these materials drawn according to a schedule areshort used, the excess quantity so drawn should be returned tothe Department in good condition and no payment will be made tothe contractor therefore. If they are not so returned to thedepartment, their cost will be recovered at the market rateprevailing at the time of supply or the issue rate whichever isgreater plus storage charges plus sales tax if leviable.

If materials are drawn in excess of theoretical requirementsindicated in the appended schedule, the excess quantity should bereturned to the Department in good condition. If they are not soreturned to the Department their cost will be recovered at issuerate plus 100% surcharge or market rate whichever is higher plusstorage and sales tax if leviable.

If materials are either short drawn or short used (though drawnaccording to schedule) (1) the savings due to short drawal/ useshould be secured to Government by recovering the cost thereofat issue rate from the Contractor. In the case of materials shortused, though drawn according to schedule this recovery will be inaddition to the recovery to be made for the cost of materials notreturned as stipulated above.

The Executive Engineer will decide the approximaterequirements of explosives. If they are drawn in excess of thesame, the excess quantity should be returned in the Departmentin good condition. If they are not so returned to the Departmenttheir cost will be recovered at issue rate plus 100% surchargeover from the contracting bill.

The Contractor should maintain separate ledgers for each ofthe items which are either supplied by the Department or requiredto be procured by the Contractor and permit the Exec. Engineeror his authorized subordinate or scrutinize the Registers any timeand note in account of the materials on hand.”

(Emphasis supplied)

70. Let us see what the contract has really provided for. We aredoing this for the reason that the Sub-Court set aside the award in regardto this claim. The appellant filed revisions against the judgment of theSub-Court. We have noticed that essentially, the High Court proceededbased on the Bar under Clause 59. The matter has not been dealt withas such by the High Court. Here also after finding that Clause 59 willnot come in the way of the claim, we could have remitted back thematter to the High Court for consideration of the matter. Having regardto the long efflux of time, we are undertaking the task of considering thematter.

71. A perusal of the contractual provisions which we have referredto yields the following inevitable result. Cement is a scarce material tobe supplied by the Department. The appellant was to maintain separateledger for the item for which cement was supplied by the Department.The issue price was Rs.416/- per metric tonne. The cost of cement atthe said rate was to be recovered from the appellant’s bill at the issuerate. Thus, if the value of the work is Rs.100/- and the value of thecement is Rs.5/-, the appellant would get only Rs.95/-.

72. The next question is the effect of the other provisions whichwe have quoted. We have already noted that there are theoreticalrequirements in regard to the use of cement. It is not unnatural for theDepartment to prescribe for the theoretical requirement. This is to ensurethat it is used exactly as per the theoretical requirement so that thestructure on the one hand is built in a safe manner and at the same timenothing in excess is used so as to avoid wastage of scarce material.There are three situations which are contemplated. In the first situation,it is provided that if materials are drawn according to the schedule andare short used then the excess quantity is to be returned to the Departmentin good condition and for the same the contractor will not get any payment.Furthermore, if the short-used material is not returned to the Department,their cost will be recovered at the market rate or at the issue rate whichis greater plus wastage charges and sales tax. An example which wemay take, would be if the requisite specifications is that 10 metric tonnesof cement is to be drawn and he draws 10 metric tonnes but he actuallyused only 8 metric tonnes there will be a short use of 2 metric tonneswhich he would have to return to the Department.

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A73. The second situation is where the materials are drawn inexcess of theoretical requirements. The contract contemplates that insuch a situation, the excess drawn quantity must be returned to theDepartment in good condition and otherwise there will be recovery atthe issue rate plus 100% surcharge or market rate whichever is higherplus storage and taxes.B

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74. The third situation contemplated is that if the materials areshort drawn or short used it is specifically provided that in such a situation,the saving due to short drawal/ use should be secured to the Governmentby recovering the cost thereto at issue rate from the contractor. Thus, inthe example, we have taken if 10 metric tonnes is actual quantity as perCthe specifications which can be drawn but if only 8 metric tonne is drawnby the contractor while he was to use 10 metric tonnes, the saving dueto short drawal was secured to the Government by recovering the costthereto at the issue rate from the contractor. This means that instead of10 metric tonnes, if 8 metric tonnes is drawn, the contractor would stillDbe liable for recovery from his bill for the entire 10 metric tonnes, though,he has actually drawn only 8 metric tonnes. In respect of short usedmaterial, though, properly drawn the recovery would be in addition tothe recovery for the cost of materials which is returned as we havenoted above. Further, the contract contemplates that if materials arerequired to be procured by the contractor, he must maintain separateEledger for each of the item which are so required to be procured by thecontractor.

75. This would mean that if the appellant had indeed securedcement from outside, the appellant was obliged under the Contract tomaintain a separate ledger. Further the Contract contemplates that thereFcould be recovery from the bill of the Contractor for the cost of cementwhich is actually not supplied to the contractor and it will be based onthe theoretical requirement as we have already referred to above. Thus,the mere fact that there has been excess recovery meaning thereby thatwithout issuing the cement to the appellant the amounts have beenGrecovered would not mean that the appellant would be able to substantiatehis claim that there was inadequate supply of cement. That is a matterwhich must be substantiated with reference to other material.

76. But there are two situations which can arise. Cement may beavailable with the Department and the Contractor draws only lesserquantity than provided in the specifications which is based on technicalrequirements. In such a case, undoubtedly the Clauses which we haveadverted to would apply. What however would be the position if cementis not available and consequently the Contractor is not supplied and he isnot in a position to draw cement. In such a scenario also, will it be a caseof drawal of cement by the Contractor which is less than the specifiedquantum? It would be so, but it may have different implications.

77. At this juncture, we may look at the correspondence whichmay throw light. In the letter dated 30.06.1979 written by the appellantto the Executive Engineer, we find there is no mention even about theinadequate supply of cement. Next letter is dated 26.07.1980. This is aletter where reference is made to all the three contracts. There is areference in this letter no doubt about the purchase of cement fromother sources. He seeks return of the cement so that extra quantity ofcement may be reimbursed. There is no reference to any particularquantity and there is no reference to which the other sources are.

78. The next letter is dated 16.07.1981. Here the reference ismade to Agreement No.10/78-79. In this letter there is no complaintabout the cement. Finally, there is letter dated 07.10.1982 which isaddressed by the appellant to the Superintending Engineer. Here thereference is made to the Agreement No.11/78-79. No doubt in the bodyof the letter he also adverts to the other contracts. Substantially, theletter is one where he makes various complaints and finally, he makes aclaim for enhancement. Here he says in this letter that there is inadequateand irregular supply of cement which affected his steady progress ofwork during 1979, 1980 and 1981. He says inadequate supply causedhim substantial loss to the work done. A look at the correspondence bythe departmental officers at this juncture may be not out of place. Letterdated 13.11.1982 written by the Executive Engineer to the SuperintendingEngineer inter alia reads as follows:

“It is a fact that there was difficulty in obtaining and procuringcement for the project. The enclosed table indicates the availablecement in the division. The total cement is used on this project

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Aalone for the works of Sri K. Marappan. It can also be seen fromthe statement the maximum percentage of cement available wasspared to the works of Sri K. Marappan. Extreme efforts havebeen made for additional allotment of cement with great difficultysome additional allotment have been obtained as clarified in thestatement. On the face of the over all shortage of cement and theBpossibilities of securing the full requirement of cement being bleak,the contractor could not be forced to increase the rate of progresswhich he was capable of managing, since most of the work carriedout upto March, 81 being at lower levels of the dam. This shortageof cement was felt continuously.Reference is invited to the letterCof Superintending Engineer No. 1230 CE dt. 13.6.81 and 831 CEdt. 27.4.79 wherein request for additional quantity of cement wasmade to Chief Engineer.

79. In letter dated 18.11.1982 written by the SuperintendingEngineer to the Chief Engineer within 5 days of letter dated 13.11.1982DSuperintending Engineer recommended completion through the samecontractor with enhancement. In letter dated 30.11.1982 written by ChiefEngineer to the Special Secretary to Government, Irrigation Department,it is inter alia stated:

“It is a fact that there was a difficulty in procuring the cement forEthis project. Overall shortage of cement and the possibilities ofsecuring the full requirement of cement being bleak, the contractorcould not be forced to increase the rate of progress which he wascapable of managing. The shortage of cement was feltcontinuously from the starting of the work till to-day.”

F80. From the correspondence, it would appear that the officersproceeded on the basis that there is a shortage of cement. Therefore,this appears to be a case where sufficient cement may not have beensupplied to the appellant. However, it is to be remembered under Clause10 of the agreement no right to compensation lies for short supply ofcement. Here the case of the contractor appellant which is accepted byGthe arbitrator is that this is not a case where compensation for shortsupply of cement is made by the appellant. All that the appellant is seekingis to be given, is the quantity of cement, which he brought from othersources or the monetary equivalent.

81. We proceed on the basis that the claim for return of the cementdoes not involve infraction of Clause 10 which forbids compensation onaccount of short supply of cement. The question, however, arises whetherthe arbitrator has misconducted himself in arriving at the amount of cementsupposedly brought from other sources by the appellant to carry out thework. As far as the monetary equivalent is concerned as we have alreadynoted it is at the issue price fixed under the contract itself and it is not anescalated amount so the measure of the amount of reimbursement maynot attract Clause 59. The only point, therefore, which remains is whetherthere was any basis for the arbitrator to have found that the appellanthad indeed brought the quantity of cement from other sources and usedit for the works in question.

82. The arbitrator has proceeded on the basis of the admittedcorrespondence between the officers to find that there is shortage ofcement. The sub-court on the other hand finds that none of thecorrespondence by the officers indicate that the appellant was givenpermission to buy cement from outside. There is no indication in any ofthe letters written by the appellant which the other sources were fromwhich he was procuring cement. The most important obstacle for theappellant is the clause in the contract which has been referred to by usand which is referred to by the sub-Court, namely, for procuring cementby the contractor, he must maintain ledger and which may be open toscrutiny by the officer as and when demanded. In this case, the appellanthas not produced any ledger showing purchase of cement from othersources. There is no written permission produced to purchase cementfrom other sources. No voucher has been produced by the appellant toestablish purchase of cement from outside.

83. The arbitrator, however, has found that even non-productionof vouchers is not material as it is proved that appellant has purchasedcement from outside. There are two things which apparently the arbitratorhas taken note of. The arbitrator finds that there is no denial about thequantity of the work done by the contractor and also about the quantityof cement used for bringing from other sources. It is stated in the counteraffidavit that exact short supply of cement can be shown only aftertaking over of measurement. It is further found that measurement wasalready taken. The second aspect is arbitrator finds that as the unstampedreceipt and the cement issue register though called for by the appellant A

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Awas not produced, adverse inference must be drawn. If the matter asalleged is not denied or is admitted then it may not be necessary toadduce evidence to prove the same. This principle is equally applicablebefore the arbitrator as it is before the court of law. Perhaps it is all themore applicable in the case of proceedings before an arbitrator.

B84. We are in one sense handicapped by the fact that the appellanthas not produced the counter affidavit filed by the State before thearbitrator. It is true that if the case pleaded by the State amounts toadmission that the cement was brought from outside by the appellantand the matter was only regarding the measurement to be carried outthat may give the impression that the arbitrator particularly having regardCto the non-production of the unstamped receipt and cement issue registerdespite being called for had some justification for coming to the conclusionthat the appellant had procured cement from outside. Then the furtherquestion would be the only quantity of cement which was purported tobe bought from outside by the appellant.

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85. State definitely has a case, however, that there is no evidenceby the appellant having procured cement from outside sources as he hasnot produced vouchers as that is seen dealt with by the arbitrator. Theexact quantity of cement purchased from outside is not pleaded. Insteadwhat the appellant contended for and what was accepted by the arbitratorEwas that the quantum of cement which was used could be found outfrom the quantum of work done. This is clear from the statement evenon the basis that when a particular quantum of work is done, as per thetheoretical requirement for cement involved in such work, the quantityof cement actually used by the appellant has been arrived at and afterdeducting the quantum of cement which was actually issued, the balanceFamount of cement which the appellant has used for the work from outsidesource has been arrived at. We have referred to the contractual provisionand it would be hazardous to arrive at the amount of cement, used fromother sources based on quantum of work done.

86. But arbitrator overlooks the fact that under the contract theGappellant was supposed to make entries in the ledger. A party is supposedto produce the best evidence or rather the evidence which under thecontract is contemplated. The failure on the part of the appellant toproduce the ledger has fatal consequences. The matter becomes further H

aggravated by the failure on the part of the appellant to even producevouchers or bills in support of the claim to purchase the cement fromoutside sources. This is even if we are to ignore the fact that there is nowritten permission for purchase of cement from outside. We proceed onthe basis that a contractor may without written permission but for thepurpose of the work purchased cement from outside. But certainly, thefact that there are neither vouchers nor any ledger entries nor billsproduced which persuades us to hold that the matter may warrantinterference with the award under Section 30. We are not inclined toaccept the claim.

CLAIM NO.VII

87. As regards this claim, the claim appears to be that appellantcollected materials and it was lying at the site. Admittedly, the appellanthas not used this material for the purpose of doing the work. Only thecase set up by the appellant is that he was given an assurance that hewill be permitted to carry out the work and therefore, since he has spentmoney for the same, he must get the amount which is claimed for havingspent on the material. We are of the view that insofar as the appellanthas not used any of the materials to carry out the work and sets up theclaim only on the basis of assurance which has not been admitted, theaction of the appellant in purchasing the materials cannot result inestablishing his claim for compensation. It is to be noticed that theappellant raised a claim for enhanced compensation. He alleged thatthere was delay on the part of the respondent on various grounds. Thisis apart from alleging other factors like breakout of malaria, unfavourableweather and delay in taking decision by the departmental officers, whichcontributed to escalation in cost. Correspondence was exchanged withthe Executive Engineer and the Superintending Engineer, theSuperintending Engineer and the Chief Engineer and finally between theChief Engineer and the Government. It appears that at that stage appellantinvoked the arbitration clause and a panel of arbitrators gave their award.In fact, the work itself was stopped. Clause 59 prevents the Court fromawarding compensation on account of any factor relating to the delaywhich may be due to any cause whatsoever. In such circumstances, weare of the view that the appellant has also not made out any cause forcompensation in regard to this claim.

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ACLAIM NO.IX

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ACLAIM NO.IX

88. As far as the question relating to interest is concerned, thearbitrator has awarded interest at 12% from the date of the claim butexcluded interest from commencement of proceeding till date of award.The question relating to interest is no longer res integra as we find thatBthe issue has been dealt with in a recent judgment of this Court in AssamState Electricity Board & Ors. v. Buildworth (P) Ltd. reported in 2017(8) SCC 146 to which one of us was a party. As long as the agreementbetween the parties does not prohibit grant of interest and the matter isreferred to the arbitrator, arbitrator would have power to grant interestCpendente lite. The Court inter alia held as follows:

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“21. The next aspect of the matter relates to the award of interestfor the period from 7-3-1986 to 31-12-1997. The arbitrator awardeda lump sum of Rs.20 lakhs for a period of 11 years. The HighCourt set aside the award of interest on the ground that Section29 of the Arbitration Act, 1940 contemplates the award of interestonly from the date of the decree. The issue as to whether interestcould be awarded for the pre-reference period and pendente liteunder the Act of 1940 is not res integra. In Irrigation Deptt., Stateof Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508, a ConstitutionBench of this Court held that: (SCC pp.533-34, para 44)

“44….. Where the agreement between the parties does not prohibitgrant of interest and where a party claims interest and that dispute(along with the claim for principal amount of independently) isreferred to the arbitrator, he shall have the power to award interestpendente lite. This is for the reason that in such a case it must bepresumed that interest was an implied term of the agreementbetween the parties and therefore when the parties refer all theirdisputes – or refer the dispute as to interest as such – to thearbitrator, he shall have the power to award interest. This doesnot mean that in every case the arbitrator should necessarily awardinterest pendente lite. It is a matter within his discretion to beexercised in the light of all the facts and circumstances of thecase, keeping the ends of justice in view.”

89. The sub Court set aside the award of interest for the periodfrom 26.4.1988 till the date of the award namely 19.8.1988 which is thependente lite interest. This is on the basis that arbitrator has no power toaward interest on amounts found due. This is purportedly followed in thejudgment of this Court in Smt. Aruna Kumari vs Government Of AndhraPradesh And Anr. reported in AIR 1988 SC 873. This Court took theview that entering upon reference is to be taken as the date ofcommencement of arbitration proceedings for calculation of interest.And this Court took the view therein that there is no power to grantinterest from the date of commencement of arbitration. However, inview of the decision in Jugal Kishore Prabhatilal Sharma vs.Vijayendra Prabhatilal Sharma 1992 (1) SCC 508 as followed in TheNational Highways Authority vs. Afcons-Apil Joint Venture 2017(8) SCC 146, the sub Court was not justified in setting aside interest andthe interest as awarded by the arbitrator is restored.

90. Accordingly, we partly allow the appeals. The award in so faras it relates to Claim No.I, as accepted by the sub-Court is restoredalong with interest on the same as awarded by the arbitrator. The amountshall be calculated and paid within two months of production of certifiedcopy of this judgment.

Devika Gujral

Appeals partly allowed.

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