STATE OF BIHAR Vs. RAMA BHUSHAN BASU

JUDGEMENT

(1.) THE respondent, who is the proprietor of a construction firm Hindusthan Engineering and Construction Company, instituted a money suit on the 17th May 1957 against the State of Bihar through its Secretary in the Public Health Engineering Department for Rs. 1,08,299-1-3-0, as detailed in Schedules A to F of his plaint, and claimed interest thereon at the rate of 8 per cent per annum with pendente lite and future interest on the money that may be decreed in his favour. He stated in his plaint that there was a contract in writing on the 25th of December 1947 between the plaintiff and the Superintending Engineer, Public Health Engineering Department, on behalf of the Governor of the State of Bihar for construction of a Raw Water Pump House and Intake Well for the Sindri Fertilizer Factory Supply. THE plaintiff executed the contract work and received various payments on on-account bills. When the work was complete by September, 1950 a sum of Rs. 24,051-13-0 remained due to the plaintiff aad a final bill was submitted by him to the Construction Engineer, Public Health Division, Sindri. This amount was on account of difference in rates, measurements and recoveries. This bill, however, did not include the plaintiff's claim for iron and steel reinforcements rods supplied for construction work, claim for clearing debris that fell within the Intake Well as a result of the collapse, claim for excavation through soft rock, claim for cement brick revetment and cement brick steps to the Intake channel and claim for payment of sales-tax as those claims had already been made before the submission of the final bill and were pending before the Superintending Engineer. Schedules B, C. D, E and F given in the plaint related to these claims. Schedule A detailed the claim of Rs. 24,051-13-0. All those works were done by the plaintiff as and when they became necessary during the execution of the contract work. Alternatively the plaintiff stated in his plaint that if those works were not part of the contract, or if the contract for execution of those works was found invalid, the plaintiff was entitled to receive the price of those works and supply of materials as the defendant enjoyed the benefit thereof. About the claim for sales-tax, the plaintiff averred that in accordance with the contract and the dealings between the parties, he was entitled to add sales-tax on the amount of his dues and recover the same from the defendant as he had paid such tax from time to time during the execution of the contract. He further stated that the Chief Engineer, Public Health Engineering Department, by his letter dated the 21st May 1954 offered Rs. 5,000/- in over-all settlement of all the plaintiff's claim in an arbitrary manner and took an unreasonable stand that all the plaintiff's claims as decided by the Superintending Engineer were final and conclusive. He refused to submit the matter of dispute to the arbitration of Mr. B.N. Ghoudhary, who had been appointed by mutual consent of the parties, to settle other disputes regarding another contract work of infiltration gallery and appurtenances works at Sindri. THE plaintiff gave notice under Section 80, Civil Procedure Code, to the defendant on the 27th September 1954 which was received by the defendant's Secretary in the Public Health Engineering Department at Patna on the 29th September 1954. On the 22nd January 1957 a reply was received from the Chief Engineer to the plaintiff's solicitors' letter dated the 30th November 1956 asking the plaintiff to see the final bill in the Chief Engineer's office and to give an acquittance in full and final settlement of all demands made by him before any payment could be made to him. When the plaintiff went to the office of the Chief Engineer on the 12th February 1957 and inspected the final bill as prepared by the Public Health Engineering Department, he found that he could not agree to accept the sum of money offered to him. As there was no other alternative a suit had to be filed in Court for recovery of his dues.

(2.) A written statement on behalf of the defendant was filed in the trial Court on the 2nd of August 1957 to contend that the plaintiff's suit was barred by limitation and also the suit was not maintainable in Court in view of the provisions of Clause 25 of the agreement of contract meaning thereby that that clause was for arbitration of the disputes regarding the plaintiff's claim. It was also pleaded that the execution of work by the plaintiff was slow and the department had relunctantly given several extensions of time for completion of the work and all the items of claim of the plaintiff had already been considered and decided by the Superintending Engineer in pursuance of Clause 25 of the agreement and according to that and also the final bill prepared by the department the plaintiff was entitled to only Rs. 5083-5-3 which the defendant had offered and were still willing to pay. Plaintiff's claim for interest was disputed. The different schedules of claim given in the plaint were referred in the written statement and I shall refer to them when I come to deal with different items of claim. One more thing was clearly stated in the written statement about the final bill. The established practice of the department was that before the final bill was prepared all the claims of the contractors had to be settled and the contractors being satisfied about the claims and measurements of the whole work, had to give a certificate that they had no further claims on the work and that they had also agreed to the measurements given in the bill, and after the bill was passed and the money was paid, the contractors had to certify that the amount they had received was in full and final settlement of all demands concerning that work. The plaintiff, however, did not comply with this practice. The final bill that was prepared was in accordance with the decision given by the Superintending Engineer on the claims of the plaintiff but it was not accepted by the plaintiff unreasonably and that was how the amount shown due to the plaintiff on the final bill remained unpaid.

(3.) BEFORE the different items of the decree were challenged, learned Government Pleader raised two main objections against the plaintiff's suit. He contended that in view of Clause 25 of the contract agreement the plaintiff's suit was not maintainable in the Civil Court and further his , suit was also barred by limitation. About the execution of the work for which claim was made in the suit there was no dispute by the defendant. The agreement of contract was also not questioned in any way. Parties, however, differed about the meaning and scope of Clause 25 of that agreement. According to the defendant, that was an arbitration clause for purpose of settlement of all claims raised by the plaintiff by the Public Health Engineer or Superintending Engineer. Learned Government Pleader argued that under the proviso given under Section 21 of the Specific Relief Act if any person who has made a contract to refer present or future difference to arbitration and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. As Clause 25 of the agreement is an arbitration clause by which the parties had agreed to refer the difference in respect of the subject-matter of the con-tract, the present suit could not be maintained' in the Civil Court. Defendant's case was that all the differences between the parties arising out of the different claims made by the plaintiff had been decided by the Superintending Engineer as provided in Clause 25. His decision, therefore, could only be challenged within the limited scope of the Arbitration Act, 1940. I shall reproduce Clause 25 of the agreement: