Army
Welfare Housing Organisation Vs. M/S. Gautam Construction & Fisheries Ltd.
[1998] INSC 480 (17
September 1998)
A.S.
Anand, D.P. Wadhwa D.P.Wadhwa. J.
ACT:
HEAD NOTE:
IAs 17
to 20 of 1998 are objections filed by M/s Gautam Construction and Fisheries Ltd.,
(GC&FL) under Section 15,17 and 33 of the Arbitration Act, 1940 (for short,
the 'Act') to the award dated September 9, 1997 of the sole Arbitrator, Justice
V. Khalid, a retired Judge of this Court. IAs 21 to 24 are the objections
similarly filed by the Army Welfare Housing Organisation (AWHO) against the
same award.
GC&FL
in their objections seek directions for modification of the award to correct an
error with regard to wrong deduction of Rs.30,000,00/- twice by the Arbitrator
from their claims 1 and 13 in their statement of claim. They have also claimed
interest @ 18% per annum on the amount of the award in their favour till
payment. AWHO in their objections also seek modification of the award stating
that their claim for anticipated liability towards completion of the contract
was wrongly rejected by the Arbitrator when some of the amounts claimed were
towards "firm liability". Both parties disputed the objections of
each other to the award as aforesaid.
Little
background will be necessary to understand the objections raised by the
parties.
There
was a contract entered into between them for construction of certain number of
dwelling units by GC&FL for AWHO on the land belonging to GC&FL.
Contract
contained an arbitration clause. Disputes arose between the parties resulting
in cancellation of contract by the WHO and issuance of publication of notice
for re-tendering of the contract for the balance of the work. Instead of the
contract, GC&FL filed an application under Section 20 of the Act and also filed
an application under Section 41 of the Act seeking interim directions. These
proceedings were filed in the Madras High Court. These learned single Judge by
order dated September 18, 1995 appointed a retired Judge of the Madras High
Court as sole arbitrator and at the same time restrained WHO from re-tendering
the work pending disposal of arbitration proceedings. Arbitration agreement
under the contract prescribed a different mode for appointment of arbitrator
but that is nor relevant now and unnecessary for us to examine that aspect.
Aggrieved
by the judgement of the High Court, WHO sought leave to appeal to this court
which was granted by order dated December 4, 1995 and the appeal itself was also heard and disposed of on the
same day. With the consent of the parties, this Court, as the Arbitrator and
also authorised him to take any help from any technically qualified person.
Liberty was given to the parties to
approach the Arbitrator for any interim relief including vacation of the
injection order granted by the High Court regarding re-tendering of the work.
It was also directed that the Arbitrator would file the award in this court
only and other courts were interdicted from interfering in the arbitration
proceedings.
After
entering in to the reference, the Arbitrator gave an interim award on May 8, 1996 whereby he vacated the order of injunction granted
by the High Court in its judgement dated September 18, 1995. This interim award when filed in
this court was made rule of the Court as no party filed any objection to the
same. Thereafter, the Arbitrator gave his final award on September 9, 1997 and on notice of filing the same
given to the parties, they filed their objections now under consideration.
The
award is quite elaborate. It take into account numerous details. Arbitrator
framed as many as 10 issues and then went on to examine each of the claims put
forward by the parties with reference to the record before him. In the
objections filed by AWHO it seeks remission of the award. The objections are
though under Section 15, 17 and 33 of the Act. In the course of arguments, it
was submitted by Mr. Tiwari, learned counsel for the AWHO that the award be
remitted back to the Arbitrator which would be under Section 16 of the Act,
though in the prayer modification of the award under Section 15 is sought. AWHO
submitted that though if claimed certain amounts as 'firm liability' after the
contract was cancelled and there were certain 'anticipated expenses' required
to complete the contract. It was submitted that the Arbitrator treated even the
firm liability as in the nature of elements of anticipated expenses and
disallowed, the Arbitrator committed a mathematical error. It is not the case
of the AWHO that the Arbitrator did not examine or did not take into account the
claim put forward by the AWHO. It is not possible for us to re-appreciate the
evidence produced before the Arbitrator and then ourselves coming to the
conclusion whether a certain amount claimed was towards firm liability' or in
the 'nature of anticipated expenses. Once the Arbitrator had held that the
claim would be in the 'nature of anticipated expenses. It is difficult for us
to hold the same otherwise. It cannot be said that the award is not good on the
face of it on that account. The objections of AWHO have no force and IAs 21 to
24 are rejected.
Under
the terms of the contract GC&FL would be entitled to a total amount of
Rs.54,95,271.72 as retention money from the total contract amount. The
Arbitrator found that under the Contract, GC&FL executed work of the value
of Rs.4,52,10,002/- and as such GC&FL would be entitled to retention money
to the extent of 63.47%. Thus from the retention money of Rs.54,95,271/- which
GC&FL would be entitled to on compaction of the contract, a sum of
Rs.34,87,848.90 is now due to them being 63.47% of Rs. 54,95,271.72. On
completion of 50% if the work, GC&FL had already received Rs. 30,00,000/-
as retention money in three installments. Thus, GCC&FL would be entitled to
the balance amount of Rs.4,87,848.90 towards the retention money. The
Arbitrator found that under claims 1 and 13 of GC&FL an amount of Rs.7,08,893.60
would be due to GC&FL from AWHO. This is how the Arbitrator arrived on this
figure :
"The
ultimate position is as follows:
RAR
BILL 23 DEMAND:Rs.1.Value of work exeuted 450,44,002.35 2.Value of extra work
1,66,000.00 3.Total 4,52,10,002.35 4.Val.of materials lying site 29,57,657.00
5.Grand total 4,81,67,659.70 6.Percentage of work done 63.47% DEDUCTION
a)
Retention Money 2,00,000
b)
Cost of Schedule "B" materials supplied by AWHO 1,69,37,615
c)
Income Tax 11,52,990
d)
Interest on Rs.18 lakhs advance' 6,26,117
e)
Payment for RAR bills upto Bill No.22 2,47,55,521
f)
Advance of retertion money after 50% work done 30,00,000
g)
Advance made at site 12,74,372 4,79,46,615.00 Balance Receivable 2,21,044.70
h)
Proportionate retention money payable at 63.47%ofRs.54,95,271.72 less
Rs.30,00,000/-already paid 4,87,848.90 Total Balance Receivable 7,08,893.60
Thus, a sum of Rs.7,08,893.50 is allowed under Claim No.1 and 13." The
objection of GC&FL is that amount of Rs.30,00,000/- has been deducted twice
by the Arbitrator which was a mistake apparent on the face of it and as such
this Court should modify the award and grant a further amount of Rs.30,00,000/-
to that already awarded by the Arbitrator under claims 1 and 13. We do not
think that Mr. Thakur is right in his approach. GC&FL is entitled to
Rs.4,87,848.90 towards balance of retention amount as an amount of
Rs.30,00,000/- GC&FL, it should have deducted Rs.30,00,000/- which it had
already received. As a matter of fact, the Arbitrator observed as under :-
"Claim No. 1 suffers from a serious flaw and the same can be rejected
outright. On a perusal of the claim and the various items shown therein. it is
seen that the petitioners have either inadvertently or deliberately omitted to
deduct Rs. 30 lakhs towards retention money obtained by them on three occasions
for 50% of the work done. If this Rs.30 lakhs is deducted from the claim minus
figure.
This
error, however, is seen corrected in the petitioners' reply to the Respondents'
claim No.1" In fact, in the calculations aforesaid, under Item (h), the
Arbitrator could have said : "Balance of the retention money payable -
Rs.4,87,848.90" Retention money due to GC&FL is from the whole of the
value of the contract.
Total
of retention money as arrived at by the Arbitrators is Rs.54,95,271.72 which is
payable on completion of the contract by the AWHO. Since GC&FL, executed
only 63.47% of the value of the contract they became entitled to Rs.34,87,848.90
being 63.47% of Rs.54,95,271.72. Having already received Rs.30,00,000/-
GC&FL became entitled to balance amount of Rs.4,87,848.90 which the
Arbitrator allowed them under the award.
As far
as the claim of interest is concerned, the award has already allowed the same
and no objection thereto has been filed by AWHO or even by GC&FL on the
claim due to AWHO under the award. IAs 17 to 20 of the GC&FL are rejected.
IAs 13
to 16 filed by GC&FL seeking directions for modification of the Award and
for grant of interest also stand dismissed.
Accordingly
the award dated September
9, 1997 is made rule
of the court and decree in terms thereof will be passed. Since both the parties
have failed in their objections to the award, they shall bear their own costs.
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