SEGAT BROTHERS Vs. UNION OF INDIA & OTHERS

JUDGEMENT

(1.) This appeal is on behalf of the plaintiff firm against an order dated January 20, 1973, passed by the Sub-Judge First Class, Amritsar, staying the suit under Section 34 of the Arbitration Act.

(2.) The suit was instituted by Messrs Segat Brothers, Builders and Contractors, against the Union of India and two other officers of the Food Storage Department, C.P.W.D., who held the offices of Superintending Engineer and Executive Engineer. The plaintiff submitted a tender in the year 1968 for the construction of a grain godown of the capacity of 5,000 tonnes at Batala. The estimated cost of the work was Rs. 2,47,646/-. Acceptance of the tender was conveyed to the plaintiff through a letter dated December 30, 1968. The work was to be completed by April 18, 1969. Time was subsequently extended to April 20, 1970. In the conditions of contract there was an arbitration clause numbered as 25. In clause No. 2 provisions was made for the compensation for delay in the execution of the work. The plaintiff was liable to pay as compensation an amount equal to 1 per cent or such smaller amount as the Superintending Engineer may decide on the estimated cost of the whole work for every day that the due quantity of the work remained incomplete. The decision of the Superintending Engineer with regard to the payment of compensation was to be final. It was through a letter dated March 27, 1971, that the plaintiff was directed to pay by way of compensation an amount at the rate of 5 per cent on the estimated cost of the work. It was made clear in that letter that the extension of time for the completion of the work was granted up to April 20, 1970, without prejudice to the rights of the Government to recover damages in accordance with clause 2 of the agreement.

(3.) It was on January 25, 1972, that the plaintiff instituted a suit for obtaining a declaration to the effect that the amount of compensation directed to be paid through letter dated March 27, 1971, was illegal, oppressive, against the terms of the contract and violative of the principles of natural justice and on that account void and inoperative. An application was filed on behalf of the Union of India stating that the dispute between the parties, in view of clause 25 of the agreement, could only be decided through an arbitrator named in the agreement. On the prayer made by the Union of India the trail Court then stayed the suit.