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PETITIONER: HIMACHAL PRADESH NAGAR VIKAS PRADHIKARAN

       Vs.

RESPONDENT: M/S. AGGARWAL & CO.

DATE OF JUDGMENT:       27/01/1997

BENCH: K. RAMASWAMY, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted.      This appeal  by special  leave arises from the judgment and order  dated May  2,1996 of  the Himachal  Pradesh  High Court passed in O.M.P. No. 626/93 in Ex. P. No. 27/1993. The admitted facts  ar that  the respondent  had entered into an agreement  with  the  appellant  to  execute  certain  works pursuant to  which there was a dispute which was referred to the  Arbitrator,  on  directions  of  the  High  Court.  The Arbitrator in  the Award  dated April  25,  1992  stated  as under:      "After  considering   whole  matter      submitted  to   me  by   both   the      parties,  both   verbally  and   in      writing  I   have  come   to   this      conclusions that  delay lies on the      part of  the respondent - Executive      Engineer,      It is  awarded that  the plaintiffs      shall be  paid by  the  respondent-      Executive Engineer  an increase  of      25% over  and above  their tendered      rates for  all  works  executed  by      them after  the stipulated  date of      completion i.e. 21.5.89."      The  awarded   was  made   rule  of   the   Court.   In implementation of  the award,  the appellant  worked out the details, as  mentioned in  the letter  No. SDA  (D) - Acctt- 7/93-644-47 dated November 12, 1993 which reads as under :      "With  reference   to  your  letter      No.AV/SIM/804-93-94           dated      5.10.1993, I  am enclosing herewith      a cheque  bearing No.  807801 dated      12.11.1993   amounting    to    Rs.      4,99,307/- on account of payment of      award  announced  by  the  director      which has  been  made  as  rule  of      court  by  the  Hon’ble  H.P.  High      Court. The  details of  the awarded      amounts and  recoverise due  to  be

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    made from you are as under:      Gross amount of the work done after      11th R/A  Bill i.e. after 21.5.1989      onwards upto 26th R.A. Bill)                         Rs. 69,78,354.00      Less   cost    of   material   i.e.      Cement/Steel supplied  by the SDA o      which there has been no increase in      the issued rates. (-)                            23,25,685.00                            -------------             Net  amount    46,52,669,00      25% increase  on Rs. 46,52,669/0 as      awarded    by    the    Arbitrator.      11,63,167.00      Less  2%   I-Tax  on   23,263/-  on      Rs.11,63,167/-12% S.C on I. Tax            Rs. 2,792.00   (-)  26,055.00            -----------------------------      Total Rs. 26,055.00    11,37,112.00      With held  on account of recoveries      due to  be made  from  you  against      agreement No.  52 of  1987-88.  (-)      6,37,805.00                          ---------------           Net payable       4,99,307.00      Please send stamped receipt.               Your faithfully,         (Executive Engineer (d),         Shimla Development Authority,              Kasumpti, Shimla-9"      It is  seen from  the contents  of the  letter that the appellant has  deducted only the cost of the material, i.e., cement and  steel supplied the SA on which there has been no increase in  the issue  rates.  After  working  out  of  the Details,  a   sum  of  Rs.  4,99,307/-  became  due  to  the respondent. The appellant calculated the amount actually due and payable  to the  respondent under  the  award  less  the income-tax and surcharge etc. and the balance amount came to be paid.  But when  the respondent  claimed a further sum of Rs. 5,81,421/-, the appellant objected thereto under Section 47 of  the CPC.  The High Court over-ruled the objection and directed payment  thereof.  Thus,  this  appeal  by  special leave.      It is  submitted by Shri H.K. Puri, learned counsel for the appellant  that the  enhancement of  25% is relatable to the tendered  rates for the works executed by the respondent and does not relate to the rates of raw material supplied by the appellant.  He also submitted that cement and steel were supplied by the Department at the contract. Thus, escalation in price  of raw  materials supplied  by the  appellant  the entire burden  was borne by the appellant and, therefore, no extra payment  could have been intended to be made under the award in  respect to  those items. Therefore, the High Court was not right in directing payment thereof. We find force in the contention.  It is  contended by  Shri Upadhyay, learned counsel  for   the  respondent,  that  when  the  Arbitrator recorded a finding that delay in execution was on account of the laches on the part of the Executive Engineer and awarded 25% more than the agree normal rate, as per the contract and the award  having been  allowed to  become final,  it is not open to the appellant to deny 25% escalation charges for the period. In  other words, it amounts to interference with the award which  has attained  finality. In support thereof, the learned counsel  relied upon paragraph 12 of the judgment in

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P.M. Paul  V. Union  of India  [ 1989  supp. (1)  SCC  368]. Therein,  the   question  was  whether  the  contractor  was entitled to escalated rates due to delay in execution of the award on  the part  of the  Department. As seen, There is no dispute on the proposition that when the award has been made awarding escalation charges, necessarily the increased rates of the  cost of securing the material for performance of the contract are required to be compensated by paying the amount to the  extent of  the escalated  charges. It  is seen  that under Clause  10 of the contract, the appellant was required to supply  the material  at the  rates prevailing  as on the date of the execution and it was entitled to deduct the same from  the   amounts  payable  after  the  execution  of  the contract. In  other words,  when the  iron and  cement  were supplied, during  the relevant period, even after the expiry of the  year for which the award came t be made, necessarily it included  the increase  in rates.  It is stated that they did not  charge increased  rates but the rates prevailing as on  the  dates  and  the  amount  worked  out  came  to  Rs. 23,25,785/-. The  respondent is  not entitled  to 25% of the escalated costs  in that behalf. The very object of awarding escalated cost  was that  the  contractor  had  secured  the material from the open market at the price prevailing at the relevant time  and used  the same for execution of the work. In view  of the fact that iron and that iron and cement were not procured  by the respondent during the extended time and actual price  for which  they were  supplied has been worked out as  detailed earlier,  the respondent is not entitled to 25% more on that material supplied by the Department itself. Under these  circumstance, The  High Court  was  clearly  in error in directing payment of the said amount.      The  appeal   is,  accordingly,   allowed  but  in  the circumstances without costs.