ASIA FOUNDATION Vs. STATE OF ORISSA

JUDGEMENT

(1.) THIS appeal filed under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') is directed against the order of the learned Subordinate Judge. Bhubaneswar refusing to set aside the award and making it the rule of the Court.

(2.) THE respondent -State of Orissa represented by the Executive Engineer, Kapur Dam Division, Indravati Project laid a claim of Rs. 9,62,305/ - against the appellant before the Arbitration Tribunal, Orissa vide claim case No. 14 of 1985. The appellant made a counter claim of Rs. 1,66,532/ - as compensation for idle labour due to interrupted power supply, Rs. 3,15,700/ - towards extra chiselling rate and refund of security deposit of Rs. 1,21,960/ -. The Arbitration Tribunal (hereinafter referred to as 'the Tribunal') rejected the counter claims laid by the appellant. It however, awarded a sum of Rs. 6,03,450/ -in favour of the respondent against the total claim of Rs. 9,62,305/ -. After receipt of the award from the Tribunal in the Court, the learned Subordinate Judge issued notice to the parties. The appellant filed objection under Section 30 and 33 of the Act to set aside the award. The learned Subordinate Judge over -ruled the objection and rufused to set aside the award by the impugned order which as already noted, is the subject -matter of challenge. The case of the respondent as disclosed in its claim statement before the Tribunal is as follows : Pursuant to the tender call notice issued by the Executive Engineer, Podagada Dam Division for the work of 'construction of Twin Discharge wall below the foundation base of Kapur North Dam of Upper Indravati Project' the appellant M/s. Asia -Foundation and Constructions Limited submitted its tender which was accepted by the State Government in the Irrigation and Power Department for a tendered amount of Rs. 60,84,500/ -. Accordingly, agreement No. 27 -F -2 of 1981 -82 was executed between the appellant and the concerned Executive Engineer. The date of commencement of the work as per the agreement was 4 -12 -1982. A sum of Rs. 4 lakhs was paid on 1 -2 -1982 to the appellant towards site installation/mobilisation. The appellant commenced the work as stipulated in the agreement and continued to work till 3 -4 -1982. By 17 -2 -1982 the appellant executed panel No 18 which was measured In 2nd R/A bill and was paid Rs. 3,19,985/ -by the Executive Engineer. Subsequently, it executed panel No. 20 which was measured in 3rd running bill and the Executive Engineer on 18 -3 -1982 paid a sum of Rs. 2,42,320/ - to the appellant. The appellant was thus, paid a sum of Rs. 3,62,305/ - which included Rs. 4 lakhs received as advance) for execution of the aforesaid two panels. The progress of the work was not as per the agreement and with a view to cover up its lapses the appellant insisted for installation of stand by diesel generators for continuity in power supply to avoid idling of its machineries. The appellant was clearly informed that it would be duly granted extension of time equal to the total period of power failure. Although the appellant was given all facilities for clue execution of the work, it instead of speeding up the progress of the work started removing the equipments, machineries etc. from the site. Ultimately, the appellant completely stopped the work and abandoned the site. By the construction of only two panels out of forty panels, the very purpose for providing an impervious curtain in the deepest section of the dam could not be done and the respondent took up alternative design for excavation of open cut off. On account of adoption of alternative design, the work done by the appellant (construction of two panels) became totally useless for the department and it suffered a loss of Rs. 9,62,305/. It is accordingly entitled to receive the said amount from the appellant with 12% interest thereon. The appellant after receiving notice from the Tribunal filed its counter denying the claim. The appellant in its counter pleaded. inter alia, that the notice inviting tender contained quantities of various items of work to be executed, the specifications, method of execution along with maps and sections showing the disphrage wall. The drawings appended did not indicate the presence of any layer of boulders, but showed a firm rockline underlying the over -burden. Basing on such date contained in the notice inviting tender, it submitted its tender. The concluded agreement containining the bill of quantities of various elements provided for chiselling to bore through hard rock etc, and provided for a total of 2400 hours of chiselling for 4680 square meters of disphargm which meant approximately 0. 8 hours of chiselling for every square meter of diaphragm wall. This fact together with the drawings in the notice inviting tender gave the picture that they were hardly in bouldery layers present in the sub soil. It is a well known fact that in bouldery layers the boring of discharge on large scale is extremely difficult and if they are massive enough, it may well become impossible even with reverse circulation rigs. The appellant quoted its rate on the basis of tender drawings and with a belief that it was required to chisal in rock of approximately 0.5 hours/square meters of disphragm wall only and had provided their equipment and submitted rates accordingly. It had no reason to question reliability of the technical date supplied by the Executive Engineer. The appellant duly mobilised its rigs and demanded power either direct and/or through stand -by generator sets for operation of rigs. The department did not supply power as per the requirement either directly or by providing stand -by generators. By the time it completed two panels, it was found that there was a massive layer of boulders of several meters overlying the bedrock, boring through which was impossible. In the circumstances, the appellant intimated the department that the execution of disphragm wall became impossible for performance and the contract should therefore be treated as furstrated. The whole problem was discussed with the Chief Engineer of Central Water and Power Commission during his visit when the appellant explained the impossibility of construction of disphragm wall in view of the type of starta met with and alternatives ware suggested. That the execution of disphragm wall was impossible for performance is established when the department itself adopted alternative methods of cut off wall. The appellant was. therefore, released from contractual obligations under the law and the contract stood frustrated and there was nothing wrong for the appellant from withdrawing from the site. The appellant accordingly, pleaded in its counter that it is not obliged to reimburse any money to the department.

(3.) SHRI Pal, learned counsel for the appellant confined his argument only with regard to the validity of the award passed for Rs. 6,08,450/ -. Following are his contentions :