NATIONAL FERTILIZERS Vs. PURAN CHAND NANGIA

JUDGEMENT

(1.) This appeal, which arises out of an award passed under the Indian Arbitration Act, 1940 concerns the interpretation of a 'variation' clause in the contract which allows the appellant, the National Fertilizers Ltd., to issue directions to the contractor varying the extent of the contract work, both upwards and downwards up to 25%. Question is whether (as contended by the appellant) the said 25% is to be arrived at by taking into account the net overall increase in the work i.e. by adding up the increases in work and 'deducting therefrom the decreases in work or whether (as contended for the respondent-contractor) the 25% was to be computed by adding up the total variations, both involving the increase in the work and the decrease in the work. The importance of the point is that if the variations exceed 25% of the contract price, the contractor is not confined to the contract rates but can claim market rates.

(2.) The disputes were referred to arbitration and the arbitrator gave a non-speaking award. The arbitrator's award was set aside by the learned District Judge on the ground that the reference was bad. He, however, gave alternative findings accepting the conclusions in the award. As the learned District Judge held the reference was bad, he set aside the award. The contractor appealed to the High Court which by its judgment in Civil Misc. (First) Appeal No. 211 of 1991 dated 18-10-94 held the reference was valid and allowed the appeal and directed the award be made Rule of Court. It is against the said judgment that this appeal is preferred.

(3.) The facts of the case are as follows : Quotations were called by the appellant for works amounting to Rs. 3,39,88,000. It appears that the respondent submitted his quotation which was opened on 12-9-84. His tender was accepted. But, instead of giving him the entire contract, the appellant awarded only 48% of the work of Rupees 3,39,88,000 amounting to Rs. 1,52,94,235, by letter dated 5-11-84. Part I of the work was up to Rs. 94,34,323 and Part II was up to Rs. 94,34,323. Subsequently, letter of intent was issued on 5/6-11-84 and then a work order was issued on 22-1-85. The said letter dated 22-1-85 of the appellant contained the ± 25% clause which permitted rates higher than the contract rates to be paid, as an exception. It stated as follows :