NON-REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.        OF 2009 (Arising out of SLP(C) No. 16133/2007)

Municipal Corporation of Greater Mumbai     …Appellant

Versus   Bharat Construction & Ors. …Respondents

JUDGEMENT

R.M. Lodha, J.

Leave granted.

2. The  Municipal  Corporation  of  Greater  Mumbai-  

appellant  (hereinafter  referred  to  as,  ‘Corporation’),  awarded  

contract for reconstruction and concretization of the road being  

Contract No. C-2 to the Respondent No. 1, Bharat Construction  

(for short, ‘Contractor’). The contractor under the contract was  

required to carry out the work in a phased manner including  

completion  of  certain  preliminaries  under  the  special  

directions/special  conditions  of  the  contract  before

commencement  of  the  work.  That  there  was  delay  in  

completion of work by the contractor within stipulated time is  

not in dispute. However, the case of the contractor is that they  

were given option by the Corporation to complete the work after  

the mansoon of 1990 and they opted to complete the work but  

asked  for  30%  rise  in  the  contract  amount  which  was  not  

granted by the Corporation, as a result of which the contract  

stood foreclosed under the terms and conditions of the contract.  

The contractor invoked Clause 97 of the general conditions of  

contract  for  resolution of  the dispute that  arose between the  

parties and lodged claim for compensation, loss etc. before the  

sole Arbitrator.

3. The  Corporation  disputed  the  claim  of  the  contractor  

before the Arbitrator  and, inter alia,  set up the case that  the  

contract was foreclosed by it and the contractor was informed  

that the Corporation would not make any payment for any loss  

on account of inability on the part of the contractor to complete  

the work.  The Corporation relied upon Clause 94 of the general  

conditions of the contract in this regard and stated that the said  

clause was clearly attracted.

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4. The Arbitrator by a non-speaking award dated June 22,  

1993  awarded  the  contractor’s  claim  in  the  sum  of  

Rs. 30,51,565/-.

5. The  Corporation  challenged  the  award  dated  June  22,  

1993 by way of a petition under Section 30 of the Arbitration  

Act, 1940 before the High Court of Judicature at Bombay and  

prayed that the award be set aside. The Single Judge of the  

High Court was not persuaded by the objections raised by the  

Corporation and vide judgment dated August 18, 1997 made  

the award, the rule  of  court  with  further  interest  @ 18% per  

annum from the date of decree till payment/realization.

6. The judgment of the Single Judge passed on August 18,  

1997  was  challenged  by  the  Corporation  in  an  intra  court  

appeal. The Division Bench dismissed the appeal on July 19,  

2007 as in its opinion the controversy was covered by an earlier  

decision of the Division Bench of that Court in Appeal No. 1148  

of 1997 given on January 27, 2005 (Municipal Corporation of  

Greater Bombay v. Atul Raj Builders Pvt. Ltd.). This is what the  

Division Bench held :  

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“An  identical  issue  has  been  considered  by  the  Division  Bench of  this  Court  in  Appeal  No.  1148 of  1997  decided on 27.1.2009 (Municipal Corporation of Gr. Bombay  V/s. 27.1.2005 (Municipal Corporation of Gr. Bombay V/s,.  Atul  Raj  Builders  Pvt.  Ltd.)  and the Division  Bench by its  detailed judgment has held that in such a situation Clause 94  does  not  come  into  play  to  prevent  the  Arbitrator  from  making  an  award  for  loss  of  profit.  The  case  is  totally  covered by the judgment of the Division Bench referred to  above. Hence, there is no scope to interfere with the order  impugned  in  the  Appeal.  Appeal,  therefore,  fails  is  dismissed.”

7. In  our  considered  view,  the  appeal  deserves  to  be  

allowed on a short ground as we find that the decision dated  

January  27,  2005  in  the  case  of  Atul  Raj  Builders  Pvt.  Ltd.  

relied upon in the impugned judgment has no application to the  

facts  of  the  present  case.  In  that  case,  the  contract  was  

foreclosed by the contractor and obviously in that fact situation,  

Clause  94  of  the  general  conditions  of  the  contract  had  no  

application. The present case is converse one in as much as  

the case of the Corporation is that it foreclosed the contract and  

contractor was intimated that the Corporation will not make any  

payment for any loss suffered on account of inability on the part  

of the contractor to complete the contract within stipulated time.  

Since  the  matter  needs  to  be  re-examined  by  the  Division  

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Bench afresh, we refrain from dealing with the diverse aspects  

raised by the Learned Senior Counsel for the parties.

8.  We,  accordingly,  allow  the  appeal  and  set  aside  the  

impugned order dated July 19, 2007.  Appeal No. 804 of 1999  

is restored to the file of the High Court. Needless to say that all  

the  contentions  of  the  parties  are  kept  open  to  be  agitated  

before the Division Bench which obviously will  be decided on  

their own merit. Since the matter is quite old, we request the  

High  court  to  hear  and  decide  the  aforesaid  appeal  as  

expeditiously as may be possible  and preferably within three  

months from the date of  production of  this  order.  We further  

direct that the respondent will keep the existing bank guarantee  

alive until the disposal of the appeal by the High Court and for a  

further  period of  one month thereafter.  Parties will  bear their  

own costs.

……………………J (Tarun Chatterjee)

…….……………..J         (R. M. Lodha)

New Delhi August  7,  2009.

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