K N SATHYAPALAN Vs. STATE OF KERALA

JUDGEMENT

(1.) The appellant entered into an agreement with the State of Kerala on 10th October, 1985 whereunder he was entrusted with the construction work of the Chavara Distributory from Ch.7440M to 9440M and 10475M to 14767M. Disputes having arisen between the parties, the matter was referred to arbitration. The Superintending Engineer, Siruvani Project, Palghat, the designated Arbitrator in terms of the contract, was appointed as the sole Arbitrator. By his award, which was published on 2nd September, 1989, the Arbitrator awarded a total sum of Rs. 42, 21, 000/- with 12% interest per annum from the date of the award. Upon the passing of the award the appellant herein filed O.P. (Arb.) 40/89 in the court below under Section 17 of the Arbitration Act, 1940 for passing a decree in terms of the award. The State of Kerala filed a petition under Section 30 of the Act challenging the award and for setting aside the same.

(2.) The application filed by the State was dismissed and aggrieved thereby the State of Kerala preferred an appeal in the High Court of Kerala at Ernakulam, being MFA No. 980 of 1990 C.

(3.) The appellant herein raised claims under 12 different heads but the Arbitrator allowed only claims (a), (e), (g), (i) and (k). Although, in the memorandum of appeal, the entire award in favour of the appellant had been challenged, but the arguments were addressed only with regard to claims under heads (a), (g), (i) and (k). A preliminary objection was raised in the appeal that the Superintending Engineer, who had been appointed as the Arbitrator and had entered on the reference, had been suspended from service for gross mal-practice, and the Government had informed all concerned that the Arbitrator was not to continue with the reference. The Arbitrator retired on superannuation while he was under suspension and the award was made after his retirement. According to the State of Kerala, in the circumstances, the award passed by the Arbitrator was without jurisdiction. The aforesaid objection being preliminary in nature, the same was taken up first for consideration and it was held by the High Court that such an objection was without any merit. The Arbitrator, who was working as Superintending Engineer was placed under suspension on 31st May, 1989. As per an agreement between the parties on 14th February, 1989, the time for making and publishing the award was extended upto 14th June, 1989. Even after the Arbitrator was suspended from service, both sides had agreed on 14th June, 1989 to extend the time further for making and publishing the award upto 14th October, 1989. The Arbitrator retired from service while under suspension on 30th June, 1989. In the light of the said facts, the High Court agreed that the court below could not revoke the authority of the Arbitrator, which could only be done under Section 5 of the Arbitration Act, 1940, with the leave of the Court. Accordingly, the preliminary objection raised on behalf of the State of Kerala that the Arbitrator had no authority to continue with the arbitration after his suspension or retirement, was rejected by the High Court. Claim (a) of the appellant herein involved the claimant's entitlement to get compensation for interruption of work by anti-social elements and failure of the Department in removing such miscreants from the sites which caused the claimant heavy financial losses by way of idle men and machinery, plant and equipment. The claim made under the aforesaid head was for a sum of Rs.11, 40, 000/-. The Arbitrator was satisfied that there was interruption of work by anti-social elements and that the State had failed to remove such obstruction from the site. Accordingly, the Arbitrator awarded a sum of Rs. 7, 30, 000/- under this claim. Claim (g) was confined to the question as to whether the claimant was entitled to compensation for the losses suffered by him on account of price escalation of materials that had taken place during the extended period of completion when such extension of time was necessitated by departmental failure, although there was no provision for escalation of costs in the contract. Under the said clause the appellant claimed an amount of Rs.39, 90, 198/- but was awarded a sum of Rs.11, 70, 000/- over and above the amount as per the rates in the agreement for the work done after the original period of contract till 9th February, 1987.