Vishwanath
Sood Vs. Union of India & Anr [1989] INSC 27 (24 January 1989)
Rangnathan,
S. Rangnathan, S.
Mukharji, Sabyasachi
(J)
CITATION:
1989 AIR 952 1989 SCR (1) 288 1989 SCC (1) 657 JT 1989 (1) 585 1989 SCALE
(1)154
ACT:
Arbitration
Act, 1940: Section 3, 14, 17, 30, 31 and 33--Arbitration agreement--Clause
providing penalty as com- pensation to Department for default on part of
contractor in adhering to time schedule--Compensation to be determined by
Superintending Engineering and none else--Award of compensa- tion--Whether
liable to be questioned before Arbitrator.
HEAD NOTE:
The
appellant undertook the construction of a Farmers' Community Centre Building by
an agreement entered into with the Union of India and the State of Himachal Pradesh, the respondents in the appeal.
The
agreement dated June 20, 1968 provided, by Clause 2, for the payment of
compensation for delay, if the contractor should have been guilty of delay in
commencing the work or in completing it, the quantum of compensation to be deter-
mined by the Superintending Engineer and that his decision was final. Clause 25
provided for settlement of disputes by arbitration. It excluded from
arbitration matters or dis- putes in respect of which provision had been made
elsewhere or otherwise in the contract.
Certain
disputes arose between the parties, and in terms of clause 25 of the agreement
they were referred to a sole arbitrator.
The
Contractor submitted a claim in respect of 9 items, and the department filed a
counter claim to the effect that they were entitled to receive from the
Contractor a sum of Rs.24,000 on account of payment of 10 per cent compensation
for not executing the work in accordance with the terms and conditions of the
agreement. The arbitrator gave his award, and the same was filed in the Court.
The
Contractor filed objections for modification in respect of items 1, 8 and 9 of
his claim and item no. 1 of the respondents' counter claim. The department also
filed its objections.
The
Single Judge dismissed the objections of the respondents and 289 allowed the
appellants' claim only in respect of item no. 1 of the respondents' counter
claim. The single Judge took the view that a reading of clause 2 with clause 25
made it clear that any compensation under clause 2 could be adjudicated upon
only by the Superintending Engineer or the Development Commissioner and that it
was not open to the arbitrator to have entered upon a reference in regard to
this claim at all.
Both
parties filed appeals to the Division Bench. The Bench reversed the order of
the Single Judge and restored the award to its original terms. It held that
inasmuch as a bonafide dispute can be raised by the contractor in regard to his
liability to compensation under clause 2 and as no machinery was provided in
clause 2 for the resolution of such dispute, there is ample justification for
holding that resort can be had to arbitration under clause 25. On this view of
the matter, the Bench did not agree with the Single Judge that the arbitrator
had traveled outside his jurisdic- tion in awarding compensation to the
Government against the contractor for the delay in executing the work.
In the
appeal to this Court it was contended on behalf of the appellants that the
terms of Clause 2 clearly envis- age the determination of the amount of
compensation for the delay in the execution of the work only by the
Superintend- ing Engineer and specifically mentions that the decision of the
Superintending Engineer in writing shall be final. The opening words of Clause
25, "Except otherwise provided in the contract" clearly take out of
the purview of Clause 25 any dispute in respect of a claim under Clause 2. Even
if Clause 25 be held applicable, the question of submitting a dispute in this
regard to the arbitrator could only arise if there had been a determination and
a dispute under Clause 2.
It was
further submitted that there was no dispute at all between the parties on the
question of compensation and that a dispute cannot be said to arise merely
because a counter- claim was for the first time put forward by the Department
before the arbitrator.
On
behalf of the respondent-Department the appeal was contested by contending that
Clause 2 was in the natore of a penal clause which automatically takes effect
irrespective of any default. The clause made the contractor liable for the
penalty prescribed therein whenever there was a delay in the completion of the
contract, whatsoever might have been the reason therefore, the question as to
whether the con- tractor was at default or not being totally immaterial. The
Department was, therefore, entitled to automatically deduct from the bills
payable to the contractor, the compensation or penalty at the rate mentioned in
Clause 2 290 or such reduced amount as may be determined in a particular case
by the Superintending Engineer and that if the contrac- tor objected to the
deduction that would give risc to a dispute which can be the subject matter of
arbitration under Clause 25.
Allowing
the appeal,
HELD:
1. Clause 2 of the contract makes the time speci- fied for the performance of
the contract a matter of essence and emphasises the need on the part of the
contractor to scrupulously adhere to the time schedule approved by the
Engineer-in-charge. With a view to compel the contractor to adhere to this time
schedule, this clause provides a kind of penalty in the form of a compensation
to the Department for default in adhering to the time schedule. [297E-F]
2.
Clause 2 contains a complete machinery for determina- tion of the compensation
which can be claimed by the Govern- ment on the ground of delay on the part of
contractor in completing the contract as per the time schedule agreed to
between the parties. The decision of the Superintending Engineer is in the
nature of a considered decision which has to arrive at after considering the
various mitigat- ing circumstances that may be pleaded by the contractor or his
plea that he is not liable to pay compensation at all under this clause.
[298E-F]
3. The
question regarding the amount of compensation leviable under Clause 2 has to be
decided only by the Super- intending Engineer and no one else. [298G]
4. The
opening part of Clause 25 clearly excludes mat- ters like those mentioned in
Clause 2 in respect of which any dispute is left to be decided by a higher
official of the Department. [299C]
5. The
question of awarding compensation under Clause 2 is outside the purview of the
arbitrator and the compensa- tion, determined under Clause 2 either by the
Engineer-in- Charge or on further reference by the Superintending Engi- neer
will not be capable of being called in question before the arbitrator. [299D]
6.
Clause 25 which is the arbitration clause starts with an opening phrase
excluding certain matters and disputes from arbitration and these are matters or
disputes in re- spect of which provision has been made elsewhere or other- wise
in the contract. These words can have reference only to provisions such as the
one in paranthesis in Clause 2 291 by which certain types of determination are
left to the administrative authorities concerned. [299B-C]
7. The
question of any negligence or default on the part of the contractor has many
facets and to say that such an important aspect of the contract cannot be
settled by arbi- tration but should be left to one of the contracting parties
might appear to have far reaching effects. In the instant case, it is made
clear that the decision regarding non arbitrability is only on the question of
any compensation which the government might claim in terms of Clause 2 of the contract.
This is not an undefined power. The amount of compensation is strictly limited
to a maximum of 10 percent and with a wide margin of discretion to the
Superintending Engineer. It is this power that is kept outside the scope of
arbitration. [299E, F, H; 300A]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1524 of 1982.
From
the Judgment and Order dated 5.9.1977 of the Hima- chal Pradesh High Court in
F.A.O. No. 8 of 1975.
A.B. Rohtagi,
Mrs. Urmila Kapoor, Miss S. Janani and Naresh K. Sharma for the Appellant.
Miss
A. Subhashini for the Respondents.
The
Judgment of the Court was delivered by RANGANATHAN, J. The appellant Vishwanath
Sood undertook the construction of a Farmers' Community Centre Building at Thanedhar by an agreement entered into with the Union of
India and the State of Himachal
Pradesh dated
20.6.1968.
Certain
disputes arose between the parties to the agreement and in terms of clause 25
of the agreement, they were re- ferred to a sole arbitrator. The contractor
submitted a claim of Rs. 1,28,000 while the respondents also submitted a
counter-claim. By an award dated 20.3.1972, the abritrator awarded an amount of
Rs.31,932 to the contractor and a sum of Rs.21,504 to the respondents. The
award was filed in the court. The contractor filed an application in the court
for modification or correction of the award in respect of three items of his
claim ( 1, 8 and 9) and item no. 1 of the respondent's counter claim. The
Department also filed its objections to the award and prayed that a sum of Rs.8,080.29
should be awarded in favour of the Department or the award remitted to
arbitrator. The 292 learned single Judge dismissed the objections of the re- spondents.
So far as the appellant's prayers were concerned, he allowed the same only in
respect of item 1 of the re- spondent's counter claim. He held that the
arbitrator was not justified in granting to the Government a sum of Rs.20,000
against the contractor. Both the contractor and the respondents preferred
appeals to the Division Bench. The Bench reversed the order of the learned
single Judge. It set aside the order of the learned single Judge in so far as
the sum of Rs.20,000 was deleted thereby from the award of the arbitrator. The
award was restored to its original terms and the contractor was held entitled
to interest at 6 per cent on the amount found due to him after adjusting the
sum awarded by the arbitrator in favour of the Government against the sum
awarded in favour of the contractor.
The
contractor has preferred this appeal by special leave from the order of the
Division Bench of the High Court.
Learned
counsel for the appellant pressed the conten- tions in respect of the four
items to which he had objected before the learned single Judge and the Division
Bench.
Three
of these items pertain to the claims put forward by the contractor which were
rejected by the arbitrator and held by the courts to have been rightly
rejected. The first claim (item no. 1) made by the contractor was of a sum of Rs.
12,720 which, according to him, was the loss incurred by him by reason of the
Department's delay in handing over the site to him for executing the contract.
The learned single Judge discussed this aspect of the matter at length. He
observed that, on this point, there was, on the one hand, oral evidence adduced
on behalf of the Department while there was only the bare denial of the
contractor on the other. He pointed out that the arbitrator had fully consid- ered
the matter and that it was not open to the court to re-assess the evidence and
that there was no error apparent on the face of the record. The second claim
(item no. 8) was for a sum of Rs.6,172 being the amount kept as security with
the respondent. In respect of this item also the learned single Judge discussed
the evidence which showed that the security amount had been properly adjusted
by the Department which had been constrained to take up the work departmental- ly
at the cost and risk of the contractor. He held that this was an aspect which
had been considered by the arbitrator and a proper conclusion arrived at. The
third claim put forward by the petitioner (item no. 9) was for a sum of Rs.30,000,
claimed as compensation for an amount spent by the contractor for the purchase
of a truck for this work.
The
learned single Judge here again pointed out that no material had been placed
before 293 the arbitrator by the contractor to show that he was enti- tled to
the amount and that, in any event, having regard to the fact that the work was
executed by the Department at the cost and risk of the contractor, there was no
question of the contractor preferring any claim in respect of this item.
The
above three claims of the petitioner were also rejected by the Division Bench
which pointed out that the award made by the arbitrator was not a speaking
award and that the face of the award did not show any error. We do not think
that so far as these claims are concerned, that the appellant has any arguable
case at all. As pointed out by the Division Bench of the High Court, the award
was a non-speaking award.
The
arbitrator had considered the materials placed before him and had arrived at
his conclusions. The award does not on the face of it disclose any error, much
less any error of law, which needs to be set fight. We therefore, hold that the
High Court was justified in affirming the award so far as the rejection of
these three claims is concerned.
The
position in regard to the counter claim of the respondents which was allowed by
the arbitrator and the Division Bench stands on a different footing. The
respond- ents' claim before the arbitrator was that they were enti- tled to
receive from the contractor "Rs.24,000 on account of payment of 10 per
cent compensation on the tendered amount for not executing the work in
accordance with the terms and conditions of the agreement". As against
this claim the arbitrator awarded the respondents a sum of Rs.20,000. The
learned single Judge took the view that having regard to clause 2 of the
contract (pertaining to the claim by the respondent) read with clause 25 it was
clear that any com- pensation under clause 2 could be adjudicated upon only by
the superintending Engineer or the Development Commissioner and that it was not
open to the arbitrator to have entered upon a reference in regard to this claim
at all. In order to appreciate the finding of the learned single Judge it will
be useful to set out clauses 2 and 25 of the conditions of contract on which
his decision was based:
"Clause
2: Compensation for delay: The time allowed for carrying out the work as entered
in the tender shall be strictly observed by the contractor and shall be deemed
to be the essence of the contract on the part of the contractor and shall be
reckoned from the fifteenth day after the date on which the order to commence
the work is issued to the contractor. The work shah throughout the stipulated
period of the contract be proceeded with all due diligence and the contractor
shall pay as compensation an amount 294 equal to one per cent, or such smaller
amount as the Superintending Engineer (whose decision in writing shall be
final) may decide on the amount of the estimated cost of the whole work as
shown in the tender for every day that the work remains uncommenced, or
unfinished, after proper dates. And further, to ensure good progress during the
execution of the work, the contractor shall be bound in all cases in which the
time allowed for any work exceeds, one month (save for special jobs to complete
one-eighth of the whole of the work before one-fourth of the whole time allowed
under the contract has elapsed; three-eighth of the work, before one-half of
such time has elapsed, and three fourth of the work, before three-fourth of
such time has elapsed.
However,
for special jobs if a time-schedule has been submitted by the Contractor and
the same has been accepted by the Engineer-in- charge, the contractor shall
comply with the said time-schedule. In the event of the con- tractor failing to
comply with this condition, he shall be liable to pay as compensation an amount
equal to one per cent or such smaller amount as the Superintending Engineer
(whose decision in writing shall be final) may decide on the said estimated
cost of the whole work for every day that the due quantity of work remains
incomplete; provided always that the entire amount of compensation to be paid
under the provisions of this clause shall not exceed ten per cent, on the
estimated cost of the work as shown in the tender." "Clause 25:
Settlement of disputes by Arbitra- tion: Except where otherwise provided in the
contract, all questions and disputes relating to the meaning of the
specifications, designs drawings and instructions hereinbefore men- tioned and
as to the quality of workmanship or materials used on the work or as to any
other question, claim, matter or thing whatsoever, in any way arising out of or
relating to the contract, designs, drawings, specifications, estimates,
instruction, order, or these condi- tions or otherwise concerning the works 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 arbitra- tion of the person appointed by the Chief
Engineer, Himachal Pradesh Public Works De- partment ........ " 295 The
Division Bench did not agree with the view of the learned single Judge. It
pointed out that, while in the ordinary course, the rate of compensation
payable by the contractor is one per cent of the amount of the estimated cost
of the whole work, under clause 2, the Superintending Engineer is authorised to
depart from this figure and deter- mine the compensation at a smaller amount if
there are any extenuating circumstances in favour of the contractor. The
question however was whether the compensation determined under clause 2 is
excluded from the scope of arbitration under clause 25. The Division Bench
answered this question in the negative. It pointed out that the sine qua non of
clause 2 was that the contractor should have been guilty of delay in commencing
the work or in completing it but the clause did not specify either the
authority or the procedure for determining whether the contractor is
responsible for the default. Observing that there can be a serious dispute in a
particular case as to the person who is responsible for the delay, the Bench
took the view that the determination of this dispute cannot be excluded from
the scope of clause 25.
The
Bench observed that inasmuch as a bona fide dispute can be raised by the
contractor in regard to his liability to compensation under clause 2 and no
machinery is provided in clause 2 for the resolution of that dispute, there is
ample justification for holding that resort can be had to arbitra- tion under
clause 25. The statement in clause 2 that the decision of the Superintending
Engineer is final, according to the Bench, merely constituted a declaration
that no officer in the Department could disturb his quantification.
But
this finality cannot be construed as extending to ex- clude the jurisdiction of
the arbitrator under clause 25. On this view of the matter, the Division Bench
found itself unable to agree with the learned single Judge that the arbitrator
had traveled outside his jurisdiction in awarding a sum of Rs.20,000 as
compensation to the Government against the contractor for the delay in
executing the work.
It
will be seen from the narration above that so far as this item was concerned,
both parties proceeded on the footing that the claim of the Government was a
claim under clause 2 and that the arbitrator had awarded the sum only in terms
of clause 2. This is also borne out by the fact that the claim of the
Department was based on a percentage of the total cost of the work and the
restriction of the claim to 10% also appears to have been the result of the
proviso to clause 2. The award, therefore, on a fair reading of it, contains a
grant by the arbitrator of compensation to the Government in terms of clause 2.
It is therefore open to the parties to urge before this Court, as they did
before the High Court also, that, on a proper construction of clauses 2 and 25,
296 this award was not justified. It is in this respect that this counter claim
of the Department stands on a different footing from the earlier claims of the
contractor which have been rejected and which, we have held above, have been
rightly rejected.
Learned
counsel for the appellants contends that the terms of clause 2 clearly envisage
the determination of the amount of compensation for the delay in the execution
of the work only by the Superintending Engineer and specifically mentions that
the decision of the Superintending Engineer in writing shah be final. The
opening words of clause 25:
"Except
where otherwise provided in the contract" clearly take out of the purview
of clause 25 any dispute in respect of a claim under clause 2. He submitted
that the clause authorised only the Superintending Engineer to go into the
question whether there is any delay or not and the reasons therefore and to
determine the rate at which compensation should be charged from the contractor.
If the Engineer-in- charge levies a compensation under clause 2, the contractor
can apply to the Superintending Engineer. If the Superin- tending Engineer
finds that there was no fault on the part of the contractor at all he could
waive the compensation under clause 2 and that cannot be challenged by the
Depart- ment before the arbitrator. Per contra, where the Superin- tending
Engineer confirms that there has been a delay for which compensation should be
charged, it will not be open to the contractor to challenge the conclusion
before the arbi- trator. Learned counsel also submitted that even if clause 25
were to be held applicable, the question of submitting a dispute in this regard
to the arbitrator could only arise if there had been a determination and a dispute
under clause 2.
Clause
2 envisages that the Engineer-in-charge should, in appropriate cases, levy a
compensation at the rate specified in that clause. If he did, it was open to
the contractor to dispute the same and approach the Superintending Engineer to
reduce or waive the compensation for any reason whatsoever.
Or, it
may be that, even where the Engineer-in-charge levied no compensation, the
Superintending Engineer could, either on his own motion or on being moved by
the department, after considering the facts charge a compensation with the
quantum of which the department may not be satisfied in which event a dispute
could arise. But in the present case neither the Engineer-in-charge nor the
Superintending Engineer had determined any liability at all under clause 2.
There was no compensation levied against which there was any protest by the
contractor, and there was no matter submitted to the Superintending Engineer
for determination. In these circum- stances, the submission of the learned
counsel for the appellant is that there was no dispute at all between the
parties on 297 the question of compensation and that a dispute cannot be said
to arise merely because a counter claim is for the first time put forward by
the Department before the arbitra- tor.
On the
other hand, the learned counsel for the Depart- ment contended that clause 2 is
in the nature of a penal clause which automatically takes effect irrespective
of any default. He described it as an "agreed penalty" clause. He
stated that the clause made the contractor liable for the penalty prescribed
therein whenever there was a delay in the completion of the contract,
whatsoever might have been the reason therefore, the question as to whether the
contractor was at default or not being totally immaterial. The Depart- ment
was, therefore, entitled to automatically deduct from the bills payable to the
petitioner the compensation or penalty at the rate mentioned in clause 2 or
such reduced amount as may be determined in a particular case by the Superintending
Engineer and that if the contractor objected to this deduction that would give
rise to a dispute which can be the subject matter of arbitration under clause
25. He therefore submitted that the Division Bench has rightly construed the
terms of the contract and confirmed the award made by the arbitrator.
We
have gone through the judgment of the Division Bench of the High Court and we
have also considered the arguments advanced on both sides. With great respect,
we find our- selves unable to agree with the interpretation placed by the
Division Bench on the terms of the contract. Clause 2 of the contract makes the
time specified for the performance of the contract a matter of essence and emphasises
the need on the part of the contractor to scrupulously adhere to the time
schedule approved by the Engineer-in charge. With a view to compel the
contractor to adhere to this time schedule, this clause provides a kind of
penalty in the form of a compensa- tion to the Department for default in
adhering to the time schedule. The clause envisages an amount of compensation
calculated as a percentage of the estimated cost of the whole work on the basis
of the number of days for which the work remains uncommenced or unfinished to
the prescribed extent on the relevant dates. We do not agree with the counsel
for the respondent that this is in the nature of an automatic levy to be made
by the Engineer-in charge based on the number of days of delay and the
estimated amount of work. Firstly, the reference in the clause to the require- ment
that the work shall throughout the stipulated period of the contract be
proceeded with due diligence and the refer- ence in the latter part of the
clause that the compensation has to be paid "in the event of the
contractor failing to comply with" the prescribed time 298 schedule make
it clear that the levy of compensation is conditioned on some default or
negligence on the part of the contractor. Secondly, while the clause fixes the
rate of compensation at 1 per cent for every day of default it takes care to
prescribe the maximum compensation of 10 per cent on this ground and it also
provides for a discretion to the Superintending Engineer to reduce the rate of
penalty from 1 per cent. Though the clause does not specifically say so, it is
clear that any moderation that may be done by the Super- intending Engineer
would depend upon the circumstances, the nature and period of default and the
degree of negligence or default that could be attributed to the contractor.
This means that the Superintending Engineer, in determining the rate of
compensation chargeable, will have to go into all the aspects and determine
whether there is any negligence on the part of the contractor or not. Where
there has been no negligence on the part of the contractor or where on account
of various extraneous circumstances referred to by the Division Bench such as vis
major or default on the part of the Government or some other unexpected
circumstance which does not justify penalising the contractor, the Superintend-
ing Engineer will be entitled and bound to reduce or even waive the
compensation. It is true that the clause does not in terms provide for any
notice to the contractor by the Superintending Engineer. But it will be
appreciated that in practice the amount of compensation will be initially
levied by the Engineer-in-charge and the Superintending Engineer comes into the
picture only as some sort of revisional or appellate authority to whom the
contractor appeals for redress. As we see it, clause 2 contains a complete machin-
ery for determination of the compensation which can be claimed by the
Government on the ground of delay on the part of the contractor in completing
the contract as per the time schedule agreed to between the parties. The
decision of the Superintending Engineer, it seems to us, is in the nature of a
considered decision which he has to arrive at after con- sidering the various
mitigating circumstances that may be pleaded by the contractor or his plea that
he is not liable to pay compensation at all under this clause. In our opinion
the question regarding the amount of compensation leviable under clause 2 has
to be decided only by the Superintending Engineer and no one else.
The
Division Bench has construed the expression in clause 2 in parenthesis that
"the Superintending Engineer's decision shall be final" as referring
only to a finality qua the department; in other words, that it only constitutes
a declaration that no officer in the department can determine the
quantification and that the quantum of compensation levied by the
Superintending Engineer shall not be 299 changed without the approval of the
Government. After refer- ring to certain judicial decisions regarding the
meaning of the word "final" in various statutes, the Division Bench
concluded that the finality cannot be construed as excluding the jurisdiction
of the arbitrator under clause 25. We are unable to accept this view. Clause 25
which is the arbitra- tion clause starts with an opening phrase excluding
certain matters and disputes from arbitration and these are matters or disputes
in respect of which provision has been made elsewhere or otherwise in the
contract. These words in our opinion can have reference only to provisions such
as the one in parenthesis in clause 2 by which certain types of determinations
are left to the administrative authorities concerned. If that be not so, the
words "except where other- wise provided in the contract" would
become meaningless. We are therefore inclined to hold that the opening part of
clause 25 clearly excludes matters like those mentioned in clause 2 in respect
of which any dispute is left to be decided by a higher official of the
Department. Our conclu- sion, therefore, is that the question of awarding compensa-
tion under clause 2 is outside the purview of the arbitrator and that the
compensation, determined under clause 2 either by the Engineer-in-charge or on
further reference by the Superintending Engineer will not be capable of being
called in question before the arbitrator.
We may
confess that we had some hesitation in coming to this conclusion. As pointed
out by the Division Bench, the question of any negligence or default on the
part of the contractor has many facets and to say that such an important aspect
of the contract cannot be settled by arbitration but should be left to one of
the contracting parties might appear to have far reaching effects. In fact,
although the contractor in this case might object to the process of arbitration
because it has gone against him, contractors generally might very well prefer
to have the question of such compensation decided by the arbitrator rather than
by the Superintending Engineer. But we should like to make it clear that our
decision regarding non arbitrability is only on the question of any compensation
which the Government might claim in terms of clause 2 of the contract. We have
already pointed out that this is a penalty clause introduced under the contract
to ensure that the time schedule is strictly adhered to. It is something which
the Engineer- incharge enforces from time to time when he finds that the
contractor is being recalcitrant, in order to ensure speedy and proper
observance of the terms of the contract. This is not an undefined power. The
amount of compensation is strictly limited to a maximum of 10% and with a wide
margin of discretion to the Superintending Engineer, who might not only reduce
the percentage but who, we think, can even reduce it 300 to nil, if the
circumstances so warrant. It is this power that is kept outside the scope of
arbitration. We would like to clarify that this decision of ours will not have
any application to the claims, if any, for loss or damage which it may be open
to the Government to lay against the contrac- tor, not in terms of clause 2 but
under the general law or under the Contract Act. As we have pointed out at the
very outset so far as this case is concerned the claim of the Government has
obviously proceeded in terms of clause 2 and that is the way in which both the
learned single Judge as well as the Division Bench have also approached the ques-
tion. Reading clauses 2 and 25 together we think that the conclusion is
irresistible that the amount of compensation chargeable under clause 2 is a
matter which has to be adju- dicated in accordance with that clause and which
cannot be referred to arbitration under clause 25.
As
stated earlier, an alternative ground was urged by the learned counsel for the
appellant that, no penalty under clause 2 having been imposed by the
respondents in the first instance, no dispute had at all arisen which could
have been referred to arbitration. This point was not taken before the High
Court and the relevant facts are not on record. That apart, in the view we have
taken, it is unnecessary to express any opinion on this argument and we refrain
from doing so.
For
the reasons above mentioned, we restore the judgment of the learned single
Judge. In the result, the amount of compensation of Rs.20,000 awarded by the
arbitrator in favour of the Government will stand deleted. The amount of
interest payable to the contractor, if any, will be worked out on the basis of
the award as modified by us above.
The
appeal is allowed. We however make no order as to costs in the circumstances of
the case.
N.V.K.
Appeal allowed.
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