REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.159-170 OF 2010

SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN     ...APPELLANT(S)

VERSUS

THE SUPERINTENDING ENGINEER T.B.P.H.L.C.  

CIRCLE ANANTAPUR     ...RESPONDENT(S)

JUDGMENT

K.M. JOSEPH, J.

1. These  appeals  are  directed  against  the

judgment  rendered  by  the  High  court  in  Civil

Miscellaneous Appeal Nos.479, 93, 94, 480, 481 and 95

of 1990 and Civil Revision Petitions Nos.303, 304,

305, 1039, 1040 and 1041 of 1990.  The appeals arise

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out of arbitration proceedings conducted under the

Arbitration Act, 1940 hereinafter referred to as `the

Act’.  By the impugned judgment, the High Court set

aside the orders passed by the Sub-Court granting the

decree in terms of the Arbitration Award though in a

modified way in respect of certain claims raised by

the appellant.  The Court also rejected the petitions

filed by the appellant challenging the decision of

the sub-Court refusing to make the Award decree of

the Court in regard to certain claim.  In short, by

the impugned judgment the High court found that the

arbitration awards were totally unsustainable in view

of Clause 59 of the Agreement.

2. A  tender  was  invited  on  18.9.1978  by  the

respondent- State for carrying out irrigation works.

The appellant having quoted the lowest rates which

ranged between about 10-12% less than the standards

specified  rate,  appellant  entered  into  Agreement

No.10/78-79 on 10/03/1979.  Equally, the appellant

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entered into Agreement No. 11/78-79 on 10/03/1979.

He  also  entered  into  Agreement  No.14/79-80  on

28/06/1979.  The work was to be completed within 18

months from the date of handing over the possession.

It would appear that the site was handed over to the

appellant  in  regard  to  Agreement  No.10/78-79  on

16.11.1979.  As far as the Agreement No.11/78-79 is

concerned, the site was handed over on 21.4.1979.

The site was handed over to the appellant in regard

to Agreement No.14/78-79 on 28.06.1979.  Under the

agreements,  raising  various  claims,  the  appellant

originally filed claim on 28.11.1983 before a panel

of three arbitrators.  The panel rendered its awards.

The awards came to be challenged by the appellant and

the awards were set aside.  An arbitrator came to be

appointed on petition filed by the appellant.  He

entered upon reference on 26.4.1988 and passed three

awards  on  19.8.1988.  The  appellant  had,  in  fact,

raised 9 claims.  The arbitrator rejected claim Nos.6

and 8 whereas he awarded various sums in regard to

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the other claims.  Claim No.9, no doubt, related to

interest. The respondent-State filed the applications

for setting aside the award under Section 30 and 33

of the Act.  The appellant moved suits for making the

award decree of the Court under the Act.  Certain

claims which were awarded by the Arbitrator, however,

did not meet with approval of the learned sub-Judge

and he agreed with the respondent-State.  It is this

judgment  which  generated  the  appeals  and  revision

petitions before the High Court which stand decided

by the High Court by completely agreeing with the

contentions  of  the  respondent-State  and  holding

mainly that the awards are in the teeth of clause 59

of the Contract.

3. We heard Mr. Ramamoorthy, the learned senior

counsel  for  the  appellant  and  we  also  heard  Ms.

Prerna Singh, learned counsel for the respondent.

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4. Though various claims have been raised in

the  appeals,  the  appellant  has  finally  chosen  to

press before us only the contentions in regard to

Claim  Nos.1,3,4,7  and  9.  The  awards  relate  to  3

different agreements entered into by the appellant

with the respondents but the claims are all identical

in  their  content  in  regard  to  all  the  three

agreements though different amounts have been awarded

under the same.  Therefore, we may set out the claims

with which we are to deal with.

Claim No.1  -  towards extra lead of 4 kms/6 kms- stone and metal.

Claim No.3 – Non-supply of food grains as per the conditions of the agreement.

Claim No.4 – Reimbursement of short supply of cement.

Claim No.7 – Claim on account of stock of materials accumulated  by  the  contractor  for  work  in  the project.

Claim No.9 – Interest of 18% per annum under the Interest Act.

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5. Learned  senior  counsel  for  the  appellant

would  contend  that  the  appellant  is  certainly

entitled to the amounts as awarded by the Arbitrator

under these claims.  He would submit that the award

of  the  arbitrator  is  immune  from  judicial

interference unless it be that the arbitrator has

misconducted himself or it be that an error apparent

on the face of the record is betrayed by the award.

It is for the arbitrator to construe the contract and

sift the materials before him.  His finding on facts

cannot be rendered vulnerable in proceedings under

Sections 30 and 33 of the Act.  As far as Clause 59

is  concerned  it  is  his  contention  that  the  said

Clause would not stand in the way of the claims as

awarded  and  which  are  pressed  before  us  being

countenanced in law.  

6. Per  contra  learned  counsel  for  the

respondent would support the judgment of the High

Court  and  would  contend  that  Clause  59  of  the

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agreement  would  bar  the  claims  canvassed  by  the

appellant.   Before  we  deal  with  Clause  59  it  is

appropriate to appreciate what happened before the

arbitrator, the sub-Court and finally in the High

Court.

PROCEEDING BEFORE THE ARBITRATOR

Claim No.I-Extra lead

7. The  case  of  the  appellant  was  that  the

appellant was to quarry and take stones and metal

from  a  specified  quarry  which  was  located  at  a

shorter  distance  than  from  where  the  appellant

contractor  had  to  actually  quarry  the  stones  and

metal and thereafter transport the materials to the

work site.  This resulted in extra rate and therefore

extra expenditure.  The claim of the appellant was

Rs. 15 per cubic meter.  The arbitrator rejected the

arguments of the respondent that the appellant on his

own went ahead and carried out quarrying from the

quarry located further away.  The arbitrator also

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found that the claim was tenable under Section 70 of

the  Contract  Act.   It  is  accordingly  that  the

arbitrator awarded compensation at the rate of Rs.15

cubic meter for the amounts as claimed.   

Claim No.III

8. Claim No.3 related to default on the part of

department  in  making  supply  of  food  grains.   In

short,  under  the  food  for  work  programme  of  the

Central  Government,  food  grains  were  to  be  made

available by the respondent and part of the wages of

the works was to be supplied by the appellant in food

grains as part of the contractual obligation and it

is the case of the appellant that the food grains

were  not  supplied  though  it  was  available.

Consequently, the appellant had to supply food grains

to his workers by procuring the food grains at higher

prices from the open market.  The arbitrator noted

the argument of the State to be that the relevant

clause  only  contemplated  making  available  food

grains, if it was available.  The arbitrator relied 8

on the correspondence to arrive at the conclusion

that though food grains were available it was still

not  supplied  to  the  appellate.  The  arbitrator

proceeded  to  award  various  sums  under  the  three

contracts  on  the  basis  that  the  appellant  was

constrained to expend money for supplying his workers

by purchasing food grains from the open market.   

Claim No.IV

9. As  far  as  claim  No.4  is  concerned,  it

related  to  short  supply  of  cement.   Under  the

contract the arbitrator noted that the department was

to supply cement to the contractor.  The value of the

cement was fixed at Rs.416/- per tonne.  It was the

case of the appellant-contractor that in breach of

its contractual obligation, the department however

did not make sufficient supply of cement.  In order

to achieve progress in the works it is the case of

the appellant that he procured cement from outside.

He also appears to have pointed out recoveries were

made as though supply of cement was effected by the 9

department when it was not the case. The department

contended that cement was in fact supplied as per the

contract and the contractor was not authorized to

purchase  cement  from  outside.   Department  further

contended  that  contractor  did  not  produce  any

vouchers.  Department further relied on Clause 10 of

the contract.  Clause 10 provided that no claim for

compensation for non-supply of cement would lie.  The

arbitrator, however, rejected all the contentions of

the  department  and  relied  on  Section  70  of  the

Contract Act.  The non-production of the cement issue

register and unstamped receipt by the department led

the arbitrator to raise an adverse inference against

the department.  The arbitrator proceeded to award

varying sums under the three contracts.  

Claim No.VII  

10. Claim  No.7  which  is  pressed  before  us

related to a claim on account of material accumulated

by the appellant for the work in the project was

particularly awarded by the arbitrator.  The claim of 10

the  appellant  was  that  he  had  purchased  various

materials and stocked at the work site for carrying

out the work but the department prevented appellant

from  carrying  out  the  work  and,  therefore,  the

appellant was entitled to the value of the materials

which he had collected at his expense. The arbitrator

after excluding sand awarded certain sums under the 3

contracts.   

Claim No.IX

11. Finally, under Claim No.9 which related to

interest at 18% under the Interest Act, the interest

was awarded at the rate of 12% per annum on all

claims from the date of the claim petition namely

23.11.1983.

Proceedings before Court under Sections 30/33 and 17 of the Act.

12. The sub-Court held inter alia as follows:

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As far as Claim No.I is concerned, namely, extra

lead,  the  sub-Court  proceeded  to  agree  with  the

arbitrator that the appellant is entitled to extra

lead.    As  far  as  the  quantum  of  extra  lead  is

concerned, the court found that the arbitrator was

not correct in fixing the extra lead at Rs.15 per

cubic meter.  The reasoning in this regard was that

there was no material in support of the same.  On the

other  hand,  the  Court  reasoned  that  there  was  a

procedure for settling such claims for extra items.

As  per  correspondence,  the  court  found  that  the

difference would only be Rs.3.23 whereas it was found

that the arbitrator has awarded at the rate of Rs.15

which would amount to giving Rs.24 for extra lead of

6 kilometers.  This was found to be an error apparent

and having regard to the fact that the matter was

pending for a long time and the present proceedings

constituted the second round of litigation, the court

proceeded to modify the amount and direct that the

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extra lead would be calculated as per the procedure

extant.  

13.  As far as Claim No.III is concerned namely,

the breach found by the arbitrator in the matter of

supply of food grains, the court proceeded to set

aside the award of the arbitrator.  It was found that

the misconstruing the contract, the arbitrator had

awarded  a  sum  of  Rs.93  lakhs  in  all  the  three

contracts  put  together  which  is  without  any

justification  as  the  arbitrator  has  exceeded  his

jurisdiction.  Contrary to the finding recorded by

the  arbitrator  the  court  found  that  there  was  no

evidence to show that the food grains were available.

The Court reappraised A-22 and A-25 and took the view

that it did not support the finding by the arbitrator

that the food grains were actually available.  It was

further found that there is no evidence to show that

the appellant had given extra wages for non-supply of

food grains by the department.  There is no evidence

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according to the court to show that the appellant had

purchased food grains at the open market rates as the

appellant had not produced the register to show that

he  had  procured  and  supplied  food  grains  from

outside. The appellant was bound to pay fair wages.  

14. As  far  as  the  claim  No.IV  is  concerned,

which  related  to  short  supply  of  cement  to  the

appellant, the Court set aside the award passed by

the arbitrator.

15. It was found  inter alia by the Court that

the  appellant  did  not  mention  the  source  through

which  he  had  obtained  the  cement.   There  was  no

evidence  before  the  arbitrator  to  show  that  the

appellant was permitted to bring his own cement and

use  it  in  his  work.   As  per  the  terms  of  the

agreement the appellant was not allowed to use the

cement  other  than  the  cement  supplied  by  the

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Government.   There  is  no  evidence  before  the

arbitrator to show any check/measurement taken at the

time of alleged use by the Contractor.  The tabular

statement  produced  before  the  arbitrator  by  the

appellant  was  found  to  be  only  theoretical

requirement of the quantity of cement for such work.  

16. The contractual provisions were ignored by

the arbitrator. In none of the letters written by the

officers referred to by the arbitrator in the awards,

the  Engineers  admitted  about  the  alleged  use  of

cement brought from outside by the appellant.

17.  There  was  no  clause  in  the  contract

permitting the contractor to use his own cement and

claim  reimbursement.  The  arbitrator  exceeded  his

jurisdiction.  

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18. As  regards  Claim  No.VII  is  concerned,

which  related  to  claim  for  value  of  the  material

stored  by  the  appellant  at  his  site,  the  court

proceeded to set aside the award.  The case of the

appellant appears to have been that he collected the

materials  on  the  basis  of  the  assurance  of  the

department  that  further  construction  work  will  be

entrusted  to  him  but  no  letter  of  assurance  was

produced.  The provisions of the agreement were only

for finished work.  The Additional Advocate General’s

argument that the Government had no objection in the

contractor selling away material after paying royalty

charges  etc.  to  the  Government  was  noted.   Under

Section 70 of the Contract Act, the Government has

got option either to pay compensation or restore the

material to the contractor.   

19. As  far  as  the  claim  for  interest  is

concerned, the court relying on the judgment of this

Court in  Gujarat Water Supply & Sewerage Board vs.

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Unique Erectors (Gujarat) (P) Ltd. & Anr. reported in

AIR 1989 SC 973 and taking the date on which the

arbitrator entered upon the reference as 26.4.1988

and the date of the awards as 23.8.1988, it was found

that for the said period, the arbitrator did not have

the power to grant interest on the amount found due.

Therefore, the Court set aside the award of interest

for the period 26.4.1988 till 23.8.1988 in regard to

the rest the award of interest was sustained by the

Court.   The  net  result  was  the  Court,  partially,

allowed  the  suits  and  passed  modified  awards  in

favour of the appellant whereas it also allowed the

petitions filed by the respondent for setting aside

the  awards  in  the  manner  which  we  have  indicated

above.

The findings of the High Court  

20. In  the  impugned  order,  the  Court  has

proceeded  to  allow  the  appeals  filed  by  the

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respondent-State and dismiss the revisions filed by

the appellant.

21. As far as Claim No.III is concerned which

related to non-supply of food grains, it was found as

follows:

“Apart from the fact that there is no such total liability on the part of the Government to supply the food grains without which he could  have  proceeded  with.  The  very  clause which has been relied upon by the contractor for supply of the food grains reduced to the effect that clearly such supply would be made only if available, and therefore, it is not the case of the Contractor that though food grains were available it is not supplied by Government.  There  is  no  mention  or  any evidence in this regard let in on behalf of the  contractor.  Therefore,  it  is  again  the compensation  which  comes  within  the  bar  of Clause 59.“

22. In regard to Claim No.IV, the following is

the finding by the High court:

“In the Claim No.4 the reimbursement of non- supply  of  cement  is  again  is  similar  such obligation  as  the  one  stated  to  be  in  the earlier  claim  and  even  on  this  account, nothing has been pointed out on behalf of the contractor on facts or in details as to how it can  be  taken  out  from  the  claim  for compensation as barred under Clause 59.”

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23. As  regards  Claim  No.I  relating  to  extra

lead, the High Court proceeded to hold as follows:

“The Claim No.1 relates to extra lead of 4 K.m for stone and metal is again attributable to the alleged delays, laches and breach on the department as complained by the contractor and therefore, such claim once again amounts to a compensation within the parameters of the bar as provided under Clause 59. Since we have found that the claims under item 2,5,3,4 and 1 exfacie squarely come under the bar of Clause 59 in view of the very maintainability which go to the very root itself, these claims are squarely barred under Clause 59 as held in the aforesaid decision of the Supreme Court in the case  of  Ramnath  International  Construction Pvt. Limited (2 Supra).”

24. It is found that claim No.2,5,3,4,1 is ex-

facie case under the bar of Clause 59 and finally it

was held as follows:

“Having  regard  to  the  reasons  as  given, especially, the authoritative pronouncement by the Apex Court on the very question, we hold that  the  claims  of  the  contractor  are  not sustainable and accordingly both the awards of Arbitrator dated 19-06-1985 and 19-06-1968 and the judgement and decree in O.P. No.118 of 1988  dated  07-10-1988  to  the  extent  of awarding  claims  in  respect  of  the  Claims Nos.1,2,3,4,5,7 are set aside and consequently we hold since the very claim being held to be

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not  entitled,  question  of  awarding  any interest does not arise.”

Decisions and Findings

25. Since the impugned decision is based on  

Clause 59, it is now necessary to refer to the same.  

It reads as follows:

“59. Delays and extension of time: No claim for  compensation  on  account  of  delays  or hindrances  to  the  work  from  any  cause whatever  shall  lie,  except,  as  hereinafter defined. Reasonable extension of time will be allowed by the executive Engineer or by the officer competent to sanction the extension for unavoidable delays, such as may result from  causes,  which,  in  the  Opinion  of  the Executive  Engineer,  are  undoubtedly  beyond the control of the contractor. The Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty five per cent in excess of the actual working period so lost.  

In  the  event  of  the  Executive  Engineer failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the superintending Engineer of the Circle whose decision  will  be  final  and  binding.  The contractor shall lodge in writing with the Executive Engineer a statement of claim for any  delay  or  hindrance  referred  to  above, within fourteen days from its commencement, otherwise,  no  extension  of  time  will  be allowed.

Whenever  authorized  alterations  or additions  made  during  the  progress  of  the

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work are of such a nature in the opinion of the  Executive  Engineer  as  to  justify  an extension  of  time  in  consequence  thereof, such extension will be granted in writing by the  Executive  Engineer  or  other  competent authority when ordering such alterations or additions.”

26. It is our view that it will not be open to a

contractor  to  claim  compensation  which  arises  on

account  of  the  fact  that  the  work  is  delayed  or

hindrance  caused  to  the  work  from  any  cause

whatsoever.  To demystify this further, it means that

should  the  work  be  delayed  on  account  of  reasons

which are attributable either partially or entirely

to the employer namely the respondent herein, the

claim  for  compensation  is  barred.   Equally,  the

clause interdicts raising claim for compensation by

the contractor if the employer poses hindrance to the

work.   If  work  gets  delayed  on  account  of  the

contractor himself, it is axiomatic that he cannot

claim compensation as it would amount to a person

taking advantage of his own wrong.  Delay from any

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cause cannot found a claim for compensation.  It may

also happen that the work may get delayed not due to

the fault of the employer.  There may be natural

causes such as natural calamities which may cause

delay in carrying out the work. Even in such cases,

in our view, Clause 59 would cast an embargo against

a claim by the contractor.  This interpretation gives

full  play  to  the  words  ‘delays  from  any  cause

whatsoever’.  Equally, if there is hindrance to the

work  from  any  cause  whatever,  a  claim  for

compensation would not lie.

27. The  heading  of  Clause  59  is  ‘delays  and

extension of time’.  While compensation on account of

delay and hindrance is impermissible, what Clause 59

provides  however,  is  that  reasonable  extension  of

time be allowed.  Request for extension of time must

arise  from  causes  beyond  the  control  of  the

contractor.  It is further provided in clause 59 that

if  delay  or  hindrance  is  caused  by  any  written

instruction by the Executive Engineer then the period

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of the delay or hindrance is to be assessed at 25% in

excess of the actual working period so lost.  It is

further  provided  that  if  delay  and  hindrance  is

caused to the contractor as a result of the Executive

Engineer failing to issue necessary instructions, the

contractor  will  have  the  right  to  claim  and

assessment  of  the  delay  by  the  Superintending

Engineer of the Circle.  The contractor is to lodge a

statement of claim for any delay or hindrance within

14  days  from  its  commencement,  failing  which  no

extension for time will be allowed.  Still further

Clause  59  declares  that  whenever  authorised

alterations or additions which are made during the

progress  of  the  work  are  of  such  a  nature  which

justify  an  extension  of  time,  extension  can  be

granted in writing by the Executive Engineer or other

competent authority when ordering such alterations or

additions.  In short, under clause 59 while extension

of  time  on  account  of  delay  or  hindrance  can  be

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granted.  Claim for compensation on account of delay

or hindrance on account of any cause will not lie.

28. Now that we have elucidated the true scope

of Clause 59, we must ponder whether the High Court

was right in placing Clause 59 side by side with

Claim No.I and find that claim is in the teeth of

Clause 59.

29. Claim No.I as we have already noted relates

to claim for extra lead for carrying out the work of

quarrying stone and metal from a quarry located at a

greater distance from the work site.  As far as the

said  claim  is  concerned,  we  would  think  that  it

cannot be associated with a delay to the work for any

cause whatever within the meaning of Clause 59.  What

is  involved  in  the  claim  is  the  right  to  claim

compensation  by  reason  of  the  fact  that  the

appellant-contractor though had to quarry from the

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specified quarry under the contract which was located

nearer to the work site was compelled to carry out

the work of quarrying, both stone and metal, from a

quarry located at a greater distance and to transport

the same to the work site.  The claim is based on the

expenditure  which  the  appellant  had  purported  to

incur on this score.  Though case of delay within the

meaning of Clause 59 is sought to be set up, there is

no support sought to be drawn from the second limb of

Clause 59 which deals with hindrance to the work from

any  cause  whatsoever.  Therefore,  we  can  safely

confine our focus on the question whether the claim

stands barred by virtue of Clause 59 on account of it

arising out of delay.  In this case, we must further

notice  that,  in  fact,  before  the  arbitrator

apparently Clause 59 was not as such pressed or at

any rate seriously pressed.  Before the civil court,

in the counter affidavit filed, the State did not lay

store  by  the  said  contention.   It  is  in  the

additional  counter  affidavit  filed  that  the

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contention based on Clause 59 was apparently raised

by  the  State.   Be  that  as  it  may,  since  the

arbitrator  is  the  creature  of  the  contract,  and

therefore, he is bound by the contract, though late

in the day, it may be, that the objection was raised,

we cannot rule out the said contention as it is a

matter that goes to the root of the matter.  In fact,

we would approve of the view taken by the High Court

in regard to effect of Clause 59 qua Claim Nos.2 and

5.  The appellant has, also, not pressed these claims

before us.  The only aspect which remains is the

contention which is urged on behalf of the respondent

that  Clause  59  would  be  infringed  as  escalated

amounts  are  given  beyond  original  period  are

canvassed by the appellant.

30. We would think that while it is true that

the  case  under  Claim  No.I  extends  to  the  period

beyond the original period of the contract (namely 18

months from the date of handing over of site), the

26

claim cannot be one which is on account of delay from

any cause whatsoever.  The claim, on the other hand

is, on account of the appellant carrying out work of

quarrying from a site which was located further away

than the site which was specified under the contract.

Be it for the original period of the contract or for

the period beyond the contract, the appellant has had

to  quarry  from  the  site  located  further  away.

Necessarily in regard to expenses, he must be paid

for the difference in the rate.  The last area of

inquiry would be whether having regard to the fact

that the civil court has agreed with the arbitrator

that appellant is entitled to extra lead at which

rate it should be paid?  It is here that we must

remind  ourselves  of  the  jurisdiction  to  interfere

with  an  award  under  the  Act.   In  calculating

compensation at the rate of Rs.15/- per cubic meter,

has the arbitrator acted without any material?  Has

he overlooked any contractual injunction?  Does the

Civil  Court  have  the  power  to  re-appraise  the

27

materials in substituting or modifying the award on

merits?

31. In  this  regard,  we  must  notice  the

provisions in the Act relating to the power of the

court when an award is challenged.  Section 15 of the

Arbitration Act, 1940 reads as follows:

”15.Power of Court to modify award. The Court  may by order modify or correct an award-

(a) where it appears that a part of, the award is upon a matter not referred to arbitration  and such part can be separated from the other  part and does not affect the decision on the  matter referred; or

(b) where the award is imperfect in form, or  contains any obvious error which can be  amended without affecting such decision; or

(c) where the award contains a clerical  mistake or an error arising from an accidental slip or omission.”

32. Section 16 of the Arbitration Act deals with

the power to remit the matter.  We may straight away

rule out the question of remitting the award having

regard to the efflux of time and also improbability 28

the arbitrator being available even otherwise for the

purpose of redoing the matter.  Coming to Section 15

of  the  Act,  the  power  available  to  the  Court  to

modify the award was available inter alia when a part

of the award is not referred to arbitration and such

part can be separated from the other part and clearly

Clause (a) is applicable as it is not the case of

either party that the matter relating to the amount

to be paid by way of extra lead was not a matter

which was referred to arbitration.

33. Under Clause (c), an award can be modified

if it contains a clerical mistake or there is an

error  which  arises  from  an  accidental  slip  or

omission.  There cannot be any doubt that this is not

a case where there is clerical mistake or an error

arises from an accidental slip or omission.  Lastly,

the power of the court to modify extend to a case

where the award is imperfect in form. Certainly, it

is not the situation in the facts of the case.  Of

29

course, where the award contains an obvious error

which can be amended without affecting such decision.

Court  has  power  to  modify.  When  the  Sub  court

modified  the  sale  at  which  the  amount  is  to  be

calculated  would  affect  the  ‘decision’  of  the

‘arbitrator’. It is not the sale of Rs. 15/ C.M., not

an  essential  part  of  the  ‘decision’  of  the

arbitrator.

34. In  the  light  of  the  above  discussion  and

proceeding on the basis that there is no power to

modify the award we would consider the legality and

correctness of the civil court decreeing the claim in

regard to Claim No.1 by modifying the award of the

arbitrator.

35. In  the  award,  it  is  the  case  of  the

appellant  that  the  Executive  Engineer  has  clearly

given the rates and arbitrator has found as follows:

30

“2.4  the  claimant  has  claimed  Rs.15/  cu.m. The  Ld.  Arbitrator  at  vol.2  page  283  has noted:

“In fact the Department itself recommended to the Government vide 87 letter of C.E. to Government  for  sanctioning  enhanced  rates because  of  escalation  of  costs.   The Department had not disputed correctness of extra rate claimed by contractor.  On the other hand by its representation and conduct it has accepted the rate as workable rate. The  claim  is  also  tenable  and  legally tenable and legally grantable, applying the principles of Sec.70 of the Contract Act. Hence I find the claim of the contractor for higher  rates  at  Rs.15/  C.M.  is  just reasonable and legal..”

For Agreement No.10, Rs.7,68,825/- is awarded.

For Agreement No.11, Rs.12,38,250 is awarded and

For Agreement No.14, Rs.9,59,325 is award.

The total is Rs.29,66,400/-“

36. The further case of the appellant is that

the  standard  rate  for  the  period  stated  by  the

Executive  Engineer  is  Rs.13.75  cu.m.  and  the

contractor has claimed Rs.15/-cu.m. which is accepted

by the Department.  It is contended by the appellant

that as per the finding of the arbitrator the sub-

31

Court,  the  extra  lead  would  relate  to  beyond  the

agreement period.

37. He had claimed at the rate of Rs.15/- cu.m.

which was accepted by the department as is clear from

letter  dated  23/11/1982  written  by  the  Executive

Engineer to the Superintending Engineer.   

38. Appellant  drew  support  from  letter  dated

23.11.1982 written by the Executive Engineer to the

Superintendent  Engineer.  We  may  also  notice  the

following statement however in the said letter.

“After gaining practical experience it has been found possible to utilize this quarry only for major quantities of two contracts of Sri DV. Krishna Reddy & Co., against the total No. of seven works for which the stone from that quarry is proposed to be utilized. The quarry from which the stone is being obtained by Sri K. Marappan is at a distance 3.45 KM MR + 1.447 KM CT. He is obtaining the entire metal and stone totally from this quarry.”

39. The sub Court, on the other hand, has found

that  the  assumption  made  by  the  arbitrator  about

Rs.15/-  cu.m.  over  and  above  the  quoted  rates  is

32

without  any  basis.   The  sub-Court  relied  on  the

provisions in the agreement relating to the manner in

which the rates were to be derived.  The sub Court

proceeded  to  make  reference  to  the  clause  in  the

agreement.  

The Clause reads as follows:

“VII. a) Procedure for working out rates for supplemental items:

The  contractor  is  bound  to  execute  all supplemental items that are found essential, incidental and inevitable during execution of main works at the rates to be worked out as detailed below:-

i) Supplemental  items  directly deducible  from  similar  items  in  the original agreement:-

The rates shall be derived by adding to or subtracting from the agreement rate of such similar items, the cost of difference in quantity of materials or labour between the new item and the similar item in the agreement worked out with reference to the schedule  of  rates  adopted  in  the sanctioned estimate with which the tenders were compared plus or minus overall tender percentage.

ii) New items (a) similar items, the rates of which cannot be directly deduced from the original agreement.  

b) Purely new items which do not correspond to any item in the agreement.  

33

The rates shall be estimate rate plus or minus overall tender percentage.  

NOTE: The term estimate rate used in (i) and (ii) and (a)  & (II) (b) above means the rate of sanctioned estimate with which the tenders were compares, or if no such rate is available in the estimate the rate derived with  reference  to  the  scheduled  of  rates adopted  in  the  sanctioned  estimate  with which tenders are compared.  

Whether the need for execution of excess quantity beyond the quantities stipulated in the  agreement  is  noticed,  the  contractor should give notice in writing to the Exe. Engineer,  who  will  in  turn  shall  obtain orders  of  the  competent  authority  before commencing execution of the excess quantity of work.  

For all items of work in excess of the quantities  shown  in  Schedule  ‘A’  of  the tender the rate payable for such item shall be either tender rate or SS rates for the items plus or minus overall tender excess accepted  by  the  competent  authority whichever is less. The SS rates means the rates with which estimate is prepared for comparing the tender.

40. Thereafter, the sub court referred to the

actual calculation made in Exhibit B.3 the letter

dated 23.11.1982 written by the Executive Engineer to

the Superintending Engineer which is in fact relied

upon  by  the  appellant  himself.   The  sub  Court

34

proceeded to find that the difference in rates for 2

kms and 6 kms works out to 3.23 per cu.m. and that

the cost of conveyance of material of all kinds RR

stones  and  spass  as  provided  in  the  estimate  is

Rs.9.81 per cu.m. which was in accordance with the

standard schedule rate for 2 km. lead.  The rate

fixed for 6 kms lead was Rs.15/- over and above the

quoted rates of Rs.8.80 which is arrived apparently

after deducting actual rate by which the appellant

had quoted his rates which was nearly 10-12% less

than the estimated rates.  The result was that the

arbitrator gave Rs.24/- per cu.m. as against Rs.13.75

which  is  without  deduction.   In  the  written

submission  before  us,  the  appellant  has  not

questioned the applicability of the clause relating

to supplemental item in regard to the extra lead.

Therefore, we need not be detained by the question

whether  the  provision  as  such  is  applicable  in

respect of claim based on extra lead.  If that be so,

the question would be whether it is a case whether

35

arbitrator has awarded Rs.15/- in place of Rs.13.75

in which case we would be inclined to agree with the

appellant that the award in this regard should be

sustained  in  its  entirety.   But  the  question  is

whether the arbitrator has actually awarded Rs.15/-

cu.m. over and above the amount which the appellant

already received on the basis of the actual lead in

the contract.  

41. The  arbitrator,  in  fact,  found  that  the

claim of the appellant for higher rates at Rs.15/-

per cu.m. is reasonable and legal and on the basis of

the  tabular  statement  which  was  prepared  by  the

appellant and awarded different sums under the three

different contracts.  It would appear that the claim

for Rs.15/- per cu.m. is based on abnormal increase

in transport charges due to increase in cost of fuel,

automobile spare parts etc. If escalated rates are

claimed, then it may attract the wrath of      Clause

59.  We  would  think  that  the  claim  of  extra  lead

36

cannot be denied.  The claim of Rs.15/- per cu.m., if

it is over and above the amount which is already

received  will  be  in  the  teeth  of  the  contractual

provision which is relied on by the sub Court for

which he has not taken any exception to in which case

we would think that the amount as ordered by the sub

Court is to be awarded to him under this claim.  This

means the amount is to be worked out as provided in

the letter dated 13.11.1982.  In other words, the

amount must be awarded on the basis of the cost of

conveyance being calculated at the rate of Rs.13.75

and the amount must be calculated and paid.  Mindful

though we are of the limitation under Section 15 (b)

of the Act to modify, we would in the facts of the

case, rely on Article 142 to sustain the decision of

the Sub Court under this claim.

CLAIM NO.III

42. Coming to Claim No.III, namely, on account

of non-supply of food grain, we have already found

that while the arbitrator has awarded the amount of 37

compensation, the sub Court has set aside the award.

The main contention of the State which found favour

with  the  sub  Court  is  that  the  clause  actually

provided  for  supply  of  food  grain  provided  it  is

available.  The arbitrator found that food grains

were not supplied despite the fact that they were

available  and  this  finding  by  the  arbitrator  was

found to be perverse.  The claim of the appellant was

that under the agreement, the appellant was to supply

the labourers a certain quantity of foodgrains as

part of the wages.  The labourers were also making

such demand as it would be beneficial to them also.

The appellant therefore had to supply food grains

from the market at the market value which led him to

incur extra expenditure.  The labourers according to

appellant were not willing to work otherwise.  It is

necessary  to  advert  to  the  actual  contractual

provisions in relation to supply of food grain.  The

clause in one of the contract relating to food grains

reads as follows:

38

“FOOD GRAINS:

1.The cost of the work is estimated to be Rs.1,16,15,713/- approximately. Against this estimate  17,500  quintals  of  wheat  at Rs.115/- per quintal, if available, will be supplied to the contractor for being issued as wages to labourers employed on the work.  

2.The tenderer shall bear the transport and other  incidental  charges  for  the transportation of wheat from nearest F.C.I. Wheat godown to the site of the work. He shall be responsible for the safe custody and storage of wheat at his own cost and ensure  issue  to  the  labourers  of  the quantity of wheat calculated at a price not exceeding Rs.1-25 per K.G. in lieu of the amount of wages payable to them.  

3.The  contractor  shall  be  responsible  to produce  the  Accounts  of  receipts, distribution etc., of what to the labourers as  and  when  required  by  the  Engineer incharge of the work.  

4.The supply of wheat to the contractor for issue  to  the  labourers  will  be  regulated from  time  to  time  according  to  the assessment of the Engineer in-charge of the work.  

5.The  department  is  not  liable  for  any compensation on account of any fluctuation of market price of wheat or deterioration in quality  of  the  wheat.  The  contractor  is bound to accept the agreed quantity of wheat at  the  stipulated  rate,  if  offered. Similarly, he shall have no claim for the supply of extra quantity of wheat on the ground of excess or enlarged scope of work and where the Department declines to supply extra wheat, no claim for compensation on this  account  shall  be  entertained  by  the Department.

39

6. The  tender  will  be  deemed  to  have satisfied himself about the availability of wheat and the rates quoted by him in the tender should take into account that aspect for  completing  the  work  according  to  the specifications  and  conditions  incorporated in the agreement.”  

43. It was further provided that the labourers

were to be supplied wheat at a rate not exceeding

Rs.125 per quintal but the quantity to be supplied to

the labourers and rates are subject to the approval

of the Executive Engineer.

44. The  appellant  relied  particularly  on  the

contents under the heading ‘Negotiation’.  It reads

as under:

“NEGOTIATIONS.

During further investigation I do hereby agree for the supply of rice in place of wheat.  I also agree to receive either wheat or rice or both to the quantity of 17,500 quintals.  I also agree for a rate of Rs.115/- per quintal of coarsed rice and Rs.130/- per quintal for fine rice.  I also agree to supply coarsed rice at a rate not exceeding Rs.125/- and fine rice not  exceeding  Rs.140/-  per  quintal  to  the labourers.  The other conditions and clauses covered by the tender relating to the supply of food grains remain unchanged.   

40

In case of short supply of either wheat or rice  compared  to  the  quantity  of  17,500 quintals, I shall have claim for compensation on this account.”

45.  The first thing we have to deal with is

whether the High court was wrong in rejecting the

said claim.  The reason for rejecting the claim by

the High Court are as follows:

1. There is no such total liability on the part

of  the  Government  to  supply  the  food  grains

without  which  he  (apparently  the  appellant)

could proceeded with.

2. The very clause which has been relied upon

by  the  contractor  for  supply  of  food  grains

reduced to the fact that such supply would be

made only if available and therefore it is not

the  case  of  the  contractor  that  though

foodgrains were available it is not supplied by

the Government.

41

3. There is no mention of any evidence in this

regard let in on behalf of the contractor. It is

thereafter  that  the  High  Court  holds  that

therefore  it  is  again  the  compensation  which

comes within the bar of Clause 59.

46. At first blush, the claim relating to food

grain even as understood by the High court does not

appear to have anything to do with compensation for

delay.  The case based on hindrance also does not

appear to be made. We shall, however, consider the

matter in some detail.

47. The  High  Court  has  not  adverted  to  the

clause  in  the  contract  under  the  heading

‘negotiation’ which we have referred to. Instead the

High  court  has  proceeded  on  the  clause  which

undoubtedly contemplated supply of food grain only

subject  to  availability.   The  clause  after  the

42

negotiation was carried out however brought about the

following changes:

 In place of wheat, the appellant agrees to

take either wheat or rice and the price at which

it  was  to  be  supplied  to  the  workers  was  also

stipulated.  The other conditions in the contract

relating  to  the  food  grain  remained  unchanged.

This  means  that  it  could  be  said  that  it  was

subject to availability and we have also referred

to clause which provides that appellant is bound

to accept the quantity at the stipulated rate, if

offered.  However, a significant change which was

brought about was that in case of short supply of

either  wheat  or  rice  compared  to  a  specific

quantity  of  17,500  quintals,  the  appellant  was

given  the  right  to  claim  for  compensation.

Therefore, this clause, in our view, brings about

the change which has not been considered by the

High court.  Since the sub Court has given other

43

reasons, it may be necessary to consider what sub

Court has held.

48. The sub Court takes note of the provisions

under  the  heading  ‘negotiation’  which  we  have

referred  to  except  the  condition  that  in  case  of

short supply the appellant will have the right to

claim compensation on this account.  The sub Court

proceeds to hold the conditions are incorporated with

a  view  to  cast  a  duty  to  receive  a  particular

quantity of food grain in lieu of cash and to supply

them to labourers at a stipulated rate and it is for

the benefit of the State as the State would receive

the food grains under the food for work programmes

under the Government of India scheme free of cost.

Further, it is for the benefit of the labourers.  The

sub Court proceeded to further hold that the purpose

of  the  food  for  work  programme  was  to  create

employment  and  the  contractor  is  not  to  get  any

benefit out of this condition.  The contractor is

bound to make record of the food grains received from

44

the Government and supplied to the labourers at the

specified rate.  He cannot sell the food grains at

the market rate.  He is the happiest person and need

not discharge the burden cast under the condition

relating  to  food  grains  if  food  grains  are  not

supplied.  The appellant was trying to take advantage

of this.  There is no promise to supply a particular

quantity  of  food  grain.   The  appellant  has  no

obligation to supply food grains to the labourers if

the Government did not provide him food grains.  The

Sub  Court  also  did  not  find  favour  with  the

contention  of  the  appellant  that  taking  the

attractive clause of supply at subsidized rate, he

quoted lesser rate and, therefore, for non-supply he

is entitled to be compensated.  It is found that the

appellant is not entitled to compensation as it is

not an attractive clause.  The Court further found

that the arbitrator was carried away by the letters

written by the Engineers wherein they have opined

that the contractor quoted lesser rates on account of

45

this  attractive  clause.   It  would  become  an

attractive  clause  only  if  the  Engineers  concerned

permitted the appellant to misutilise the grain by

selling the food grain by the contractor in the open

market.  The appellant is bound to pay fair wages

under  the  contract  (It  is  true  that  under  the

contract clause the appellant shall not pay less than

the fair wages).

49. It  is  found  that  department  officers

misunderstood the food for work in their letters.

The  arbitrator  relied  on  such  letters  as  if  the

Engineers are the master to interpret the term of the

contract.   It  was  further  found  that  there  is

absolutely no basis that food grains were in plenty

with the Government.  The sub Court further finds

that the reliance placed by the arbitrator at Exhibit

A.22 for availability was not justified.  He referred

to Exhibit A.22 with annexure also.  The contention

of  the  appellant  was  that  he  promised  to  the

46

labourers that he would pay a portion of their wages

by way of food grain at specified rate and he had to

supply the food grains at the subsidized rates as

promised  by  purchasing  the  food  grains  at  higher

rates. The sub Court finds that there is no evidence

produced  before  the  arbitrator  to  show  that  he

purchased  food  grains  from  the  open  market  and

supplied those food grains to the labourers at the

subsidized rates.  In case of supply of food grains,

the appellant was bound to maintain record of proper

distribution but the appellant has not produced any

such register, it is reasoned by the sub Court.  Next

it is found that the appellant even it is true that

he  agreed  that  the  workers  are  to  be  supplied  a

certain  portion  of  the  wages  in  food  grains,  he

cannot fix wages in such a manner that the contractor

would  get  any  advantage  out  of  it  as  it  is  not

contemplated under the scheme.  He has to pay the

fair wages and besides fair wages he had to provide

additional facilities by providing food grains at the

47

subsidized rates.  The question of supply of food

grains to worker by appellant in the event of non-

supply of the same by the Government did not arise.

It is further found that there is no provision in the

agreement to the effect that in case of failure to

supply  food  grains  the  Government  is  liable  to

compensate the loss that may be sustained on account

of failure of the department to supply food grains,

and the arbitrator patently exceeded jurisdiction.

50. The  first  thing  that  stands  out  in  the

reasoning  of  the  sub-Court  is  the  absence  of  any

reference  to  the  clauses  specifically  under  the

heading ‘negotiation’ which specifically confers a

right  of  compensation  in  case  of  short  supply  of

either  wheat  or  rice  compared  to  the  quantity  of

17,500 quintals (Agreement NO.11/78-79). This means

that while the parties contemplated that a part of

the wages was to be paid by way of supply of food

grains at the stipulated price, the obligation of the

appellant was to take the food grain supply from the

48

Food  Corporation  godown  and  carry  it  to  the  work

site.  He was to further supply the said food grains

to the workers at a higher specified rate in view of

the fact that he would incur certain expenses.   This

undoubtedly  was  subject  to  availability.   But

introduction of the clause in the contract that in

case  of  short  supply  of  either  wheat  or  rice  in

comparison to the actual quantity which was agreed to

be  supplied,  the  appellant  will  have  a  claim  for

compensation on the said count has been missed by the

sub Court as also the High Court.   

51. The sub-court has proceeded to find that the

case  of  the  contractor  appellant  that  the  clause

providing for supply of food grains was an attractive

clause, was not correct.  We are inclined to agree

with  the  said  finding.   In  the  claim  filed  by

appellant what is stated inter alia is as follows:

“(ii)…………The tender documents provided for supply of wheat at the quantities mentioned above.  It also provides that the charges on account of the storage, transportation, the cost  of  the  container  as  fixed  by  the Government, and sales tax have to be borne

49

by the contractor.  The contract condition also further stipulates that the contractor has to supply the wheat to the labourers consistent with their requirement and at the rates  not  exceeding  Rs.125/-  per  quintal. It is also mentioned in the contract that a particular quantity of wheat at Rs.115/- per quintal, will be supplied to the contractor for  being  issued  as  wages  to  labourers employed on the work.  On the representation made by the contractor on this clause there was negotiation and agreement was arrived at between the contractor and the Department to the effect that the contractor will receive the quantity of grains to be supplied either as  wheat  or  as  rice  or  both,  further stipulating the rate at which it is to be supplied  fixing  the  rate  at  Rs.115/-  per quintal for coursed rice and at Rs.130/- per quintal for fine rice and also stipulating the rates at which the contractor is to pay to  the  labourers,  retaining  the  other conditions  and  clauses  covered  by  the contract  relating  to  the  supply  of  food grains.  

(iii) In  short  the  agreement  stipulates that the food grains will be supplied by the Department to the contractor at the specific rates, which of course are competitive rates as against the rates of the grains to be acquired  from  the  open  market.   The contractor  took  this  important  and attractive  aspect  into  consideration  and submitted his tender at the most competitive rate only on account of the advantage he would derive from the department supplying the food grains at specific rates which he would pass on to the labourers.”  

52. A perusal of the aforesaid averments will

reveal that the tender document contemplated supply

50

of wheat of a particular quantity at Rs. 115/- per

quintal and the contractor was to supply at Rs.125/-

per quintal to workers.  Thereafter, it is stated

that on a representation made by the contractor there

was  negotiation  and  an  agreement  was  arrived  at

between  the  contractor  and  the  department.   The

contractor was to receive the quantity of food grains

either as wheat or rice or both.  In other words,

reference  is  made  to  the  clause  coming  under

negotiation.  It is thereafter stated that in short,

the agreement stipulated that the food grains will be

supplied  at  specific  rate  which  were  competitive

rates as against the rates in the open market.  It is

further  alleged  that  the  contractor  took  this

important and attractive aspect into consideration

and submitted his tender at the most competitive rate

only on account of the advantage he would derive from

the department.

51

53. It is to be noted that even according to the

appellant, the tender documents provided for supply

of  wheat.   The  contract  was  settled  by  calling

tenders.  The appellant submitted his tender which

turned  out  to  be  the  lowest.   At  the  time  of

submitting his tender the condition relating to the

negotiated settlement could not have been there.  If

that  is  so,  the  original  tender  conditions

contemplated supply of wheat at Rs.115/- per quintal,

if available.  The appellant was to supply the food

grains only if the food grains were made available by

the Government.  Therefore, it is totally untenable

for the appellant to set up a case that attracted by

the clause which resulted from the representation and

negotiation, he submitted his tender. May be at the

time  of  entering  into  the  contract  following  his

representation  and  negotiation  the  clause  was

incorporated which provided for supply of rice or

wheat and other terms.  In other words, at the time

when appellant submitted his tender which may have

52

been lesser than the estimated rate by about 10 to

12%, the negotiated clause was not there.  On this

score, the case sought to be built up around the

clause being attractive cannot be accepted.

54. Secondly,  as  regards  the  supply  of  food

grains,  the  appellant  is  not  correct  in  having

contended that the appellant was duty bound to supply

food grain even if the food grains were not supplied

by  the  department.   The  sub-Court  is  correct  in

concluding that appellant was duty bound to supply

food grains only if it was supplied to him by the

department.   This  is  because  despite  the  clause

resulting  from  negotiation,  the  other  conditions

remained intact.  A perusal of the clause relating to

supply  of  food  grain  would  show  that  food  grains

would be supplied, if available.  Again, the words

“if offered” is conspicuous.  The words in the clause

which provided that the appellant shall supply food

53

grain to the labourers is not to be considered in

isolation.

55. The sub-Court is not correct in coming to

the conclusion that the appellant was bound to pay

the fair wages to the workers and he was also liable

to  offer  food  grains  apart  from  fair  wages.   A

perusal of the clause makes it clear that what was

contemplated was if the food grains were available

and supplied, the appellant was to make use of the

same supplied it to the workers ‘in lieu of wages’.

56. There  are  a  few  aspects  which  remain.

Firstly, what is urged before us is that the under

the negotiated clause the department agreed to supply

a definite quantity of food grains.  In agreement

No.11, it was 17500 quintals.  We proceed on the

basis  that  in  other  two  agreements,  different

quantities as claimed by the appellant was mentioned.

We notice that in the claim while the appellant has

54

referred to the negotiated clause relating to supply

of rice and also providing for the quantity, there is

no reference to the clause that appellant will be

entitled to compensation if there is short supply of

food  grains.   This  clause  is  also  not  considered

either by the sub court or by the High Court.  Very

interestingly this is what the arbitrator has said.

“It  is  argued  for  the  Department  that agreement clause is that contractor is not entitled for compensation even if there is non supply of food grains.  I do not agree with this submission because the words used in  the  agreement  are  ‘short  supply’.  The agreement does not state that the contractor has no claim in case of non supply of food grains.  The  counsel  for  the  contractor submits  that  his  clause  was  subsequently negotiated because intention of the parties was that contractor cannot insist on wheat alone or rice alone and if there is short supply either of rice or wheat, then for that short supply contractor has no claim for  compensation. I  am  inclined  to  agree with the submission of the counsel of the contractor  that  so  called  clause  in  the agreement does not apply and it is not a bar to the contractor claiming compensation.”

57. However, in the contractual provision which

we  have  extracted,  we  notice  that  right  to  claim

compensation is reserved to the contractor in case of

55

short supply.  But then, the case of the appellant is

not of short supply but of non-supply. The appellant

in his written submission also in paragraph 3 stated

as follows:

“The Agreement at Vol.3, Pg.71, 72 refers to this  head.  At  Pg.72  after  the  head ‘Negotiations’ the clause reads as under:

“….In case of short supply of either wheat or rice compared to the quantity of 17,500 quintals,  I  shall  have  claim  for compensation on this account.”

58. Further, it is relevant for us to notice the

discussion by the arbitrator regarding the quantum of

compensation.   The  arbitrator  relies  upon  the

Statement No.3 appended to claim No.III wherein he

has shown the prevailing rate of rice in the open

market during the period November 1979 to October

1982.  The amount which he has paid for the labourers

for purchase of food grain on the basis of rates in

the open market, the price of food grain payable to

labourers  for  purchase  of  food  grain  as  per  the

56

agreement condition and the extra amount involved due

to non supply of food grain by the department.  The

arbitrator found that the statement shows that the

extra  amount  paid  varies  between  Rs.162/-  and

Rs.211/- per quintal in the said period.  On striking

an average, it came roughly to about Rs.185/- per

quintal which the appellant paid to the workers for

non  supply,  finds  the  arbitrator.   Further  the

arbitrator found that the labourers cannot purchase

rice from the fair price shops because they were not

rice card holders.  The arbitrator referred to the

communication  to  the  Executive  Engineer  dated

23.7.1987 wherein he has stated that 1000 to 1200

workers work daily in each works and the rates for

the food grain in the open market are increasing day

by day, therefore he has no hesitation in awarding

price increase by restricting it to 180% though the

contractor’s statement shows 185%.  Thereafter, the

arbitrator awarded as follows:

“The quantity agreed to be supplied by the Department  namely  rice  to  the  contractor

57

under  agreement  No.10  is  13,200  quintals, under agreement No.11, it is 17,500 quintals and  under  agreement  No.14,  it  is  20,000 quintals.  In  the  tabular  statement contractor claimed difference of rates for 15,521  quintals  under  agreement  No.10  and 20,804  quintals  under  agreement  No.11  and 22,195 quintal under agreement No.14. Thus he claimed higher rates for 58,520 quintals where as the Department agreed to supply him a  total  quantity  of  50,700  quintals  is multiplied by Rs.180.00 being the difference in  price  he  has  incurred  an  additional expenditure of Rs.91,26,0000.00. Accordingly he  is  entitled  to  compensation  for Rs.23,70,000.00 under agreement No.10/1978- 79  and  Rs.31,50,000.00  under  agreement No.11/1978-79  and  Rs.26,00,000.00  under agreement No.14/1979-80.”

59. The arbitrator refers to Exhibit P.1 to P.4

letters.  Arbitrator also refers to Exhibit B.3 to

B.7 letters wherein it is stated that contractor was

suffering  as  he  has  incurred  expenditure  on  this

account as there was a condition in the agreement to

give  food  grains  as  part  of  the  wages  and  his

aspirations and objectives were not fulfilled because

he  has  quoted  less  rates.   The  arbitrator  make

reference to the negotiations where rice took the

place of wheat and thereafter the arbitrator enters

the finding that the rice was available.  He relies 58

on Ex.A-27 where the Executive Engineer speaks about

1000 to 1200 workers working daily at each work and

the rates for food grains in the local market was

increasing day by day.  According to the arbitrator,

there  is  correspondence  that  abundant  quantity  of

food  grains  was  available  but  no  adequate

arrangements were made to supply the food grains to

the contractor.  In the letter written by the Chief

Engineer to the State Secretary, he notes the case of

the appellant that the appellant has quoted lesser

rates relating to supply of food grain at stipulated

issue rates.  The quantum in the three contracts is

noted as also the rate and the amount, the value in

rupees is noted.  The Superintending Engineer has

agreed  that  the  food  grain  could  not  be  supplied

since allotment was not received even though there is

stipulation in the agreement to supply food grain if

available.  The aspirations of the appellant could

not be fulfilled, it is stated.  It is noted that the

price  structure  of  various  materials  is  increased

59

from the date of tender i.e. 10.11.1978.  In relation

to wheat it is shown an increase of 147%.  There is

an increase in the case of rice to the extent of

178%.  This letter is written on 30.11.1982 Exhibit

B-7.

60. First letter written by appellant is dated

30/06/1979.  In the said letter this is what he says:

“I had requested on several times for the supply of food grains but so far no food grains were supplied to me.  I request to make arrangement for the early supply of food grains.  In this connection, I wish to state  that  I  had  engaged  labours  on  the term that food grains will be supplied to them as a part of their wages  and I am supplying food grains to them by purchasing in the local market.  Hence, urgent action may be taken for the supply of food grains early  otherwise,  I  have  to  invest  extra finance…”

61. Therefore, the case set up by him is that he

has  purchased  food  grains  from  local  market  and

supplied.  In the letter dated 27/08/1980 he states

inter alia  that he had engaged labourers on terms

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that rice or wheat will be supplied to them as a part

of their wages.  He complains that no food grains was

supplied.  Then he says on the terms agreed to by him

he had paid the price of the quality of rice that was

cheapest in the market.  As can be seen in the second

letter the case appears to be that he was paying the

labourers the price of rice and he is departing from

the case that he was supplying the food grains.

62. In  the  next  letter  dated  16/07/1981  he

states that he had to go in for additional finance on

account of non-supply of food grains.  He repeats the

same complaint about huge financial outlay on account

of non-supply at the specific rate of Rs.115/- per

quintal which was actually available, in the last

letter dated 07/10/1982.

63. We are of the view that the sub Court is

right in holding that the correspondence referred to

by the arbitrator did not show that the food grains

were  actually  available  with  the  department  and

61

department was only trying to get the food grains

from the administration with which the food grains

was available.  As long as there is some material

which  substantiated  appellants  claim  before  the

Arbitrator,  the  Court  hearing  the  petition  under

Article 30 and 32 would not reappraise the material

to come to the conclusion that the arbitrator went

wrong in arriving at a finding of fact.  At the same

time, if virtually there were no material then it

becomes  a  case  of  no  evidence.   No  doubt  the

contractual  provision  which  provides  that  the

appellant is to keep accounts and produce accounts

relating  to  receipts  and  distribution  may  assume

relevance when appellant receives food grains from

the department and distributes.  But at the same time

the  appellant  is  putting  up  the  claim  for

compensation and that too a claim which runs into a

fairly large sum.  There would certainly be material

to evidence the actual purchase and further actual

supply to the workers or payment as alleged.  Even

62

assuming  everything  that  the  appellant  says  is

correct about the fact of the negotiated settlement,

there is virtually no material except the appellants

statement that the appellant paid for the price of

food  grains  to  the  workers.   Further,  the  claim

involves payment of price of rice at escalated rates

for period beyond the contract also and it invites

the wrath of Clause 59.  We would therefore think

that the award of the claim by the arbitrator cannot

be sustained.

CLAIM NO.IV

64. As  regards,  claim  No.  4  is  concerned,  it

arises from alleged short supply of cement. First of

all, we have to find as to whether it is hit by the

embargo contained in Clause 59 and also advert to the

finding of the High Court. In this regard, the High

Court holds that the obligation is similar in nature

to the earlier claim, namely, claim no. 3 and nothing

is pointed out on behalf of the appellant on facts or

in details as to how it can be taken out of Clause

63

59. We have to ascertain what exactly is the claim

raised by the contractor.

65. The claim in brief is as follows:  

Cement is one of the items to be supplied by the

Department at specific issue rates. The appellant,

accordingly, perceiving the same as attractive quoted

10 to 12% lesser than the estimate rate. Cement was

to be supplied at the issue rate of Rs.416/- per

metric tonne.  Right from the beginning, there was

short supply.  The appellant had no other option but

to get cement from other sources. Large quantities

were so brought from other sources. The Department

being aware agreed specifically and by conduct that

they will recoup the cement. The appellant had no

intention to give cement free to the Department. The

quantity of cement used by the contractor for the

project  had  been  quantified  and  noted  in  the

measurement book and the USR (Unstamped Receipt). The

quantity  of  cement  supplied  by  the  Department  is

64

correctly  noted  in  the  cement  issue  register

maintained  by  the  Department.  Recoveries  had  been

effected without the actual issue of such quantity by

the Department as evidenced by the document like USR

and other entries. The appellant appended a tabular

statement of quantity of cement used for the work,

the quantity which was issued by the Department and

the balance quantity which constituted the basis of

the claim.  

66. The arbitrator in regard to the said claim

finds inter alia that in the letter dated 17.08.1980,

the Engineer had stated that there is short supply

and he was bringing cement from other sources and

action may be taken to return the extra quantity of

cement.  He  notes  that  in  the  counter  of  the

Department, there is no denial about the quantity of

work done by the appellant and also the quantity of

cement used by him by bringing from other sources. He

further finds that it is stated that the exact short

65

supply of cement can be shown only after taking all

measurements.  The  details  in  the  claim  statement

which also include, apparently, the tabular details

was not denied in the counter. Though, the cement

issue register and the USR were called for by the

appellant, they were not produced. Adverse inference

was drawn. The arbitrator further noted that in the

bill the quantity of cement used has been recovered,

though the quantity has not been issued and in the

last bill, more quantity was given representing part

reimbursement.  The  letters  of  the  Department  were

also  found  to  support  the  case  of  the  appellant.

Referring to the objection in the counter that no

vouchers  were  produced  by  the  appellant,  it  was

brushed aside as immaterial as it is found that it is

proved that he was bringing cement from other sources

to complete the work except a small quantity under

Agreement No.14.  Reliance is placed on Section 70 of

the Contract Act.  The argument without a plea in the

counter by the Government pleader that the appellant

66

was saving cement out of the quantity supplied by the

Department  was  found  untenable  on  the  basis  that

engineers would not have permitted it.  As far as,

clause 10 of the Agreement prohibiting any claim for

compensation for non-supply or delayed supply, the

arbitrator found that appellant is only asking for

return  of  cement  brought  by  him  and  used  in  the

construction on the assurance of the Department that

it will be reimbursed. In total 3790 metric tonnes of

cement were found to be brought by the appellant.

Rejecting the claim of the appellant for market rate

and applying the departmental issue rate of Rs.416/-

per tonne different amounts were awarded under the

three different contracts.  

67. We  would  think  that  this  claim  cannot  be

said to be hit by clause 59 as appellant is not

claiming compensation for any delay. On the other

hand, his case is that, contrary to the agreement

that  he  would  be  supplied  the  cement  it  was  not

supplied and he had to use cement by spending money

67

from  his  pocket  and  he  only  wanted  that  cement

actually used which is in excess of the cement issued

to  be  given  to  him.  More  importantly,  the  amount

awarded is at the rate fixed in the original contract

and no escalation is given.

68. The Sub-Court, however, set aside the award.

The Sub-Court finds as follows: -

Cement is a controlled commodity and it could

not be purchased from outside, without valid permit.

It was found that the appellant did not produce any

document to show that cement was actually purchased

from  outside.   The  source  was  not  mentioned.  The

appellant did not produce any permission from the

Department for purchasing cement from outside.  Even

if purchased, it was to be checked by check measure

but  there  was  no  check  measurement.  The  tabular

statement shown by the appellant, only represents the

theoretical requirement in the quantity of cement. He

referred to the contractual provisions in this regard

68

which  we  will  refer  to.  In  the  letters  of  the

Officers,  there  is  no  reference  about  the  use  of

cement  by  the  appellant  which  was  brought  from

outside. The letters written by the appellant also

complained only of inadequacy of supply of cement and

there is no mention of use of cement which he brought

from outside. More importantly, he referred to the

contractual provision to find that the Government is

entitled to recover the cost of theoretical quantity

which is not used and use of any lesser amount in

comparison to theoretical amount would only enure to

the Department.  

69. We must refer to the contractual provision

which has not been referred to by the Arbitrator.

The contract provides that cement will be supplied at

cost by the Department inter alia and the cost of

cement issued will be recovered from the contractor’s

bill  at  the  rate  specified.   The  contract  also

contains  the  theoretical  requirement  of  important

69

materials which include cement which are set out. The

rate  of  recovery  is  shown  as  Rs.416/-  per  metric

tonne. However, the important aspects which weighed

with the Sub-Court are contained in the following

provisions  relating  to  the  scarce  materials  like

cement. It reads as follows:-

“The contractor is expected to use the scarce materials  like  cement and  steel  as  per  the theoretical requirements shown above.  

A  schedule  of  quantities  of  important materials like steel cement etc., required for execution  in  accordance  with  the  requisite specifications  is  appended  hereto  for  which recovery will be affected. If these materials drawn according to a schedule are short used, the excess quantity so drawn should be returned to  the  Department  in  good  condition  and  no payment  will  be  made  to  the  contractor therefore. If they are not so returned to the department, their cost will be recovered at the market rate prevailing at the time of supply or the issue rate whichever is greater plus storage charges plus sales tax if leviable.  

If  materials  are  drawn  in  excess  of theoretical  requirements  indicated  in  the appended schedule, the excess quantity should be returned to the Department in good condition. If they are not so returned to the Department their cost will be recovered at issue rate plus 100% surcharge  or  market  rate  whichever  is  higher plus storage and sales tax if leviable.  

If materials are either short drawn or short used (though drawn according to schedule) (1) the savings due to short drawal/ use should be secured to Government by recovering the cost

70

thereof at issue rate from the Contractor. In the case of materials short used, though drawn according to schedule this recovery will be in addition to the recovery to be made for the cost of materials not returned as stipulated above.  

The Executive Engineer will decide the approximate requirements of explosives. If they are  drawn  in  excess  of  the  same,  the  excess quantity should be returned in the Department in good condition. If they are not so returned to the Department their cost will be recovered at issue rate plus 100% surcharge over from the contracting bill.

The Contractor should maintain separate ledgers for each of the items which are either supplied by the Department  or required to be procured by the Contractor and permit the Exec. Engineer  or  his  authorized  subordinate or scrutinize the Registers any time and note in account of the materials on hand.“

  (Emphasis supplied)

70. Let  us  see  what  the  contract  has  really

provided for. We are doing this for the reason that

the Sub-Court set aside the award in regard to this

claim.  The  appellant  filed  revisions  against  the

judgment  of  the  Sub-Court.  We  have  noticed  that

essentially, the High Court proceeded based on the

Bar under Clause 59. The matter has not been dealt

with as such by the High Court.  Here also after

finding that Clause 59 will not come in the way of

71

the claim, we could have remitted back the matter to

the  High  Court  for  consideration  of  the  matter.

Having regard to the long efflux of time, we are

undertaking the task of considering the matter.

71. A  perusal  of  the  contractual  provisions

which  we  have  referred  to  yields  the  following

inevitable result. Cement is a scarce material to be

supplied  by  the  Department.  The  appellant  was  to

maintain  separate  ledger  for  the  item  for  which

cement  was  supplied  by  the  Department.  The  issue

price  was  Rs.416/-  per  metric  tonne.  The  cost  of

cement at the said rate was to be recovered from the

appellant’s  bill  at  the  issue  rate.  Thus,  if  the

value of the work is Rs.100/- and the value of the

cement  is  Rs.5/-,  the  appellant  would  get  only

Rs.95/-.

72

72. The next question is the effect of the other

provisions  which  we  have  quoted.  We  have  already

noted  that  there  are  theoretical  requirements  in

regard to the use of cement.  It is not unnatural for

the  Department  to  prescribe  for  the  theoretical

requirement.  This  is  to  ensure  that  it  is  used

exactly as per the theoretical requirement so that

the structure on the one hand is built in a safe

manner and at the same time nothing in excess is used

so as to avoid wastage of scarce material. There are

three situations which are contemplated. In the first

situation, it is provided that if materials are drawn

according to the schedule and are short used then the

excess quantity is to be returned to the Department

in good condition and for the same the contractor

will not get any payment. Furthermore, if the short-

used  material  is  not  returned  to  the  Department,

their cost will be recovered at the market rate or at

the issue rate which is greater plus wastage charges

and sales tax. An example which we may take, would be

73

if the requisite specifications is that 10 metric

tonnes of cement is to be drawn and he draws 10

metric  tonnes  but  he  actually  used  only  8  metric

tonnes there will be a short use of 2 metric tonnes

which he would have to return to the Department.

73. The second situation is where the materials

are drawn in excess of theoretical requirements. The

contract contemplates that in such a situation, the

excess  drawn  quantity  must  be  returned  to  the

Department in good condition and otherwise there will

be recovery at the issue rate plus 100% surcharge or

market  rate  whichever  is  higher  plus  storage  and

taxes.

74. The third situation contemplated is that if

the materials are short drawn or short used it is

specifically provided that in such a situation, the

saving due to short drawal/ use should be secured to

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the  Government  by  recovering  the  cost  thereto  at

issue rate from the contractor. Thus, in the example,

we have taken if 10 metric tonnes is actual quantity

as per the specifications which can be drawn but if

only 8 metric tonne is drawn by the contractor while

he was to use 10 metric tonnes, the saving due to

short  drawal  was  secured  to  the  Government  by

recovering the cost thereto at the issue rate from

the contractor. This means that instead of 10 metric

tonnes, if 8 metric tonnes is drawn, the contractor

would still be liable for recovery from his bill for

the entire 10 metric tonnes, though, he has actually

drawn only 8 metric tonnes. In respect of short used

material, though, properly drawn the recovery would

be  in  addition  to  the  recovery  for  the  cost  of

materials which is returned as we have noted above.

Further, the contract contemplates that if materials

are required to be procured by the contractor, he

must maintain separate ledger for each of the item

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which  are  so  required  to  be  procured  by  the

contractor.  

75. This would mean that if the appellant had

indeed secured cement from outside, the appellant was

obliged under the Contract to maintain a separate

ledger.    Further  the  Contract  contemplates  that

there  could  be  recovery  from  the  bill  of  the

Contractor for the cost of cement which is actually

not supplied to the contractor and it will be based

on the theoretical requirement as we have already

referred to above.                 Thus, the mere

fact  that  there  has  been  excess  recovery  meaning

thereby  that  without  issuing  the  cement  to  the

appellant the amounts have been recovered would not

mean that the appellant would be able to substantiate

his claim that there was inadequate supply of cement.

That is a matter which must be substantiated with

reference to other material.

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76. But  there  are  two  situations  which  can

arise.  Cement may be available with the Department

and the Contractor draws only lesser quantity than

provided  in  the  specifications  which  is  based  on

technical requirements.  In such a case, undoubtedly

the Clauses which we have adverted to would apply.

What however would be the position if cement is not

available  and  consequently  the  Contractor  is  not

supplied and he is not in a position to draw cement.

In such a scenario also, will it be a case of drawal

of cement by the Contractor which is less than the

specified quantum?  It would be so, but it may have

different implications.

77. At  this  juncture,  we  may  look  at  the

correspondence which may throw light.  In the letter

dated  30.06.1979  written  by  the  appellant  to  the

Executive Engineer, we find there is no mention even

about the inadequate supply of cement.  Next letter

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is  dated  26.07.1980.   This  is  a  letter  where

reference is made to all the three contracts.  There

is a reference in this letter no doubt about the

purchase  of  cement  from  other  sources.   He  seeks

return of the cement so that extra quantity of cement

may be reimbursed.  There is no reference to any

particular  quantity  and  there  is  no  reference  to

which the other sources are.

78. The next letter is dated 16.07.1981.  Here

the reference is made to Agreement No.10/78-79.  In

this letter there is no complaint about the cement.

Finally, there is letter dated 07.10.1982 which is

addressed  by  the  appellant  to  the  Superintending

Engineer.   Here  the  reference  is  made  to  the

Agreement No.11/78-79.  No doubt in the body of the

letter  he  also  adverts  to  the  other  contracts.

Substantially,  the  letter  is  one  where  he  makes

various complaints and finally, he makes a claim for

enhancement.  Here he says in this letter that there

is inadequate and irregular supply of cement which

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affected his steady progress of work during 1979,

1980 and 1981.  He says inadequate supply caused him

substantial loss to the work done.  A look at the

correspondence by the departmental officers at this

juncture  may  be  not  out  of  place.   Letter  dated

13.11.1982 written by the Executive Engineer to the

Superintending Engineer inter alia reads as follows:

“It is a fact that there was difficulty in obtaining and procuring cement for the project. The  enclosed  table  indicates  the  available cement  in the  division. The  total cement  is used on this project alone for the works of Sri K.  Marappan.  It  can  also  be  seen  from  the statement  the  maximum  percentage  of  cement available was spared to the works of Sri K. Marappan.  Extreme efforts have been made for additional  allotment  of  cement  with  great difficulty some additional allotment have been obtained as clarified in the statement. On the face of the over all shortage of cement and the possibilities of securing the full requirement of cement being bleak, the contractor could not be  forced  to  increase  the  rate  of  progress which he was capable of managing, since most of the work carried out upto March, 81 being at lower  levels  of  the  dam.  This  shortage  of cement  was  felt  continuously. Reference  is invited  to  the  letter  of  Superintending Engineer No. 1230 CE dt. 13.6.81 and 831 CE dt. 27.4.79 wherein request for additional quantity of cement was made to Chief Engineer.  

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79. In letter dated 18.11.1982 written by the

Superintending Engineer to the Chief Engineer within

5  days  of  letter  dated  13.11.1982  Superintending

Engineer  recommended  completion  through  the  same

contractor  with  enhancement.   In  letter  dated

30.11.1982 written by Chief Engineer to the Special

Secretary to Government, Irrigation Department, it is

inter alia stated:

“It is a fact that there was a difficulty in procuring the cement for this project. Overall shortage  of  cement  and  the  possibilities  of securing the full requirement of cement being bleak, the contractor could not be forced to increase  the  rate  of  progress  which  he  was capable of managing. The shortage of cement was felt continuously from the starting of the work till to-day.”

80. From  the  correspondence,  it  would  appear

that the officers proceeded on the basis that there

is a shortage of cement.  Therefore, this appears to

be a case where sufficient cement may not have been

supplied to the appellant.  However, it is to be

remembered under Clause 10 of the agreement no right

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to  compensation  lies  for  short  supply  of  cement.

Here the case of the contractor appellant which is

accepted by the arbitrator is that this is not a case

where compensation for short supply of cement is made

by the appellant.  All that the appellant is seeking

is to be given, is the quantity of cement, which he

brought  from  other  sources  or  the  monetary

equivalent.

81. We proceed on the basis that the claim for

return of the cement does not involve infraction of

Clause 10 which forbids compensation on account of

short  supply  of  cement.   The  question,  however,

arises  whether  the  arbitrator  has  misconducted

himself  in  arriving  at  the  amount  of  cement

supposedly  brought  from  other  sources  by  the

appellant  to carry  out the  work.  As far  as the

monetary equivalent is concerned as we have already

noted  it  is  at  the  issue  price  fixed  under  the

contract itself and it is not an escalated amount so

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the measure of the amount of reimbursement may not

attract Clause 59.  The only point, therefore, which

remains  is  whether  there  was  any  basis  for  the

arbitrator  to  have  found  that  the  appellant  had

indeed  brought  the  quantity  of  cement  from  other

sources and used it for the works in question.

82. The arbitrator has proceeded on the basis of

the admitted correspondence between the officers to

find that there is shortage of cement.  The sub-court

on  the  other  hand  finds  that  none  of  the

correspondence  by  the  officers  indicate  that  the

appellant was given permission to buy cement from

outside.   There  is  no  indication  in  any  of  the

letters  written  by  the  appellant  which  the  other

sources were from which he was procuring cement.  The

most  important  obstacle  for  the  appellant  is  the

clause in the contract which has been referred to by

us and which is referred to by the sub-Court, namely,

for  procuring  cement  by  the  contractor,  he  must

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maintain ledger and which may be open to scrutiny by

the officer as and when demanded.  In this case, the

appellant  has  not  produced  any  ledger  showing

purchase of cement from other sources.  There is no

written permission produced to purchase cement from

other sources.  No voucher has been produced by the

appellant  to  establish  purchase  of  cement  from

outside.

83. The arbitrator, however, has found that even

non-production of vouchers is not material as it is

proved  that  appellant  has  purchased  cement  from

outside.  There are two things which apparently the

arbitrator has taken note of.  The arbitrator finds

that there is no denial about the quantity of the

work  done  by  the  contractor  and  also  about  the

quantity  of  cement  used  for  bringing  from  other

sources.  It is stated in the counter affidavit that

exact short supply of cement can be shown only after

taking over of measurement.  It is further found that

measurement was already taken.  The second aspect is

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arbitrator finds that as the unstamped receipt and

the cement issue register though called for by the

appellant was not produced, adverse inference must be

drawn.  If the matter as alleged is not denied or is

admitted  then  it  may  not  be  necessary  to  adduce

evidence  to  prove  the  same.   This  principle  is

equally applicable before the arbitrator as it is

before the court of law.   Perhaps it is all the more

applicable  in  the  case  of  proceedings  before  an

arbitrator.

84. We are in one sense handicapped by the fact

that  the  appellant  has  not  produced  the  counter

affidavit filed by the State before the arbitrator.

It is true that if the case pleaded by the State

amounts to admission that the cement was brought from

outside  by  the  appellant  and  the  matter  was  only

regarding the measurement to be carried out that may

give the impression that the arbitrator particularly

having regard to the non-production of the unstamped

receipt  and  cement  issue  register  despite  being

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called for had some justification for coming to the

conclusion  that  the  appellant  had  procured  cement

from outside.  Then the further question would be the

only quantity of cement which was purported to be

bought from outside by the appellant.

85. State definitely has a case, however, that

there is no evidence by the appellant having procured

cement from outside sources as he has not produced

vouchers  as  that  is  seen  dealt  with  by  the

arbitrator.  The exact quantity of cement purchased

from  outside  is  not  pleaded.   Instead  what  the

appellant contended for and what was accepted by the

arbitrator was that the quantum of cement which was

used could be found out from the quantum of work

done.  This is clear from the statement even on the

basis that when a particular quantum of work is done,

as  per  the  theoretical  requirement  for  cement

involved  in  such  work,  the  quantity  of  cement

actually used by the appellant has been arrived at

and after deducting the quantum of cement which was

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actually issued, the balance amount of cement which

the  appellant  has  used  for  the  work  from  outside

source has been arrived at.  We have referred to the

contractual provision and it would be hazardous to

arrive  at  the  amount  of  cement,  used  from  other

sources based on quantum of work done.

86. But arbitrator overlooks the fact that under

the  contract  the  appellant  was  supposed  to  make

entries  in  the  ledger.   A  party  is  supposed  to

produce  the  best  evidence  or  rather  the  evidence

which  under  the  contract  is  contemplated.   The

failure on the part of the appellant to produce the

ledger has fatal consequences.  The matter becomes

further aggravated by the failure on the part of the

appellant  to  even  produce  vouchers  or  bills  in

support  of  the  claim  to  purchase  the  cement  from

outside sources.  This is even if we are to ignore

the  fact  that  there  is  no  written  permission  for

purchase of cement from outside.  We proceed on the

basis  that  a  contractor  may  without  written

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permission but for the purpose of the work purchased

cement from outside.  But certainly, the fact that

there are neither vouchers nor any ledger entries nor

bills produced which persuades us to hold that the

matter may warrant interference with the award under

Section 30.  We are not inclined to accept the claim.

CLAIM NO.VII

87. As regards this claim, the claim appears to

be  that  appellant  collected  materials  and  it  was

lying at the site.  Admittedly, the appellant has not

used this material for the purpose of doing the work.

Only the case set up by the appellant is that he was

given an assurance that he will be permitted to carry

out the work and therefore, since he has spent money

for the same, he must get the amount which is claimed

for having spent on the material.  We are of the view

that insofar as the appellant has not used any of the

materials to carry out the work and sets up the claim

only on the basis of assurance which has not been

admitted, the action of the appellant in purchasing

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the materials cannot result in establishing his claim

for  compensation.   It  is  to  be  noticed  that  the

appellant raised a claim for enhanced compensation.

He alleged that there was delay on the part of the

respondent on various grounds.  This is apart from

alleging  other  factors  like  breakout  of  malaria,

unfavourable weather and delay in taking decision by

the  departmental  officers,  which  contributed  to

escalation  in  cost.   Correspondence  was  exchanged

with the Executive Engineer and the Superintending

Engineer, the Superintending Engineer and the Chief

Engineer and finally between the Chief Engineer and

the  Government.   It  appears  that  at  that  stage

appellant invoked the arbitration clause and a panel

of arbitrators gave their award.  In fact, the work

itself was stopped.  Clause 59 prevents the Court

from awarding compensation on account of any factor

relating to the delay which may be due to any cause

whatsoever.  In such circumstances, we are of the

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view that the appellant has also not made out any

cause for compensation in regard to this claim.

CLAIM NO.IX

88. As far as the question relating to interest

is concerned, the arbitrator has awarded interest at

12% from the date of the claim but excluded interest

from commencement of proceeding till date of award.

The question relating to interest is no longer res

integra as we find that the issue has been dealt with

in a recent judgment of this Court in  Assam State

Electricity  Board  &  Ors.  v.  Buildworth  (P)  Ltd.

reported in 2017 (8) SCC 146 to which one of us was a

party.  As long as the agreement between the parties

does not prohibit grant of interest and the matter is

referred  to  the  arbitrator,  arbitrator  would  have

power to grant interest pendente lite.  The Court

inter alia held as follows:

“21. The next aspect of the matter relates to the award of interest for the period from 7-3-1986 to 31-12-1997. The arbitrator awarded a lump sum of Rs.20 lakhs for a period of 11 years. The High Court  set  aside  the  award  of  interest  on  the ground that Section 29 of the Arbitration Act,

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1940 contemplates the award of interest only from the date of the decree. The issue as to whether interest could be awarded for the pre-reference period and pendente lite under the Act of 1940 is not res integra. In Irrigation Deptt., State of Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508, a Constitution Bench of this Court held that: (SCC pp.533-34, para 44)

“44…..  Where  the  agreement  between  the parties  does  not  prohibit  grant  of interest  and  where  a  party  claims interest and that dispute (along with the claim  for  principal  amount  of independently)  is  referred  to  the arbitrator, he shall   have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed  that  interest  was  an  implied term of the agreement between the parties and therefore when the parties refer all their disputes – or refer the dispute as to interest as such – to the arbitrator, he  shall  have  the  power  to  award interest.  This  does  not  mean  that  in every  case  the  arbitrator  should necessarily award interest pendente lite. It is a matter within his discretion to be  exercised  in  the  light  of  all  the facts  and  circumstances  of  the  case, keeping the ends of justice in view.”

89. The  sub  Court  set  aside  the  award  of

interest for the period from 26.4.1988 till the date

of the award namely 19.8.1988 which is the pendente

lite interest.  This is on the basis that arbitrator

has no power to award interest on amounts found due.

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This is purportedly followed in the judgment of this

Court in  Smt. Aruna Kumari vs Government Of Andhra

Pradesh And  Anr. reported in AIR 1988 SC 873.  This

Court took the view that entering upon reference is

to  be  taken  as  the  date  of  commencement  of

arbitration proceedings for calculation of interest.

And this Court took the view therein that there is no

power to grant interest from the date of commencement

of arbitration. However, in view of the decision in

Jugal  Kishore  Prabhatilal  Sharma   vs.  Vijayendra

Prabhatilal Sharma 1992 (1) SCC 508 as followed in

The  National  Highways  Authority  vs.  Afcons-Apil

Joint Venture  2017 (8) SCC 146, the sub Court was

not  justified  in  setting  aside  interest  and  the

interest as awarded by the arbitrator is restored.

90. Accordingly,  we  partly  allow  the  appeals.

The award in so far as it relates to Claim No.I, as

accepted  by  the  sub-Court  is  restored  along  with

interest on the same as awarded by the arbitrator.

The amount shall be calculated and paid within two

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months  of  production  of  certified  copy  of  this

judgment.

..…………………………….CJI.                                     (Ranjan Gogoi)

...…………………………….J.                                     (Sanjay Kishan Kaul)  

……………………………J.                                            (K.M. Joseph)

New Delhi; March 27, 2019

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