WESTERN COALFIELDS LTD Vs. NARBADA CONSTRUCTION JABALPUR

JUDGEMENT

(1.) The appellant has filed the aforesaid two appeals under Section 37(b) of the Arbitration and Conciliation Act, 1996 (No. 26 of 1996) (for short 'the Act of 1996') against common order dated 9.8.1997, passed in Civil Suit No. 23-A/96 and Civil Suit No. 25-A/96 by IIIrd Additional District Judge, Chhindwara.

(2.) Facts giving rise to these appeals are thus : On 15.3.1990 the appellant invited tenders for construction of 198 miners quarters. 40 'B' type quarters and 2'C' type quarters for mine employees of WCL at Tandsi Project in Kanhan area District Chhindwara. The work cost was estimated at Rs. 2,35,26,072.30. The respondent submitted its offer at percentage rate for the said work which was accepted by the appellant vide letter dated 4.7.1991. An agreement No. 13 of 1991-1992 was entered into between the parties and work order was issued on 13.7.1991 which was to be completed within the stipulated period of 18 months from the date of work order, i.e., by 23.1.1993, in accordance with the terms and conditions of the agreement. As per terms of the agreement appellant was to arrange for cement, electricity, coal for bricks etc. at the fixed rate for the construction work. Appellant also agreed to make payment of monthly bills every month according to the progress report of the work. The respondent could not complete the construction work within the period of 18 months, hence, on three occasions vide letters dated 15.1.1993, 15.1.1994 and on 10.3.1995.) applied for extension of the period. The appellant granted provisional extensions without prejudice to the rights of levy of penalty and escalation vide letters dated 23.1.1994, 23.1.1996 and 20.3.1996, respectively. The respondent even after extensions could not complete even a substantial portion of the work and abandoned the work. The respondent alleged that the appellant failed to supply cement, electricity and coal and also failed to make the payment of regular monthly bills as such there was no option for the respondent but to abandon the remaining part of the work. Therefore, the respondent on 20 3.1996 served a notice on the appellant to appoint an arbitrator in terms of clause 13 of the agreement. The Chairman-cum-Managing Director failed to appoint arbitrator for deciding all questions and disputes of the claim of the respondent, hence, the respondent filed an application under Section 20 of the Arbitration Act, 1940 (for short 'the Act of 1940') on 23.3.1996 which was allowed vide order dated 31.7.1996 passed in Civil Suit No. 25-A of 1996.

(3.) The Chairman-cum-Managing Director of the appellants company in compliance of the order of the Court vide letter dated 11.10.1996 appointed one Shri A.G. Watwe as sole Arbitrator to adjudicate the dispute between the two parties and to pass a reasoned award. The details of the claim and counter claims of the parties' were also enclosed for the reference of the Arbitrator. The appellant filed the written statement to the claim of the respondent on 6.12.1996 while the respondent filed reply to the counter claim of the appellant on 27.12.1996 wherein an objection to the jurisdiction of the Arbitrator to decide the counter claim was raised as it was not entertainable in view of the order of reference passed under Section 20(4) of the Act of 1940, whereby the Court did not direct to decide the counter claim as it was not raised in the proceedings initiated by the respondent on the application under Section 20 of the Act of 1940. The Arbitrator without deciding the maintainability of the counter claim passed a reasoned award dated 26.3.1997 for Rs. 2,28,036.60 in favour of the respondent towards the claim of respondent and also allowed the counter claim preferred by the appellant of granting compensation to the tune of Rs. 29,35,401.16 wherein a deduction of Rs. 2,28,036.60 was made and an award of Rs. 27,08,114.56 was passed in favour of the appellant. 3A. The appellant filed an application under Section 36 of the Act of 1996 for enforcement of the award whereas the respondent filed an application under Section 34 of the Act of 1996 read with Section 30 of the Act of 1940 for setting aside the award passed against it and for grant of his claim. The learned Court below after hearing the parties set aside the arbitral award which dealt with the counter claim not contemplated by the order of reference made to the Arbitrator by the Court. After dealing with the various claims of the respondent the Court held that the delay was on the part of the appellant in not supplying the required material like cement, etc. for construction of quarters and also observed that during the stipulated period of 18 months or even during the extended period of 57 months only one-fifth quantity of cement was supplied though it had stock of cement. Similarly the supply of electricity and coal was irregular and payment of monthly bills was not made. Therefore, observed that the Arbitrator has ignored all the aforesaid facts and hence set aside the award in both the disputes and directed the Chairman-cum-Managing Director of WCL to appoint an impartial Arbitrator for adjudicating the dispute and to pass an award. If any counter claim is filed by the appellant in the Court the same shall be connected with the applications filed by the respondent and shall be forwarded to Chairman-cum-Managing Director so that the claim and counter claim be disposed of simultaneously.