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CASE NO.: Appeal (civil) 5489-5490  of  1995

PETITIONER: BHARAT COKING COAL LTD.

       Vs.

RESPONDENT: M/S L.K.AHUJA & COMPANY

DATE OF JUDGMENT:       21/02/2001

BENCH: S. Rajendra Babu & S.N. Phukan.

JUDGMENT:

RAJENDRA BABU, J. : L...I...T.......T.......T.......T.......T.......T.......T..J

   Two   works   were  assigned  by   the   appellant   for construction  of  108  and 72 units of B  Type  quarters  at Karmik  Nagar,  Dhanbad  pursuant to a tender  notice  dated 4/13.7.1981.    After  certain   negotiations  between   the parties, two work orders were issued by the appellant to the respondent on certain terms and conditions mentioned therein valuing  at  Rs.86,49,730/- and Rs.57,64,368/- for the  said two  works  on  14.3.1982 and two separate  agreements  were executed  by the parties.  The schedule dates for completion of  the  respective  works  were   fixed  as  24.3.1983  and 19.3.1983.   The  respondent  sought for extension  of  time which  was granted by the appellant.  Disputes having arisen between  the  parties, the matter was referred to  the  sole arbitrator,  Shri  M.P.Sharma,  the  then  Additional  Chief Engineer.   The arbitrator made two awards in respect of the two contracts on 14.5.1989, which were filed in the court of the  Civil  Judge  on 12.6.1990 in two  Title  [Arbitration] Suits  Nos.  37/86 and 40/86.  The learned Civil Judge  held that  the  notice for Title [Arbitration] Suit No.37/86  had been  served  upon  the  appellant   on  28.8.1990  and  the objections  filed on 14.9.1990 could be examined as they had been  filed  in  time.  So far as Title  [Arbitration]  Suit No.40/86  is concerned it appears that the service of notice on the respondent was made on 13.7.1990 of the filing of the award and the objections in question were filed on 18.8.1990 and  thus  apparently  there being a delay of five  days  in filing  the  objections  beyond  the  period  of  limitation prescribed  under  Article  119  of   the  Schedule  to  the Limitation  Act, 1963 were not considered.  On decrees being passed  in  terms of awards appeals filed in the High  Court having  met with failure, these appeals have been  preferred by special leave.

   The  parties  filed  elaborate   pleadings  before   the arbitrator in respect of both the agreements.@@                                   JJJJJJJJJJJ

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   The claim made in the first agreement is as follows:

   1.   Claim  for  payment  of   the  final  bill   amount Rs.3,10,000.00

   2.  Claim for payment of PLO escalation Rs.  20,000.00

   3.    Claim   for    compensation    for   making   late Rs.8,00,000.00 payment of running account bill

   4.    Claim   for   payment    for   labour   escalation Rs.4,12,000.00

   5.   Claim  for  refund of sales tax Rs.   60,000.00

   6.  Claim for payment of extra items Rs.10,31,350.00@@     JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

   7.    Claim   for  payment    of   material   escalation Rs.40,00,000.00

   8.  Keep Back Amount Rs.  8,000.00

   9.    Claim   for  payment  of  compensation   to   loss Rs.10,00,000.00  arising out of turnover due to prolongation of work

   10.    Claim  for  payment  on   account  of   loss   of Rs.2,00,000.00 reputation etc.

                       Rs.78,41,350.00 @@  IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

   =============  11.  With interest @ 18 % per annum  from@@     IIIIIIIIIIIIIIIJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ Rs.20,000.00  31.5.84 till date of actual payment of awarded@@               JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ amount or court decree whichever is earlier.

   12.  Arbitration Cost Rs.20,000.00

   Claim  made  in  the  dispute   arising  out  of  second agreement is as follows :

   1.   Claim  for  payment of the final  bill  amount  Rs. 2,00,000.00

   2.  Claim for payment of PLO escalation Rs.  15,000.00

   3.    Claim  for  compensation   for  making  late   Rs. 5,00,000.00 payment of running account bill@@             JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

   4.    Claim  for  payment   for  labour  escalation  Rs. 3,00,000.00

   5.  Claim for refund of sales tax Rs.  40,000.00

   6.  Claim for payment of extra items Rs.  6,54,000.00

   7.  Payment of material escalation Rs.25,00,000.00@@     JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

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   8.  Keep Back Amount Rs.  28,000.00

   9.   Claim  for  payment  of compensation  to  loss  Rs. 7,00,000.00  arising out of turnover due to prolongation  of work

   10.   Claim  for  payment  on account  of  loss  of  Rs. 2,00,000.00 reputation etc.

                               Rs.51,27,000.00 @@  IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

   =============  11.  With interest @ 18 % per annum  from@@     IIIIIIIIIIIIIIIJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 30.4.84  till  date of actual payment of awarded  amount  or court decree whichever is earlier.

   12.  Arbitration Cost Rs.20,000.00

   He passed two separate awards.

   In  addition  to  these pleadings, it appears  that  the arbitrator  asked  both  the parties to file  certain  joint statements and in this regard stated as follows:

   .Before going into the merits of the case the parties were advised to file joint statement signed by them, showing the  quantities,  rates  and the payments made  for  various items  and balance payment due to the claimant under various heads  and  other  particulars  on  26.4.89.   The   parties submitted   the  joint  statements   duly  signed  by   them containing  details of bricks and cement supply  statements, bill  statements  with  details of delay in payment  of  R/A bills  alongwith  relevant dates of measurements  and  other particulars,  including payable amounts under various  heads and measurements for extra items, rolling margin etc.

   The  arbitrator noticed in the course of his award  that the  joint  statements  signed by both the  parties  is  the backbone of the award.  The arbitrator rather strangely made the  two  awards  after making elaborate  reference  to  the pleadings  on  either side but not deciding any one  of  the claims  except  the  claim relating to payment  of  material escalation in the two claims.  On that aspect of the matter, the  arbitrator, after adverting to the pleadings, stated as follows:

   Since  the  prices of building materials and  labour cost  sky rocketting and the value of rupee going down,  the refusal  to  compensate  increase in material cost  on  some ground  or the other would lead to total financial  disaster to  the claimant.  The payment of advances like mobilisation has been made against rebate of 1½% claimed by the O.P.         and was  meant for mobilising resources before commencing  work. On the other hand very partly sum is payable against secured advance without hardly giving any financial assistance.  The planning  of procurement of material is linked with progress at  site.   Whereas during contract period the  work  hardly progressed  50% and the payment for work done was restricted to  16%  how could the planned procurement availing  secured advance  could  be  made in such solution.  The  payment  of material  escalation  for  the increase in cost  during  the

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extended  period  of the contract would give some relief  to disaster already caused financially to the claimant.

   On examination of the contract provision I find that the claimant had undertaken to complete the work at agreed rates within   the  stipulated  period   with  the  provision  for extension  of  time  to  execute at the  agreed  rates  till completion.   This  contention shall hold good provided  the extended  period is within a reasonable limit.  In this case the  original  stipulated  period is 12  months  and  actual completion  is  26  months having extension  element  of  14 months  which cannot be termed reasonable by any  yardstick. The grant of extension of time is a poor consolation.  It is not remedy for losses suffered on account of delay in supply of building materials committed to be supplied by the O.P.

   But after setting out the other claims of the respondent and  the rebuttals to them by the appellant, the  arbitrator concluded as follows:

   NOW, THEREFORE, I, the said M.P.Sharma, Sole Arbitrator after  hearing the parties at length examining and carefully considering  the evidence adduced the arguments advanced  by them,  the  discussions made above, scrutinising  the  joint statement  signed by the parties and written arguments filed by O.P.  DO HEREBY MAKE AND PUBLISH MY AWARD AS FOLLOWS:

   1.   The  Opposite  Party M/s Bharat Coking  Coal  Ltd., Dhanbad,  shall  pay the claimant i.e.  L.K.Ahuja &  Co.   a lump  sum amount of Rs.24,27,686.12 (Rupees Twenty four lacs twenty  seven  thousand  six hundred eighty  six  and  paise twelve only).

   I  am dividing the period in three years for calculation and payments of interest.

   a).   The aforesaid amount will carry interest @ 15% per annum for the following periods:

   I.   From 1.1.85 to 3.10.88 when the claimant  submitted the claim.

   II.   From  4.10.88  to  14.5.90   when  the  award   is published.

   III.   From  14.5.90 till the date of payment  or  court decrees whichever is earlier.

   2.   A sum of Rs.15,000/- (Rupees fifteen thousand) only towards  the cost of arbitration proceedings along with  the interest  @  15%  p.a.   w.e.f.  14.6.90 till  its  date  of payment or the date of court decree whichever is earlier.

   It  may  be made clear that the power to order award  of interest  on  all above amounts vests in the  Honble  Court from  the date of decree till the decretal amount is paid to the  claimant as provided under S.29 of the Arbitration  Act which  empowers the Honble Court deems reasonable from  the date  of  decree  till  payment of decretal  amount  to  the claimant.

   He  similarly  awarded in respect of second agreement  a

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lump sum of Rs.  16,74,197.29 with interest at certain rates and costs of the arbitration.

   We cannot but describe the arbitrators awards as hybrid which  are neither speaking awards nor non-speaking - partly speaking  and  partly non-speaking awards.  The law is  well settled  that  if  the  award made by the  arbitrator  is  a non-speaking  one the difficulty of showing that there is an error   apparent   on  the  face   of  the   award   becomes insurmountable   and  ordinarily  such   award   cannot   be challenged at all unless it is shown that the arbitrator has wholly  travelled  outside the contract which gives him  the jurisdiction.  The law is equally well settled that in cases of  speaking  awards the court can interfere if there is  an error  apparent  on the face of the award itself;  it  could also  be shown that the arbitrator has misconducted  himself in  arriving at certain conclusions which are either plainly contrary  to law or to the terms of the contract or  ignored the  provisions  of contract or the evidence on  record  and such  other similar matters.  When a lumpsum award is  made, it  is  all the more difficult to find out as to  what  went into the mental process of the arbitrator in fixing the same particularly  when  a part of the award is a speaking  award and  determines  the  portion of the claim in  a  particular manner  and in respect of other claims merely refers to  the pleadings  but  not decided the matter but gives the  award. The position of the appellant before the court is unenviable and  bristles  with  too many complexities to get  over  the awards.

   Realising  these  difficulties, Shri M.L.Verma,  learned senior  Advocate and Shri Ajit Kumar Sinha, learned Advocate for the appellant, very cautiously treaded their path to put forth  before  us the difficulties in upholding  the  award. Shri  S.B.Upadhyay, learned counsel for the respondent, with equal  astuteness and competence contended as to the  manner in  which  the  award  made  by  the  arbitrator  could   be maintained though it is bristles with many difficulties.

               We have adverted in detail to the consideration of the claim on payment of material escalation earlier.  The terms of the contract in this regard indicate as follows:

   Clause 17:  The contractor shall supply at his own cost all materials (except such special materials, if any, as may be  in  accordance  with the contract be supplied  from  the Engineer-in-Chiefs  stores),  plants,   tools,  appliances, implements,  ladders,  cordage,   tackle,  scaffolding,  and tempers,  works requisite or proper for the proper execution of  the  work whether original, altered or  substituted  and whether  included  in the specification or  other  documents forming  part  of  the  contract or  referred  to  in  these conditions  or not or which may be necessary for the purpose of  satisfying  or  complying with the requirements  of  the Engineer-in-  Chief as to any matter as to which under these conditions  he  is  entitled to be satisfied,  which  he  is entitled to require together with carriage therefore, to and from  the  work.  The contractor shall also  supply  without charge  the  requisite number of persons with the means  and materials  necessary  for the purpose of setting out  works, and  counting  weighing and assisting in the measurement  or examination at any time and from time to time of the work or materials.   Failing his so doing, the same may be  provided by  the  Engineer-in-Chief at the expense of the  contractor and  the expenses may be deducted from any money due to  the

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contractor  under the contract from his security deposit  or the  proceeds  of sale thereof, or of a  sufficient  portion thereof.   The  contractor shall also provide all  necessary fencing  and  lights  required to protect  the  public  from accident, and shall be bound to bear the expenses of defence of every suit, action or other proceeding at law that may be brought  by any person for injury sustained owing to neglect of  the above precautions, and to pay any damages and  costs which  may be awarded in any such suit, action or proceeding to  any  such  person or which may with the consent  of  the contractor  be  paid  to compromise any claim  by  any  such person.

   It  is  not clear from the pleadings whether  the  claim made  by  the respondent is in respect of escalation in  the costs   of  material  such  as  plant,  tools,   appliances, implements,  ladders,  cordage,   tackle,  scaffolding,  and tempers,  works,  etc.   inasmuch as the appellant  has  the obligation  to supply the most essential building  materials such  as cement, steel and such other building material.  It is  also  not  clear either from the pleadings or  from  the award  as  to whether the escalation claim is in respect  of the  materials  provided by the respondent or in respect  of escalation  arising  from delay in non-supply  of  materials which  was  due to be supplied by the appellant.  So far  as the  plant  and  other equipments are  concerned,  they  had already  been  provided for the purpose of the execution  of the  work  and  how  the delay  in  non-supply  of  building materials  such as cement, steel, etc.  caused escalation so far  as the building materials provided by the appellant  is concerned  is not clear.  The arbitrator has not applied his mind to this aspect of the matter at all.  Having lost sight of  the importance of clause 17 and application of the  same to  the circumstances of the case will clearly disclose that there  is  an error apparent on the face of the award.   The claim  under  this head is Rs.40 lacs with reference to  the first  agreement  and  Rs.  25 lacs with  reference  to  the second  agreement which is the major chunk being nearly half the  claim  made  by the respondent.  In  what  manner  this aspect has gone into in fixing the lumpsum by the arbitrator is not discernible.  Therefore, we have no option but to set aside  the  entire award in respect of both  the  agreements made  by  the arbitrator and remit the matter.   We  propose that  a  new  arbitrator be appointed in place  of  the  old arbitrator  because the arbitrator has dealt with the matter himself  as  an  officer  who had  correspondence  with  the contractor  at  the  time  when he was  an  officer  of  the appellant.   Therefore, it is fair neither to the  appellant nor  to  the respondent to continue him as an arbitrator  in the proceedings.

   In  so  far  as the other appeal is  concerned,  certain additional contentions have been addressed by the respondent and  they  are based on Article 119 of the Schedule  to  the Limitation  Act  which  provides  that  an  application  for setting  aside  an  award or getting an award  remitted  for reconsideration,  the  period of limitation is fixed  as  30 days  from  the  date of the service of the  notice  of  the making  of the award.  As stated earlier, the award had been filed  in the court and the notice of which had been  served upon  the appellant in Title [Arbitration] Suit No.40/86 and the  objection  had been filed.  Service of notice has  been made  on  the  appellant on 13.7.1990 and the  objection  in question  had been filed on 18.8.1990, while it should  have

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been  filed  on  or before 12th August, 1990.   The  learned counsel  for  the  respondent in this regard relied  on  the following  observations made by this Court in Madan Lal  vs. Sunderlal & Anr., 1967 (3) SCR 147:

   It  may  be  conceded  that there is  no  special  form prescribed  for  making  such  an   application  and  in  an appropriate  case an objection of the type made in this case may be treated as such an application, if it is filed within the period of limitation.  But if an objection like this has been  filed  after  the period of limitation  it  cannot  be treated  as an application to set aside the award, for if it is so treated it will be barred by limitation. [p.151]

   It  is  obvious  from these observations  that  even  an objection setting out the grounds specified in Section 30 of the  Arbitration  Act  would  amount to  an  application  as contemplated  under  Article  119  of the  Schedule  to  the Limitation  Act and, therefore, such objection will have  to be filed within the period of limitation.  Courts have taken the  view  that  inasmuch  as   agreement  of  reference  to arbitration  is an instrument of solemn character, which  is binding on the parties, and so is the award;  if, therefore, a  party desires to avoid the effect either of the agreement or the award, he must strictly comply with the provisions of the  law and an objection to the award must be filed  within the   time   which   cannot   be   extended.    In   certain circumstances,  courts have taken the view that by  granting time  to file objection the Court had impliedly extended the time  even  without a formal application under Section 5  of the Limitation Act.  An application for condonation of delay is  permissible  to file objections under Section 30 of  the Arbitration  Act by resorting to Section 5 of the Limitation Act.   Section  5 of the Limitation Act, 1963 provides  that any  application, other than those contemplated under  Order XXI CPC could be admitted after the prescribed period if the applicant  satisfies the court that he had sufficient  cause for  not  preferring  the appeal or making  the  application within  such  period.   It is clear that Section  5  of  the Limitation  Act is applicable to all applications other than those  under Order XXI C.P.C.  Hence scheme of an  enactment cannot  be availed of to defeat such a right conferred under the  statute  of limitation in clear terms.  In the  instant case,  it is set out in the course of the order made by  the Civil Judge that the award was filed in the sealed cover and presented  to  the  court  and  unless  the  same  was  made available   to  the  parties,  they   could  not  file   the objections.   The  object  of filing the  objections  is  to question  the validity of the award on the grounds mentioned in  Section 30 of the Arbitration Act.  If such a course  is not possible for want of copy in respect of award, certainly the circumstances, as arising in the present case, should be taken note of.  The objections filed on 18.8.1990 are in the nature of an application under Section 30 of the Arbitration Act  to  set  aside the award and is  an  application  under Article  119  of  the  Schedule   to  the  Limitation   Act. Therefore, Section 5 necessarily would get attracted to such a  situation.   In this case, the notice of filing of  award was served upon the appellant on 13.7.1990 and the appellant filed objections on 18.8.1990 and those objections have been shut  out from the consideration on the ground that the same have  been filed beyond the period of limitation  prescribed under the relevant provisions of the Limitation Act.  On the

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totality  of the circumstances, we are satisfied that  there was  a sufficient cause for delay in making the  application and  the  time  should be extended till 18.8.1990  when  the application  was made.  We condone the delay in f iling such objections upto that date.  case in neither There is a clear lapse  on the part of the Advocate appearing in the making a proper  application  for  enlargement of time in  the  civil court  nor  pursuing this aspect of the matter in  the  High Court.  In this Court too even, at the time of arguments, no application  was forthcoming.  However, to meet the ends  of justice,  we  have adopted this course, but this  indulgence shown  by  this  Court cannot be taken advantage of  by  the appellant without paying appropriate costs to the respondent which  we quantify to be a sum of Rs.40,000/- which shall be paid  before  the new arbitrator commences  the  arbitration proceedings.   This cost shall not be the costs in the cause and are payable by way of penalty.

   So  far  as  the main matter is concerned, there  is  no difference  between the award passed in Title  [Arbitration] Suit  No.37/86  and the proceedings in  Title  [Arbitration] Suit No.40/86 and the same also deserves to be set aside for the very reasons stated earlier and shall be governed by the same   terms  as  to  remittal  of  the  award   for   fresh consideration by a new arbitrator.

   As  suggested  by the learned counsel on both sides,  we name  Shri  Justice Uday Sinha, former Judge, High Court  of Patna,  as  the new arbitrator who is at liberty to fix  his terms as he deems fit and proper to adjudicate the matter in dispute.   The  new arbitrator shall consider the  pleadings and  evidence  on record already placed by the  parties  and shall  not  permit either of the party to raise  further  or fresh  pleas  or evidence.  It would be appropriate for  the arbitrator  to make an award within a period of four  months from the date of the receipt of this judgment and submit the same to this Court after publishing the same to the parties.

   The  Registry  of this Court is directed to  transmit  a copy  of  this judgment to Shri Justice Uday  Sinha,  former Judge, High Court of Patna, 308, Patliputra Colony, Patna-13 forthwith.   The parties are directed to appear before  Shri Justice  Uday Sinha for further directions, as may be deemed fit by him, within one week from the date of this judgment.

   In  the result, the appeals are disposed of accordingly. In the circumstances of this case, the appellant is directed to  pay a sum of Rs.40,000/- [Rupees forty thousand only] to the respondent as costs.

                                                                               [ S. RAJENDRA BABU ]

S.N. PHUKAN]

FEBRUARY 21, 2001.