Durga Charan Rautray
Vs. State of Orissa & ANR.
J U D G M E N T
JAGDISH SINGH KHEHAR,
appellant was entrusted with the construction of balance work of earth dam in connection
with the Kharkhai Irrigation Project upto RL 316.50 on 31.12.1975. The estimated
cost of the said balance work was Rs.13,78,810/-. As per the contract agreement,
the work was to commence on 1.1.1976 and was to be completed on or before
31.7.1976. For some reasons including change in design, the work could not be
completed within the prescribed time. The appellant eventually completed the assigned
work in July, 1978.
This delay in completion
of work, according to the appellant, resulted in financial loss to the appellant.
In addition to the aforesaid, the appellant had some other grievances as well.
Illustratively, the appellant sought payment towards some additional work executed
by him, and also, refund of royalty deducted on account of the supply of
"morum". All these disputes were raised by the appellant, with the concerned
respondent(s). The respondent(s) chose not to entertain the claims raised by
the appellant. In fact, all communications addressed by the appellant to the
respondents remained unanswered.
The appellant then sought
reference of his claims for adjudication before an arbitrator. This request of the
appellant was also not heeded to. The appellant thereafter obtained a Court
order dated 15.5.1981, whereby the disputes raised by the appellant were referred
to an arbitral tribunal. The arbitral tribunal examined nine items of claim
raised by the appellant.
award rendered by the arbitral tribunal dated 15.9.1998, adjudicated claim item
nos. 4, 5, 6 and 9, in favour of the appellant. In so far as claim item no.4 is
concerned, the appellant had demanded an additional amount of Rs.2 lakhs on
account of price escalation. This claim was based on the fact, that after the
work was assigned to him, the State Government had revised minimum wages of labour,
and increased the same by 16%. The appellant, accordingly, claimed extra
payment of 16% over the gross amount paid in the final bill. The arbitral
tribunal held the appellant entitled to Rs.24,380/- towards price escalation.
In claim item no.5, the
appellant claimed Rs.5,51,173/- towards cost of "morum" supplied, but
for which no payment had been released. In this behalf, the appellant claimed
carriage of 47,106 cubic meters with 15 kilometers lead, at the rate of Rs.21.35
per cubic meter. While adjudicating the instant claim, the arbitral tribunal found
the appellant entitled to the difference between the cost of supply of "morum",
as against the cost of supply of "earth". In respect of claim item
no.5, the appellant was held entitled to a sum of Rs.78,667/-. In claim item
no.6, the appellant demanded a refund of Rs.20,727/- deducted towards royalty from
The aforesaid royalty
was allegedly charged on the "morum" supplied by the appellant. The
appellant was held entitled to refund of the entire sum of Rs.20,727/- deducted
from his bills towards royalty. In so far as claim item no.9 is concerned, the
appellant claimed interest at the rate of 18% per annum on the principal claim
amount, from the due date till the date of final payment. The arbitral tribunal
held the appellant entitled to interest at the rate of 10% per annum on the
principal awarded amount of Rs.1,23,724/-, with effect from 19.8.1981 (i.e.,
the date with effect from which the Interest Act, 1978 came into force) till 5.4.1992.
Calculated in the aforesaid terms, the arbitral tribunal awarded interest of
Rs.1,31,544/- to the appellant.
Notice to make the arbitral award dated 15.9.1998 "rule of the court"
was issued on 22.2.1999. In March, 1999, the respondents were served with the said
notice. On 21.12.1999, the Government Pleader entered appearance on behalf of the
respondents, and sought time to file objections. Objections on behalf of the
respondents were filed before the Civil Judge, Senior Division, Bhubaneswar on 6.3.2000.
To contest the arbitral award dated 15.9.1998, the respondents filed objections
under sections 30 and 33 of the Arbitration Act, 1940 by filing a
"Miscellaneous Case". It would be relevant to mention that section 30
aforesaid, postulates the grounds for setting aside an award, whereas, section 33
lays down the course to be adopted for challenging, inter alia, the validity of
an arbitral award.
"Miscellaneous Case", filed by the respondents was contested by the
appellant inter alia by raising a preliminary objection. It was sought to be asserted,
that the "Miscellaneous Case" was barred by limitation. The "Miscellaneous
Case" filed by the respondents was rejected by the Civil Judge, Senior Division,
Bhubaneshwar by accepting the plea of limitation raised by the appellant. The suit
filed by the appellant was decreed on 30.4.2002. The award of the arbitral
tribunal dated 15.9.1998 was made "rule of the court". The
respondents were directed to pay the awarded amount to the appellant, failing
which, the appellant was granted liberty to recover the same through Court.
with the order passed by the Civil Judge, Senior Division, Bhubaneshwar, the
respondents preferred an appeal before the High Court of Orissa under section
39 of the Arbitration Act, 1940. In the said appeal, the respondents raised two
contentions. Firstly it was sought to be asserted, that the objections filed by
the respondents through the "Miscellaneous Case" filed under sections
30 and 33 of the Arbitration Act, 51940, were wrongly rejected by the Civil Judge,
Senior Division, Bhubaneshwar, on the ground of limitation. Secondly it was
asserted, that the controversy raised by the appellant could not have been referred
for adjudication by way of arbitration, after the appellant had received the
final bill without raising any objection.
determination by the Civil Judge, Senior Division, Bhubaneshwar, on the issue of
limitation was upheld by the High Court. Yet the contention advanced at the
hands of the respondents, that it was not open to the appellant to have sought
adjudication of his claims, by way of arbitration, after the appellant had
received payments on the preparation of the final bill without raising any
objections, was accepted. In sum and substance, therefore, by its order dated 22.12.2003
it was concluded by the High Court, that the appellant could not reap the
benefits of the award rendered by the arbitral tribunal in his favour on
with the judgment rendered by the High Court dated 22.12.2003, the appellant filed
a petition for special leave to appeal bearing no.12183 of 2004. Leave was granted
on 20.3.2006. Consequently, the matter came to be renumbered as civil appeal
no.1735 of 2006.
the plea of limitation had been decided in favour of the appellant and against
the respondents, the only question to be adjudicated upon, in the present appeal
filed by the appellant, is, whether the disputes/claims raised by the appellant
could have been referred for arbitration, after the appellant had received
payment after the preparation of the final bill, without raising any objections.
The answer to the
instant query must necessarily flow from the relevant clause of the agreement
which entitled the appellant to seek redressal of disputes through arbitration,
as it is the arbitration clause alone which defines the parameters of the disputes
which rival parties can raise for adjudication before an arbitrator (or
arbitral tribunal). In so far as the instant aspect of the matter is concerned,
clause 23 of the agreement dated 31.12.1975 is relevant. The same is being
extracted hereinbelow: "Clause 23 - Except where otherwise provided in the
contract all questions and disputes relating to the meaning of the specifications,
designs, drawings and
instructions hereinbefore mentioned and as to the quality of workmanship of
materials used on the work, or as to any other questions, claim, right matter,
or thing whatsoever, if any way arising out of, or relating to the contract, designs,
drawings, specifications, estimates instructions, orders or these conditions,
or otherwise concerning the work or the execution, or failure to execute the same,
whether arising during the progress of the work, or after the completion or
abandonment thereof shall be referred to the sole arbitration of a Superintending
Engineer of the State Public Works Department unconnected with the work at any stage
nominated by the concerned Chief Engineer. If there be no such Superintending Engineer,
it should be referred to the sole arbitration of the Chief Engineer concerned.
It will be no objection
to any such appointment that the arbitrator so appointed is a Government Servant.
The award of the Arbitrator so appointed shall be final, conclusive and binding
on all parties to these contract." 7A perusal of clause 23 of the contractual
agreement extracted above, leaves no room for any doubt that the appellant
could claim arbitration on account of disputes arising from the contract "except
where otherwise provided". It is not the case of the respondents, that the
appellant was precluded by any clause in the contractual agreement from seeking
settlement of claims raised by the appellant (which have been allowed in favour
of the appellant by the arbitral tribunal). Clause 23 includes within the
purview of arbitration, disputes whether arising during the progress of the work
or after the completion or abandonment thereof.
There is no restraint
whatsoever expressed in clause 23, which would deprive the appellant from
seeking redressal by way of arbitration, merely because he had received
payments after the preparation of the final bill, without raising any
objections. Accordingly, we are of the view, that even after the receipt of
payment on the preparation of the final bill, it was open to the appellant to
seek redressal of his disputes by way of arbitration, even though he had not
raised any objections. Secondly, in so far as the instant aspect of the matter
is concerned, the issue in hand stands concluded by this Court in Bharat Coking
Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154 wherein it has been held
the respondent has accepted the final bill, the same would not mean that it was
not entitled to raise any claim. It is not the case of the appellant that while
accepting the final bill, the respondent had unequivocally stated that he would
not raise any further claim. In absence of such a declaration, the respondent
cannot be held to be estopped or precluded from raising any claim...".In the
instant case also the appellant, while accepting payment on the preparation of
the final bill, did not undertake that he would not raise any further claims.
As such, we are satisfied
that the judgment rendered in Bharat Coking Coal Ltd., case (supra) leads to the
irresistible conclusion, that despite receipt of payment on the preparation of
the final bill, it was still open to the appellant to raise his unsatisfied
claims before an arbitrator, under the contract agreement. Thirdly, it was no
longer open to the respondents to contest the claim of the appellant on the
instant issue after the appellant had obtained the court order dated 15.5.1981 which
referred the disputes raised by the appellant to an arbitral tribunal.
The Court order dated
15.5.1981 referring the disputes raised by the appellant to arbitration, attained
finality inasmuch as the same remained uncontested at the hands of the respondents.
The respondents were, thereafter precluded from asserting that the claims
raised by the appellant could not be adjudicated upon by way of arbitration. Once
the disputes raised by the appellant were referred for arbitration and the rival
parties submitted to the arbitration proceedings without any objection, it is no
longer open to either of them to contend that arbitral proceedings were not
And fourthly, the order
passed by the High Court is contradictory in terms. Once the High Court had concluded,
that the Miscellaneous Case filed by the respondents raising objections was
barred by limitation, it was not open to the High Court to consider one of the
objections raised by the respondents and to uphold the same, so as to
disentitle the appellant from reaping the fruits of the arbitral award. In
other words, once the plea of limitation had been upheld, the objection(s)
filed by the respondents, irrespective of the merit(s) thereof were liable to
the reasons recorded hereinabove, we are of the view that the High Court erred
in concluding that the appellant having received payment after preparation of
the final bill, without having raised any objection, could not have initiated
arbitral proceedings. The judgment rendered by the High Court dated 22.12.2003 is,
accordingly, set aside. The order passed by the Civil Judge, Senior Division,
Bhubaneshwar dated 30.4.2002 is upheld. The instant appeal is accordingly
allowed. The respondents are directed to pay the appellant the awarded amount,
failing which, the appellant shall be at liberty to recover the same through
will be no order as to costs.
(Jagdish Singh Khehar)