UNION OF INDIA Vs. M/S. BUILD FAB

JUDGEMENT

(1.) The petitioner had engaged the respondent (claimant) for constructing a building for Regional Provident Commissioner at Kolkata. The agreement to that effect was executed on 21st August, 1994. It was initially agreed upon by and between the parties the starting date for execution of the work was to be 27th August, 1994, and the work was to be completed in twenty four months. The projected date of completion of the work, thus, was 26th August, 1996. The value of the contract was Rs.90,34,898/-(Rupees ninety lacs thirty four thousand eight hundred and ninety eight only).

(2.) Dispute had arisen in relation to certain claims made by the contractor after payment of final bill, in which no disbursal had been made in respect of certain items, or partial disbursal had been made. The arbitrator, whose award is under challenge in this petition was appointed in terms of an order passed under Section 11(6) of the Arbitration and Conciliation Act 1996. I find from records that at the initial stage the arbitrator's authority to act in that capacity was questioned, but the petitioner's plea on that count was rejected by the arbitrator in an application taken out under Section 16 of the 1996 Act. In the statement of claim filed before the arbitrator, the claimant had raised claims under six heads. The first claim comprised of three parts, in respect of escalation, penal recovery of cement and extra/substituted items. A total sum of Rs.5,11,655/-(Rupees five Lacs eleven thousand six hundred and fifty five only) was claimed under these three heads. The second claim related to cost of maintaining extra establishment both on-site and off-site for twenty eight months, being the extended time within which the contract was completed and the sum claimed was Rs.5,27,000/- (Rupees five lacs twenty seven thousand only). Claim No. 3 related to extra cost on tools and plants for prolongation of the work and a sum of Rs.2,63,000/- (Rupees two lacs sixty three thousand only) was claimed. The fourth claim was for Rs.5,27,000/- (Rupees five lacs twenty seven thousand only) on account of loss of profit resulting from prolongation of the work beyond the stipulated period of twenty four months. The rest two claims were in respect of interest and costs. Upon hearing the learned counsel appearing for the parties after completion of pleadings and examination of evidence, the arbitrator awarded a sum of Rs.18,04,403/-(Rupees eighteen lacs four thousand four hundred and three only) as principal in relation to the first four claims. 12% interest was awarded from 17th February, 2005 till the date of the award, which was computed to be Rs.4,63,371/-(Rupees four Lacs sixty three thousand three hundred and seventy one only) and 18% interest with effect from 10th April, 2007, to be computed from the date of the award till the date of payment. Costs of Rs.1,00,000/- was awarded in addition, against claim no. 6. The award was made and published on 9th April, 2007.

(3.) This award is assailed in this proceeding on diverse grounds. It appears from the award itself that in course of hearing before the arbitrator, the petitioner sought to exclude certain claims as "excepted matters". The arbitrator on this point, inter alia, held:- "..........But claims which are incidental to and arise out of or flow from the contract but which do not form the subject matter of the contract cannot be termed as 'excepted matters' as for instance refund of security deposit, escalation, loss of profit due to prolongation of the contract beyond the stipulated period of completion, loss due to blockage of working capital, loss due to inability to plough back the working capital to any gainful enterprise because of delay in making timely payment of 'on account' bills etc. etc. These are very much arbitrable though these do not form the subject matter of the contract."