TOMKOS ENGINEER AND CONTRACTORS Vs. UNION OF INDIA

JUDGEMENT

(1.) Appellant herein was the respondent in O.P. (Arb.) No. 229/90. Respondents filed a petition under Sections 16 and 30 of the Arbitration Act to set aside the award passed by the Arbitrator. The second respondent invited tenders for the work of Design, Fabrication, Supply, Erection and Commissioning of Assembly Tower at Polar Satellite Launch Vehicle Project, Valiamala Complex, Nedumangad. The appellant quoted for the work and the same was awarded to him. The contract period was originally stipulated as 9 months from 14.9.1984 and the price of the work was also stipulated. Accoridng to the appellant immediately after the award of the work they went to execute the work with necessary men and machinery. But because of the default in performing the obligtions of the respondents, the work could not be completed as originally scheduled and there was delay in completion of the work. Therefore, the appellant requested that in view of the delay caused on the part of the respondents an amount of Rs. 26,66,711.10 should be paid. Since the matter was not settled, it was referred for arbitration. A copy of the concerned agreement was produced by the respondents along with the counter affidavit as Annexure-R1 Clause 9 of Annexure R1 agreement provides for settlement of disputes by arbitration. The above clause reads as follows: SETTLEMENT OF DISPUTES Any disputes arising out of this contract shall be, to the extent possible, settled amicably through discussions between the contractor and the purchaser. If amicable settlement is not reached through mutual discussions, the disputes shall then be settled by Arbitration in accordance with Clause 27 of the Arbitration Act, 1940.

(2.) As a settlement could not be reached between the parties, the appellant invoked the Arbitration Clause in the agreement and filed O.S. (Arb.) No. 205/87 before the Sub Court, Trivandrum for referring the disputes for arbitration. The disputes which have to be settled by the Arbitrator were specifically stated in the suit which are as follows:

(3.) The respondents entered appearance and contended that the disputes are not liable to be referred for arbitration as there is no escalation clause in the agreement and the contract was a fixed price contract. Rejecting their contentions, Sub Court referred the disputes for arbitration and the parties were directed to suggest names of persons for appointment as Arbitrator. This decision was accepted by the respondents and they suggested oneof their officers to be appointed as Arbitrator. Thereupon the appellant challenged the said order by filing C.R.P. No. 1612/88 and this Court appointed a retired District and Sessions Judge as Arbitrator. Accordingly the Arbitrator entered on reference and both parties appeared before him and filed their statements. Issues were framed. Thereafter the respondents filed a petition for adding/amending certain issues. In that petition Arbitrator ordered that it can be considered at the time of final hearing. Issues were thereafter remodified at the time of final hearing taking into account the issue raised by the respondents also. But substantially the issues were one and the same. Arbitrator found that three years' delay occurred on account of the default of the respondents and thereafter if found that the prices of steal and certain other materials were increased and actual price increase of those materials should be paid. Other claims were rejected and therefore the Arbitrator awarded a total amount of Rs. 13,36,972.10. According to the respondents since it is a fixed price contract, the Arbitrator had no power to grant raw-material price increase apart from the original price agreed and therefore the Arbitrator has no Jurisdiction to pass the award in question, and therefore filed a petition to set aside the award. The Sub Court accepted the contention of the respondents and found that the award of the Arbitrator is liable to be set aside because of the following three grounds-(1) Time was the essence of the contract and contract was completed after the fixed time. (2) The Arbitration award is without jurisdiction as it is a fixed price contract. (3) Arbitrator has redrafted the issues.