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Rawla Construction Co. Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtDelhi High Court
Decided On
Case NumberSuit Appeal Nos. 983 and 1245A of 1979 and Interim Application No. 19 of 1980
Judge
Reported inILR1982Delhi44; 1982RLR20
ActsMinimum Wages Act
AppellantRawla Construction Co.
RespondentUnion of India
Advocates: Daljit Singh,; Ashok Kashyap and; Vijaya Rao, Advs
Cases ReferredDes Raj and Sons v. Union of India
Excerpt:
.....probe into the mind of the arbitrator. ; the facts of the present case are that the petitioner was awarded the work of making provision for accommodation of certain military units by the respondent. disputes arose and as the contract between the parties contained an arbitration clause, the disputes were referred to arbitration. after recording evidence, the arbitrator made and published his award. the respondent filed objections to the award and in particular to three of the petitioner's claims. those claims pertain to increase in the cost of construction material in respect of works carried out after 14th july, 1973; a claim on account of expenditure on overheads and establishment due to prolongation of the period of the contract and a claim on account of increased wages paid to labour..........of india has confined her objections to the following three claims of the contractor. the first claim and arbitrator's decision thereon is in these words : 'claim of rs. 2.73,000.00 revised to rs. 10,05,000.00 due to the increase in the cost of construction mate- rial in respect of works carried out after 14th july, 1973, the date of completion stipulated in the contract, due to prolongation of the period of the contract. the claim is partly justified. the respondent shall pay to the claimant a sum of rs. 2,46,217.03 (rupees two lakhs forty six thousand two hundred seventeen and paise three only).'the second claim of the contractor and the award thereon is this: 'claim of rs. 4,63,944.00 on account of expenditure on overheads and establishment, due to prolongation of the period of the.....
Judgment:

Avadh Behari Rohatgi, J.

(1) This is an award on a building contract. The Union of India objects to the award.

(2) The petitioner M/s. Rawla Construction Company, is a firm of contractors (the contractor). By a contract in writing they were awarded by the Union of India work of making provision of accommodation for certain units of the mlitary at Meerut. Disputes arose between the parties. There was an arbitration clause in the contract. The matters in dispute were referred to the sole arbitration of Col. S. S. Virdi, Additional Chief Engineer. He took upon himself the burden of the reference. He heard the parties and examined the evidence produced before him. On 31st July, 1979 he made and published the award.

(3) There were a number of claims of the contractor against the Union of India. The Union of India in their turn had certain claims of their own against the contractor. The arbitrator made his award on all of them. Mrs. Rao on behalf of the Union of India has confined her objections to the following three claims of the contractor. The first claim and arbitrator's decision thereon is in these words :

'CLAIM of Rs. 2.73,000.00 revised to Rs. 10,05,000.00 due to the increase in the cost of construction mate- rial in respect of works carried out after 14th July, 1973, the date of completion stipulated in the contract, due to prolongation of the period of the contract. The claim is partly justified. The respondent shall pay to the claimant a sum of Rs. 2,46,217.03 (Rupees two lakhs forty six thousand two hundred seventeen and paise three only).'

The second claim of the contractor and the award thereon is this:

'CLAIM of Rs. 4,63,944.00 on account of expenditure on overheads and establishment, due to prolongation of the period of the contract. The claim is party justified. The respondent shall pay to the claimant a sum of Rs. 3,11,958 (Rupees three lakhs eleven thousand nine hundred fifty eight only).'

The third claim was regarding increase in wagas. This is the claim and the decision on it :

'CLAIM of Rs. 3,90,657.80 on account of increased wages paid to the labour due to a notification of the Central Government. The claim has been partly established. The respondent shall pay to the claimant a sum: of Rs. 2,13,771.82 (Rupees two lakhs thirteen thousand seven hundred seventy one and paise eighty two only).'

I will take up the last claim first because it can be shortly disposed of on a reading of clause 58 of the Conditions of Contract on which counsel for Union of India relies. Clause 58 says:

'THE contractor shall pay not less thin the 'fair wage' as defined below or the minimum wage fixed under the Minimum Wages Act whichever is higher to labourers engaged by him on the work. 'Fair Wage' means wage whether for time or piecework notified at the time of inviting tenders for the work and where such wages .have not been so notified, the wages prescribed by the .Chief Engineer for the stations at which the work is dene.'

The rest of the clause is not material for our purpose. In my opinion this clause only means that the contractor shall not pay to the labour anything less than the fair wage as defined in the clause or the minimum wage fixed under the Minimum Wages Act, whichever is higher. But it does not prohibit him from paying increased wages according to the notification of the Central Government. In fact, he is obliged to do so because the notification of the Central Government says to the contract : 'You shall pay increased wages as notified by as.' If there is increase in wages by reason of the notification issued by the Central Government and the labour is actually paid increased wages by the contractor, I do not see why the contractor should not be entitled to claim the increase from the government. The government itself has increased the wages. They are bound to pay to the contractor the increase in wages. In my opinion the arbitrator was right in allowing the claim to the extent he thought it to have been 'established'.

(4) Now I turn to the first two claims. Counsel for the Union of India says that under clauses 9, 11, and 63 of the Conditions of the Contract, the contractor is not entitled to any compensation even if the delay in the execution of the contract is caused by reason of default on the part of the government. I cannot accept this argument. If there is delay in the execution of the contract by reason of default on the part of the government, none of the three clauses referred to by counsel will stand in the way of the contractor in making a claim before the arbitrator regarding the increase in the cost of material or expenses on account of overheads and establishment charges. Hudson in his Building and Engineering Contracts (9th ed. p. 492) states the principle governing damages in these words :

'WHERE the cause of delay is due to the breach of contract by the employer, and there is also an applicable. power to extend the time, the exercise of that power will not, in the absence of clearest possible language, deprive the contractor of his right to damages for the breach.'

Such provision as attempt to deprive the contractor of the right to claim damages will be strictly construed against the employer (Hudson p. 493). Because such a clause will have calamitous consequences for the Contractor. He will have no remedy anywhere, however outrageous the conduct or behavior of the employer may be, however interminable the delay. (See Metro Electric Co. v. Delhi Development Authority, Air 1980 Del 266.

(5) 'THE most usual circumstances which give rise to claims are delay in giving the contractor possession of the site, or in the supply of drawings, or suspension of the work caused by some act or omission of the employer, and a consequent increase of expense in the performance of the works. The contractor will be entitled to recover damages for delay caused by the employer notwithstanding that an extension of time for completion has been granted in respect of such delay. (Emden and Gill's Building Contracts and Practice, 7th ed. p. 272; Halsbury Laws of England, 4th ed. Vol. 4 para 1281 p. 653).

(6) The fact that the engineer has under the building contract, a power to extend for any reason the date for completion of the contract, and has so extended it, docs not operate to free the employer from damages for breach of contract (i.e. for delay by the employer) unless the contractor, on his side also, has accepted this extension as full satisfaction in repect of the delay. In Trollope and Sons and Colls and Sons Ltd. v. Singar. (1913) H.B.C. 849, during a contract for carrying out alterations and additions, to a dwelling-house, the contractor was delayed by (inter alia) the non-supply of drawings and details and essential information, and he claimed damages on these counts. The employer denied liability and counter-claimed for damages for delay in completion. The time for completion had been extended by the architect, and was further extended by the arbitrator, in an arbitration which ensued, to the date when the work was in fact completed. It was held that this extension of time did not affect the damages claimed by the contractor against the employer for breach of contract, by not affording possession of the site, and by interference with the execution of the work.

(7) The contractor's claim was that due to prolongation of the period of contract he had to buy construction material at higher rates because the prices had increased and also had , incur extra expenditure on overheads and establishment. The arbitrator found these claims partly justified. He awarded Rs. 2,45,217.03 on the first claim on account of increase in the cost of construction material. On account of expenditure on overheads and establishment he awarded to the contractor a sum of Rs. 3,11,958. Both the claims were founded on the primary plea of 'prolongation of the period of contract.' This prolongation can well be due to the default of the government. And if the arbitrator finds I hat the government is to be blamed for the delay and that the contractor could not complete the work in time because of the delay on their part, the arbitrator, I think is. entitled to award damages on account of increase in the cost of construction material or extra expenditure on overheads and establishment. These are damages which the contractor suffers because of the breach of contract by the government. The period of performance is lengthened. It is extended beyond the time originally fixed in the contract.

(8) If the duration of the work is prolonged, the expenses will increase. The question then will be: Who is responsible for delay Who is in breach? Who is the prolonger Neither clause 9 nor clause 11 nor clause 64 take away the arbitrator's jurisdiction to adjudicate upon the claim of the contractor, and award him damages for the loss sustained by the breach. If the contractor himself is guilty of delay, the arbitrator will dismiss the claim because no party can take advantage of his own wrong. But if he is not at fault and the other party to the contract is in default, the arbitrator can award damages.

(9) What happened in the present case was this. There was phase I of the work. The date of commencement of this work was 15th January, 1972 as fixed in the contract originally. The contractual date of completion of this phase I was 19th July, 1973. But the work could not be completed within this time. It was completed after two years from the date of the completion stipulated in the contract, It was originally completed on 14th July, 1975. There is nothing to show that for this delay it was the contractor who was solely responsible. It may be that he was himself partly responsible and partly the government was responsible. I say this because the arbitrator found the contractor's claim 'partly justified'. The contractor claimed much more but the arbitrator awarded him much less.

(10) Counsel for Union of India invited my attention to two exhibits on the arbitrator's record Ex. No. 100 dated 6th July, 1973 and Ex. No. 116 dated 5th September, 1973. What happened during the currency of the contract was that the Garrison Engineer suspended the work on 5th September. 1973. This suspension he lifted on 16th February, 1974 with effect from 18th February, 1974. The result was that during this period of nearly six months, the work remained suspended. Counsel invokes clause 9 of the Conditions of Contract and says that under this clause the Garrison Engineer has a right to suspend the execution of the work and if he does so, the contractor - shall not be entitled to compensation. She says that the contractor is entitled only to a separate period of completion 'but no other claims in this respect for compensation or otherwise, however, shall be admitted.' This contention is not well founded. The reason is that we do not know whether the arbitrator actually awarded any damages for this period of six months during which the work remained suspended, It may well be that he found that for this period the contractor was not entitled to any compensation. This is why he allowed the claim of the contractor partly. He has given no reasons in the award.

(11) There is one point of fundamental importance in this case. The award is a non-speaking award. The arbitrator has given no reasons. He has not invited us to read clauses 9, 11 and 63 of the Conditions of Contract which are the mainstay of counsel's argument. With regard to non-speaking awards the law is clear. Id Alien Berry and Co. v. Union of India, : [1971]3SCR282 (3), the Supreme Court has said :

'THE question whether a contract or a clause of it is incorporated in the award is a question of construction of the award. The test is, does the arbitrator come to a finding on the wording of the contract. If he does, he can be said to have impliedly incorporated the contract or a clause in it whichever be the case. But a mere general reference to the contract in the award is not to be held as incorporating it. The principle of reading contracts or other documents into the award is not to be encouraged or extended. The rule thus is that as the parties choose their own arbitrator to be the judge in the dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. thereforee, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted not set aside notwithstanding the mistake.'

(12) The arbitrator has not referred to any clause of the contract. There not been incorporated in the contract. There is not permissible for the court to read the clause of the contract first and then to arrive at the conclusion that the arbitrator has gone wrong in construing terms of the contract. This principle is now well settled. The court has thereforee no right to read the clauses of 'the contract and to find fault with the arbitrator's: by adopting a line of reasoning of its own.

(13) If the arbitrator says 'On the wording of this clause I hold so and so, then that clause is impliedly incorporated into the award because he invites the reading of it' (Blaiber & Co. v. Leopold Newborne (London Ltd. (1953) 2 LR 427 per Denning LJ). But here there is no reference to any specific provision of the contract on which the arbitrator may be said to have based his decision. It is quits impossible to say that he has incorporated the contract in the award in the sense that he has invited those reading the award to read' the contract 'The principle of reading contracts or other documents into the award is not one to be encouraged or extended.' I am thereforee not entitled, on an award which is non-speaking, to look at the contract and search it in order to see whether there is an error of law. The award is delphic. The arbitrator has not given any reasons why he has arrived at the conclusion he did. They will always remain in the breast of the arbitrator. The route of reasoning he adapted for himself the court will never know. The court has no means to enter his mind and to explore his thought processes.

(14) Mrs. Rao referred me to a single bench decision of Dalip Kapur J. in Suit No. 524-A/77 Des Raj and Sons v. Union of India, decided on January 22, 1980. It is enough to say that this judgment is under appeal (FAO (OS) 35R/80). It will thereforee not be proper for me to comment on its correctness. To my mind the law is clear. I will not say anything more.

(15) I, thereforee, hold that the award is not liable to be set aside on any of the grounds raised before me.

(16) For these reasons the objections are dismissed. The award is made a rule of the court. I pass a decree in terms of the award. The claimant shall be entitled to interest @ 9 per cent from the date of the award till payment and costs. Counsel's fee Rs. 500.


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