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Union of India Vs. Mehta Teja Singh and Co. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 16 of 1978
Judge
Reported inAIR1983Delhi297; 23(1982)DLT170
ActsArbitration Act - Sections 30 and 35
AppellantUnion of India
RespondentMehta Teja Singh and Co.
Advocates: U.L. Watwani and; L.C. Goyal, Advs
Excerpt:
.....of setting aside the award on this claim altogether, remitted the matter to the arbitrator for going into the matter afresh and giving his award after providing the contractor with an opportunity to put forward its objections if any, to the technical report. here, however, clearly as pointed out by the learned judge, the claims are severable and the order setting aside the award only in regard to one of the claims is clearly justified......final bill, the union, relying upon the report of a technical examiner made under clause 67 of the contract, claimed that the contractor had been overpaid to the extent of rs. 50,478.15 and that the union was entitled to recover this amount from the contractor. (3) the basis for the above claim was briefly this. it was said that the contractor was entitled to be paid at the rate of rs. 4.50 per cubic metre in regard to the item of work referred to above only where it did the excavation work and transported the removed spoil to a distance of 440 yards or more, but that, as the contractor had dug the borrow pits in such manner that it had to remove the soil over a distance of only 50 yards or even less the rates of payment to him called for reduction. (4) learned counsel for the appellant.....
Judgment:

S. Ranganathan, J.

(1) There is an appeal by the Union of India from the Judgment of a learned single Judge of this court : AIR1977Delhi231 setting aside an arbitration award in so far as it directed the respondent a firm of contractors (M/s. Mehta Teja Singh & Go.) to pay to the appellant (the Union of India) a sum of Rs. 14,674.00 .

(2) The respondent firm had executed a contract for the construction of an irrigation channel at Hissar. This involved, inter alia, rough excavation in any soil (ordinary or hard) getting out and removal of spoil to a distance not exceeding 440 yards all as specified' (vide item 4 of Schedule A to the contract). For this item of work the contractual rate agreed upon was Rs. 4.50 per cubic metre (as against a rate of Rs. 4.24 mentioned in the standard specification rates: 'SSR'. for short). When, at the end of the contract, the contractor firm claimed a sum of Rs. 12,782.09 as due to it under the final bill, the Union, relying upon the report of a technical examiner made under Clause 67 of the contract, claimed that the contractor had been overpaid to the extent of Rs. 50,478.15 and that the Union was entitled to recover this amount from the contractor.

(3) The basis for the above claim was briefly this. It was said that the contractor was entitled to be paid at the rate of Rs. 4.50 per cubic metre in regard to the item of work referred to above only where it did the excavation work and transported the removed spoil to a distance of 440 yards or more, but that, as the contractor had dug the borrow pits in such manner that it had to remove the soil over a distance of only 50 yards or even less the rates of payment to him called for reduction.

(4) Learned counsel for the appellant has elucidated the basis of the claim as consisting of three steps. He first drew our attention to certain items specified in the Ssr : (a) under item 78, a rate of Rs. 0.98 per cubic metre is specified for excavation ; (b) under item 108, a rate of Rs. 2.55 per cubic metre is specified for removing the spoil to a distance not exceeding 410 yards ; (c) under item 106, the rate for removing the spoil to a distance not exceeding 50 yards is Rs. 1.20 and (d) under item 509, the contractor is entitled to an increase of the above by 20%. Thus, he says under the Ssr, if the contractor firm had dug the borrow pits and removed the spoil to a distance not exceeding 440 yards, it would have been entitled to be paid at the rate of Rs. 4.24 per cubic metre as follows :- Specified item No. 78 0.98 Specified item No. 108 2.55 3.53 Specified item No. 509 0.71 Likewise, under the Ssr, if the contractor had dug pits and removed the soil to a distance not exceeding 50 yards his rate would have been only Rs. 2.62 per cubic metre : Specified item No. 78 0.98 Specified item No. 106 1.20 The second step in the argument is that the contract with the present respondent envisaged the removal of soil to a distance not exceeding 440 yards and for this fixed the rate of Rs. 4.50 per cubic metre as against Rs. 4.24 that would have been payable under the SSR. The third step in the argument is that, since the Contractor removed the soil to a distance not exceeding fifty yards for which the Ssr specified only Rs. 2 62, the rate at which the contractor would claim payment for the work done by it would be the amount which bears to Rs. 2.62 the same proportion that Rs. 4.50 bears to Rs. 4.24 (i.e. Rs. 2.78). Hence, by paying the contractor at Rs. 4.50 per cubic metre for the work done by it, there had been an excess payment of Rs. 1.72 per cubic metre.

(5) In support of the allegation that the contractor had done less work than it was bound to do under the contract and in respect of which it had been paid, reliance was placed on a technical examination report under Clause 67 of the contract dated 8-9-1971 which said :

'DURINGsite inspection it was noticed that the borrow pits have been dug along channel Nos. 1 and 4 involving no lead at all. This has resulted in an unintended benefit to the contractor to the extent of Rs. 2.50 per cubic metre (i.e., by taking the difference of rates quoted for items 4 and I of Schedule A)'.

(6) A dispute having arisen between the parties on this matter, it was referred to arbitration. The arbitrator awarded the Union a sum of Rs. 14,674.00 in respect of its claim for recovery. He said, in his award dated 1st June, 1973:

'(B)Claimant's claim No. 2 of Rs. 50,478.15 against recovering for removal of spoil to a distance less than specified : the claimant shall pay to the respondent a net sum of Rs. 14,674.00 only towards recovery.'

It is this part of the award that was challenged by the firm of contractors successfully before the learned single Judge in. a petition under Sections 30 and 35 of the Arbitration Act.

(7) The learned single Judge accepted the contentions of the contractor firm and set aside the award in so far as the above finding of the arbitrator was concerned. His decision rested principally on two grounds. He found, firstly, that the arbitrator did not order the production, by the Union of India, of the technical report on the basis of which its claim for recovery was made though specifically requested by the contractor to do so. The award thus had been made by the arbitrator without looking at the technical examiner's report which was the vital document on which the Union had based its claim. This amounted to misconduct rendering the award liable to be set aside. He also held that the basis on which the Union of India made the claim before the arbitrator (which has been set out earlier) was totally opposed to the technical examiner's report and the contractor had been hampered in defending the counter-claim by the non-production of the technical examiner's report.

(8) We find ourselves in full agreement with the learned single judge. The whole claim of the Union of India rested on the technical examiner's report. The report was thus a vital document without looking at which no award could be made. The action of the arbitrator in making an award without himself looking into the said document and without allowing the contractor inspection thereof clearly amounted to misconduct of the arbitration proceedings.

(9) Sri Watwani argued that the purport of the technical examiner's report had been communicated to the contractor in a letter dated 6-6-1972 which had also been looked into by the arbitrator and that thereforee the nonproduction of the report itself did not result in any injustice or denial of natural justice. He urged further that, in the proceedings before this court, the Union of India had been directed to produce the report and the contractor could have put forward any objections based on the report before the learned single Judge. At worst, he contends, the learned single Judge should have instead of setting aside the award on this claim altogether, remitted the matter to the arbitrator for going into the matter afresh and giving his award after providing the contractor with an Opportunity to put forward its objections if any, to the technical report.

(10) The above contention of the appellant does not however commend itself to us for acceptance for a number of reasons. In the first place, the whole claim of the Union being based on the technical report, the conduct of the arbitrator in proceeding to make an award without even looking into that report, despite the contractor's emphasis on its non-production and requests for its production, cannot be upheld. Secondly, the appellant stenously opposed the request of the contractor for the production of this document and even in this court claimed privilege which was over-ruled by the court. In view of this attitude of the appellants before the arbitrator and this court, it does not appear equitable to allow them the benefit of a second enquiry by the arbitrator. Thirdly, the letter of June 6,1962, although referring to the technical report, did not extract the second sentence of the technical examiner's report (which has been extracted earlier). It was in this sentence that the technical examiner had given his basis for saying that the contractor had obtained some unintended benefits. The letter of 6-6-1972 was not, thereforee, sufficient to enable the respondent to meet the brunt of the report. Finally, the basis of the claim as envisaged by the technical examiner and that as put forward by the Union before the arbitrator were radically different, and this takes us to the crux of the reason why the learned Judge concluded that the contractor had not had a real opportunity to meet the objections made. in the technical report.

(11) It is unnecessary to prepare the contents of the technical report. What it alleged was that the contractor had dug borrow pits without any lead at all and that, as a consequence, he had secured an unintended benefits 'to the extent of Rs. 2.50 per cubic metre being the difference between the rates quoted for items 4 & 1 of Schedule A' Item No. I of the Schedule to the contract mentioned a rate of Rs. 2.25 for work involving 'excavation overareas and getting out the soil including forming the surface to the required shape.' Item No. 4 specified a rate of Rs. 4 50 for rough excavation and removal of spoil to a distance not exceeding 440 yards'. The technical examiner was apparently of the view that the work done by the contractor should have been paid for at rates given under item I instead of that under item 4. (Actually the difference between these two rates was only Rs. 2.25 and not Rs. 2.50 as stated in the technical report). But, as against this, the claim made by the Department before the arbitrator was totally different. It proceede on the basis that the. contractot had not only excavated but also transported the soil over some distance but that since this distance was less than 50 yards. Payment should have been made to the contractor at a rate worked out pro-rate from the several items specified in the S.S.R. for various types of work. Whether this claim is otherwise justified or not, it is not the same as the claim outlined in the technical report. That much is clear. The contract in the present case contained a reference, in item 4, to work done by way of excavation and removal of soil to a distance not exceeding 440 yards as specified. It does not appear to be the case of the Union that the spoil was not removal to such distance as were specified by the appellant. Even assuming, as contended for by the appellant, that the soil was deposited at some shorter distance than 440 yards, the contractor was entitled to be paid at the rate against item 4 as the soil has been removed to a distance ''not exceeding 440 yards.' There are no differential rates in the present contract depending upon the distance involved in such removal as seems to be found in the SSR. Sri Watwani is probably correct in saying that, under the contract, the terms of the S.S.R. were applicable in areas where the contract itself was silent. But, as pointed out by the learned single judge, item 4 of the contract is clear that contractor is entitled to payment there under at Rs. 4.50 per cubic metre where the soil was removed to some distance even if such distance be less than 440 yards. In fact, there is an infilicity in the description of items 108 and 106 of the S.S.R. for, the item 'removal of spoil to a distance not exceeding 440 yards' will also be covered where there removal of spoil is to a 'distance not exceeding 50 yards'. Perhaps if the terms of the S.S.R. had been applicable and the above two items had to be read together, they would have been harmoniously interpreted to mean that the rate in item 106 will apply where the spoil is removed to a distance not exceeding 50 yards whereas item 108 will be attracted where the removal is over a distance exceeding 50 yards but not exceeding 440 yards. But) in the present case the contract does not incorporate this distinction; it only incorporates one item No. 4 which covers all cases of removal of spoil to any distance whatever so long as it does not exceed 440 yards. We are not expressing any final opinion as to whether, on a proper construction of the contract, the basis of the Government's claim was correct or not. Such an expression of opinion is beyond our jurisdiction in these proceedings. All that we are concerned to point out here is that the claim based on a dissection, combination and prorate reworking of a number of items referred to in the S.S.R.. in preference to the specific rate directly mentioned in the contract is a claim which whether correct or not on the merits, is totally at variance with the basis of the technical examiner's report. The appellants can claim recovery under Clause 67 only on the basis of the technical examiner's report. The technical examiner opened that the respondent should have been paid under item I, not item 4, of the contract; in other words, as per his opinion, the claim for recovery was based only on the contractual rates. But the claim eventually put forward by the Government travelled outside the rates specified in the contract and outlined a purely artificial basis entirely different from that in the report. The conduct of the arbitrator in allowing the claim, though in part, without looking into the technical report and without allowing the respondent an opportunity to meet the same has resulted in substantial prejudice to the contractor. Given a proper opportunity the contractor may have been able to bring out the variance in the two stands and proved that neither was justified. In the circumstances, we agree with the learned single Judge that there has been misconduct on the part of the arbitrator resulting in denial of natural justice to the contractor.

(12) Sri Watwani, relying on Jaykumar Jain and others v. 0m Parkash and another, : AIR1970MP119 , submitted that the award should have been set aside as a whole and not only in so far as it related to claim No. 2 of the appellant. The decision cited relates to an award the items dealt with under which were non-severable. Here, however, clearly as pointed out by the learned Judge, the claims are severable and the order setting aside the award only in regard to one of the claims is clearly justified.

(13) Sri Watwani also suggested that the learned Judge should not have set aside the award on this point but should have remitted it for reconsideration. But in the circumstances and for the reasons discussed earlier we do not think it will be just to adopt this course in the circumstances of the present case.

(14) We, thereforee, dismiss this appeal but we make no order as to costs.


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