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Tamil Nadu Electricity Board Vs. Kirloskar Constructions and Engineers Limited and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Case NumberO.P. No. 227 of 2002
Judge
Reported in2008(4)ARBLR355(Madras)
ActsLimitation Act, 1963; Arbitration and Conciliation Act, 1996 - Sections 31(3), 34, 34(2), 37(1) and 37(2); Indian Contract Act, 1872 - Sections 55 and 73; Indian Limitation Act, 1908 - Schedule: Articles 30 and 137; Arbitration Act, 1940 - Sections 20 and 20(1); Carriage of Goods by Sea Act, 1992 - Sections 2(2)
AppellantTamil Nadu Electricity Board
RespondentKirloskar Constructions and Engineers Limited and ors.
Appellant AdvocateN.C. Ramesh, Adv.
Respondent AdvocateR. Murari, Adv.
DispositionPetition dismissed
Cases ReferredJ.C. Budhraja v. Chairman
Excerpt:
arbitration - award - constitution of tribunal - section 34 of arbitration and conciliation act, 1996 - dispute arose between petitioner and 1st respondent with regards to payment - they appointed arbitrator - arbitrator passed award against petitioner - hence, present petition - whether award was illegal and not in accordance with law - held, award was in accordance with law and there was no illegality in award granted because tribunal consist of body of experts as required for instant litigation - no reason made out under section 34 of act to set aside award - petition dismissed accordingly - chitra venkataraman, j.1. op no. 227 of 2002 is filed by the tamil nadu electricity board challenging the award dated 17.03.2001 passed by the arbitrators in the matter 23 arbitration regarding the construction of raw and clear water tunnels from pillur reservoir, etc. for water supply to coimbatore local planning and rural areas for coimbatore water supply project under contract agreement no. sech/e1/aee1/ae/vk/f.cwsp/sech-16 dated 18.11.1991.2. the first respondent was the successful tenderer on 20.10.1990. after successful round of discussion, the first respondent submitted a supplemental technical bid and a price bid. accordingly, there was an increase in bid price by 7.5%. the validity of the bid was extended up to 28.02.1991. the petitioner issued the letter of acceptance on.....
Judgment:

Chitra Venkataraman, J.

1. OP No. 227 of 2002 is filed by the Tamil Nadu Electricity Board challenging the award dated 17.03.2001 passed by the arbitrators in the matter 23 arbitration regarding the construction of raw and clear water tunnels from Pillur Reservoir, etc. for water supply to Coimbatore Local Planning and Rural Areas for Coimbatore Water Supply Project under Contract Agreement No. SECH/E1/AEE1/AE/VK/F.CWSP/SECH-16 dated 18.11.1991.

2. The first respondent was the successful tenderer on 20.10.1990. After successful round of discussion, the first respondent submitted a supplemental technical bid and a price bid. Accordingly, there was an increase in bid price by 7.5%. The validity of the bid was extended up to 28.02.1991. The petitioner issued the letter of acceptance on 28.02.1991 on the value quoted by the first respondent. Thus, for the construction of the Water Tunnel Board, Pillur, the value of the contract as quoted by the first respondent and accepted by the petitioner was Rs. 3,71,20,650 and for construction of clear water tunnel across Kattan Hills was Rs. 97,03,500, totalling to a sum of Rs. 4,68,24,150. Admittedly, the petitioner herein handed over the site on 15.03.1991 to the first respondent. The time for completion of the work was stated to be 14.07.1993 - 27 months from the date of letter of intent or from the date of handing over the site. The site was handed over on 15.03.1991. The first respondent was granted the extension originally up to 31.12.1993.

3. The allegation of the petitioner is that the first respondent did not complete the work within the stipulated period as per the letter of acceptance. In its letter dated 13.06.1993, the first respondent sought for extension of time up to 31.12.1993. Accordingly, under its letter dated 19.11.1993, the petitioner, after specifically stating that the conditions contained in the contract would be applicable, extended the time up to 31.12.1993. The first respondent wrote letters between 01.01.1994 and 15.01.1995 and sought for further extension of time. Admittedly, the petitioner did not reject the same but allowed the work to be executed and payment was made as per the rates stated under the letter of acceptance. The work was completed on 15.01.1995 and the petitioner took possession of the site on 15.01.1995.

4. The petitioner states that in the course of execution of the work, the first respondent sent a letter on 15.01.1994, wherein, the first respondent sought for a revision in the rates as regards the work done after 01.01.1994 and called upon the petitioner herein to take a decision early. The specific case of the petitioner herein is that, by its letter dated 22.03.1994, the petitioner rejected the claim for revision in rates. To this, the first respondent sent a reply dated 15.05.1994 that the first respondent would raise a dispute before the appropriate forum at a later stage. The first respondent sent a notice on 12.07.1997 and invoked the arbitration clause by appointing its nominee arbitrator, namely, the third respondent in this petition before this court. Thereafter, the petitioner appointed its nominee arbitrator and both the arbitrators, in turn, appointed the presiding arbitrator. The first respondent made a claim for Rs. 2,63,59,916, claiming interest at 18% per annum from the date on which the alleged claims fell due. The total claims were under 27 distinct heads. The petitioner herein filed a detailed counter opposing the claims, contending that the first respondent was not entitled to any of the claims, since the same were not falling under the contractual terms. Thus, the petitioner questioned the jurisdiction of the arbitral tribunal to arbitrate on the issue. On receipt of the claim and the counter to the claim made, the petitioner raised a preliminary objection on limitation regarding the maintainability of the claim. Apart from this, the petitioner also made its submission on the individual claims. The arbitral tribunal rejected the plea of the petitioner on the limitation aspect while rejecting some of the claims. It passed an award accepting the claims partially to the total tune of Rs. 49,94,000. On the question of interest, the tribunal awarded interest at 18% per annum from 15.10.1997 when the tribunal sat for the first time.

5. Making his submission on the question of limitation, learned Counsel appearing for the petitioner submitted that the first respondent wrote a letter to the petitioner herein and called upon them to pay the revised rate as regards the work done beyond 01.01.1994. This was replied to by the petitioner on 23.02.1994 that no extra rate would be paid for concreting to be done after 01.01.1994. The first respondent further wrote a letter dated 15.05.1994 wherein, they stated that in case the revised rate is not granted as sought for in their letter dated 15.01.1994, they would like to take up the matter before the appropriate forum at a later date. Learned Counsel appearing for the petitioner submitted that in terms of this indication on the dispute raised on the rate that the matter would be taken up before the appropriate forum at a later date, the cause of action had arisen as early as on 15.01.1994, as such the limitation worked out from this date when the first respondent raised an issue. In any event, when the first respondent indicated its intention to take up this matter before the appropriate forum, in its letter dated 15.05.1994, the limitation for making a claim had to be reckoned with from that date. He pointed out that even during the pendency of the proceedings, payments were made. Hence, the limitation for the purpose of extra rate claimed for work done before 01.01.1994 has to be calculated in any event from 23.02.1994 and certainly not beyond 15.05.1994. He pointed out that the final bill was paid on 19.10.1995. This was received by the first respondent under protest and without prejudice to the letter dated 14.11.1994 marked as Exhibit C-7.

6. He further pointed out that the first respondent accepted all the other bills, but for the final bill, the first respondent noted it as 'under protest'. He pointed out that the bills raised by the contractor were as per the rate fixed under the contract at the basic rate +7.5% escalation and not based on the claim made by the first respondent in its letter dated 15.01.1994. In terms of the first respondent accepting the rate adopted in respect of all bills and having regard to the rejection of the claim for a new rate in the letter dated 23.02.1994, the claim made long thereafter was totally barred by limitation. He made further reference to the letters written by the first respondent to the petitioner as well as to the Member Generation of the petitioner. Ultimately, the first respondent invoked the arbitration clause only on 12.07.1997 as per Clause 49 of the General Conditions of Contract and called upon the petitioner to appoint their arbitrator for an early settlement of the dispute. Learned Counsel pointed out that in terms of the rejection of his claims throughout, on the date when the arbitration clause was invoked, the claim itself had been totally time barred for any adjudication. He also pointed out to the letter dated 30.03.1996, addressed to the first respondent wherein the petitioner had specifically stated that calling for further details was without prejudice to the final outcome on the claim and without any prior commitment of the petitioner. He pointed out that this letter, however, did not stall the limitation running through its course; hence, going by the conduct of the first respondent, it is crystal clear that the claim itself is barred by limitation. Learned Counsel referred to Clause 49 of the agreement relating to arbitration and submitted that it was specifically agreed that the work under the contract shall continue during the arbitration proceedings and no payments due or payable by the petitioner shall be withheld on account of such proceedings. Hence, the claim, as on the date of invoking the arbitration clause, had been time barred and the award passed is illegal.

7. Learned Counsel appearing for the petitioner pointed out that on the aspect of limitation, there is absolutely no discussion by the arbitrators. After going through the various claims raised, the arbitrators held that the claims were not barred by limitation. No reasons were assigned by the learned arbitrators for holding so. He referred to the decisions in Union of India v. Seyadu Beedi Co. : AIR1970Mad108 ; S. Rajan v. State of Kerala : [1992]3SCR649 Panchu Gopal Bose v. Board of Trustees for Port of Calcutta : [1993]3SCR361 Vishindas Bhagchand v. Chairman, Maharashtra State Electricity Board, Mumbai 2001 (Suppl.) Arb. LR 505 (Bom.); Madras Metro Water Supply and Sewerage Board v. O. Ramakrishna Reddy 1995 2 L.W. 694; and State of Orissa and Anr. v. Damodar Das : AIR1996SC942 to impress on the fact that the provisions of the Limitation Act, 1963 are not excluded from its application to matters arising under the Arbitration and Conciliation Act, 1996. Going by the dispute raised as early as on 15.01.1994, the invoking of the arbitration clause on 12.07.1997 was totally hit by limitation.

8. On the question of applicability of the contract rate on the execution of the work on the extended period beyond 31.12.1993, learned Counsel also raised a question as to whether there was an extension of the contract or it was a new contract. He pointed out that the claim statement was filed by the claimants on 04.11.1997 and a counter-claim was filed on 19.01.1998. A rejoinder by the claimants was filed on 14.02.1998 and again a reply by the petitioner.

9. The importance of this question assumes significance in terms of the rates to be applied. Learned Counsel appearing for the petitioner pointed out that as per Clause 8.3, the rates were stated to be firm. The contention of the petitioner was that there was an agreed extension and, therefore, the rate under the contract would alone be applicable for the purpose of valuing the work. The petitioner contended that if there is no extension beyond 01.01.1994, then the work done beyond that date would amount to a new contract, under which, there is no arbitration clause to refer this issue for arbitration. Hence, this issue would be totally beyond the jurisdiction of the arbitrators to deliberate on. On the contrary, if the work executed beyond 01.01.1994 is to be treated as extension only and hence not a new contract, then the rates as per Clause 8.3 alone would prevail. Referring to the various correspondence on this, learned Counsel pointed out that the claimant admitted in his rejoinder filed in reply to the counter by the petitioner that the work was completed by the contractor on the extension of time granted and the final extension was granted by the petitioner herein up to 15.01.1995. He pointed out that the first respondent admitted the grant of extension of time in the reply filed to the petitioner's claim for liquidated ferriages in the counter filed before the arbitrator. He pointed out that till then, the admitted case of the first respondent was that the work done on 01.01.1995 was only by way of extension. He pointed out after admitting that there was an extension, the first respondent sought for an amendment of the claim before the arbitrators that the original contention in the claim petition as to 15.01.1995 as the final extension of time granted was to be amended to read that no final extension of time was granted after 15.01.1995. Apparently, as a counterblast to the claim for damages, the first respondent sought for amendment of the claim as though there was a fresh contract for a rate different from the contractual rate to be adopted. Learned Counsel pointed out that the first respondent maintained silence till the 13th claim. Only when the 14th claim was taken up, the amendment petition taking a new contention was made. Till then, the contractor treated the whole execution as an extension of the period contemplated under the original contract. He further pointed out that the arbitral tribunal, however, rejected the plea of the first respondent in its order dated 08.10.1999 and held that there was only an extension of time as per the original contract. This order of the tribunal was not challenged by the contractor-first respondent.

10. Therefore, the view of the tribunal that it was only an extension of contract has become final. Learned Counsel submitted, in the face of this admitted fact, the view of the tribunal while passing the award that there was no extension of the. contract for the work done on and from 01.01.1994 and hence the contractual rate could not be adopted was totally contrary to the terms of the agreement and the admitted facts. Hence, quite apart from the claim being barred by limitation, the arbitrators ignored the terms of the agreement as regards the rate to be adopted for the period from 01.01.1994 and their own order rejecting the plea for an amendment of the petition. Consequently, there is a fundamental illegality in the order of the arbitral tribunal. Learned Counsel referred to the decision in Thawardas Pherumal v. Union of India : [1955]2SCR48 in support of his stand that if the extended period is to be treated as a new contract, then in the absence of any agreement on arbitration, the arbitrators have no jurisdiction to arbitrate on any issue pertaining to the period covered under the extended period. Going by the admitted state of affairs, the rate could only be as per the contract which specifically stated that the rates were to be firm.

11. Learned Counsel appearing for the petitioner pointed out that contrary to the admitted facts and its own order dated 08.10.1999, the tribunal propounded a new case that there had been a fresh contract. There was no material for holding so and a basis disclosed as to the rate adopted, nor any details given to the working of the arbitrators to grant the award. He pointed out that when the arbitrators adopted the rate, notice must be given to the parties on the rate adopted. No reasons were given for adopting the new rate and the requirements under Section 31(3) are totally violated.

12. As regards the individual claims, learned Counsel pointed out that no details were given in the award for working out the relief. Referring to Claim No. 2 under the head 'idling charges', he pointed out that the issue is not an arbitrable one. The tribunal awarded a sum of Rs. 3,83,000 under this head. The contract, in Clause 2.7, specifically states that the first respondent is not entitled to any idling charges. Secondly, he pointed out that there was a specific undertaking by the contractor not to claim idling charges, and in any event, no averments are there to substantiate the claim for idling charges. Elaborating on the provision for payment of idling charges as per Clause 2.7, learned Counsel submitted that the award failed to take note of Clause 2.7 and there are no reasons given for granting the relief. He pointed out that the petitioner had been repeatedly taking the stand before the arbitrators that they had no jurisdiction to entertain the claims of the claimant. However, there is absolutely no discussion as regards this claim. He further pointed out that in the letter addressed by the first respondent on 17.08.1992, under Exhibit R-73, it was stated that they would not claim any monetary benefit other than escalation on account of extension of time and no claim in future would be made on this account. In the face of this claim that the first respondent would not claim any monetary benefit other than escalation in respect of work executed beyond 31.12.1993, the petitioner contended that under no circumstances, idling charges could be paid during the extended period. He pointed out that there was no contention or a pleading that the undertaking given on 17.08.1992 was coerced and not out of free will.

13. As to the contention of coercion, he pointed out that the pleadings make no reference of this letter dated 17.08.1992 and that there are no circumstances narrated therein to substantiate the pleading that the letter was written out of coercion on the first respondent. As regards the question as to whether there was factually an idling of machinery and men, he pointed out that in the letter written on 01.02.1994, there is hardly any indication as to the idling of the machinery or men and even in the letter written on 30.07.1993, was there any allegation to raise the claim. He pointed out to the series of letters Exhibits C-11, C-16 and C-18, that there were no evidences to support the plea of idling. He further pointed out that marking was not complete then, and lining was also not complete. Therefore, even according to the case of the claimant, no concreting could be done during this period. Consequently, the question of any claim to be made under idling could never arise.

14. As regards Claim No. 8 relating to handling charges for extra cement used, learned Counsel appearing for the petitioner pointed out that Clause 17.1 stipulated that the contractor should make his own arrangement for loading the cement and conveying to the work spot. He further pointed out that the contract conditions also gave the distance to be covered for transporting the same. The rate given therein was also inclusive of transport. He further pointed out to the decision arrived at after the discussion on the submission of tender that supplementary price bid could be given for increase in usage of cement at Rs. 1,951 per tonne at Karamadai Stores. The supplementary price bid also did not contemplate inclusion of transport charges. He pointed out that while acknowledging the decision arrived at, the first respondent herein in its letter dated 20.10.1990, gave the supplementary price bid in terms of the agreement. Thus, in the face of the agreed terms, the question of claiming handling charges for extra cement did not arise. He pointed out to the letter written by the first respondent wherein they also disclosed their agreement to have the supply at Rs. 1,951 per tonne. The letter also discloses the anxiety to maintain the desired strength. Hence, in the light of Clause 17.1, no claim could lie for handling charges for extra cement. The letter of acceptance dated 28.02.1991 also indicates the issue rate accepted by the parties.

15. Learned Counsel pointed out that the first respondent, in its supplemental price bid, referred to the increase in the cost of materials and labour with many reasons, and based on this, they sought for increase of the price bid by further 7.5% on the rates quoted in the original tender submitted on 16.07.1990. In the letter addressed by the petitioner dated 28.02.1991 to the first respondent herein, the first respondent was informed that to attain the desired strength, additional cement would be issued at the issue rate from Karamadai Stores. Learned Counsel also pointed out that the first respondent never objected or made a claim on the extra transport charges that he might have to incur on account of extra cement to be lifted to reach the desired strength. In the face of these clauses, learned Counsel for the petitioner questioned the award of Rs. 1,70,000 that the same goes against the very tenor of the contractual terms. He pointed out that by letter dated 11.07.1997 the first respondent was informed about the decision on the claim for handling charges and extra cement used; as such, the view of the arbitral tribunal that the first respondent was entitled for conveyance and other handling charges for extra quantity of cement used over and above the specified quantity, was totally against the agreed conditions. He pointed out that in its letter dated 20.10.1990, the first respondent acknowledged the minutes of the meeting recorded; as such, having thus agreed to the terms, the first respondent cannot make a claim beyond the terms. The award is thus contrary to the terms of the agreement, hence, is liable to be set aside. He further pointed out that as against the claim of Rs. 3,63,956, an award was made for a sum of Rs. 1,70,000. While questioning the award thus made, learned Counsel further submitted that for arriving at the said sum, the arbitrators indicated no reasons to justify the grant of the said award.

16. As regards Claim No. 9 namely, compensation for wage escalation claims and Claim No. 13, namely, compensation for delayed payment of withheld quantity of mining, learned Counsel submitted that the awards under these heads to the tune of Rs. 2,60,000 and Rs. 2,40,000 respectively are totally unsustainable. As far as Claim No. 9 is concerned, he submitted that as per the contractual terms, the contractor was not entitled to any amount, since, as per the agreement and the letter of undertaking dated 17.08.1992, the contractor would not claim any monetary benefit in the above circumstances, he questioned the very basis of the award.

17. As regards Claim No. 12 on compensation for underutilisation of resources during mining of tunnel due to low voltage and power failure, learned Counsel pointed out that as per Clause 2.8, the contractor was not entitled to any idle time charges. As per Clause 24.2, the contractor was to maintain at the site, necessary equipment in good working condition for timely completion of the various works. Under Clause 24.4, it shall be the duty of the contractor to ensure that the work continues uninterruptedly even in the event of power failure. For this, adequate number of generators and diesel operated equipment should be provided as an alternative arrangement, so that the progress of the work is not hindered. Learned Counsel pointed out that the clause stipulated that no extra claim would be paid on account of power failure. The contractor was to maintain four diesel generators, and even in the tender form, the first respondent indicated the number of generators to be provided and gave an undertaking to that effect. He further laid emphasis on Clause 35 that no compensation would be payable for idle labour, staff and machinery due to occasional power failure or any causes beyond the control of the petitioner and for pre-arranged shut down in electricity supply. Referring to the award, learned Counsel pointed out that the arbitrators granted leave to the extent of Rs. 7,00,000 as against the claim of Rs. 17,78,000. The award contained no reasons as to why the claim merited acceptance to the extent of Rs. 7,00,000.

18. Referring to Claim No. 15 on the compensation for the loss incurred due to shortage of cement, learned Counsel pointed out that as per Clause 7.2, the contractor was to give the Engineer, not less than 30 days' notice of the cement requirement. He pointed out that the contractors did not produce before the arbitral tribunal any evidence as to how much was indented by them periodically. In the reply statement filed by the petitioner before this court, it was specifically pointed out that the first respondent did not produce any record to substantiate the plea. He pointed out that when no evidence was produced to explain the basis of the claim, the tribunal wrongly held that the petitioner committed a breach. He made a particular reference to the written submission made before the tribunal as well as to the counter by the first respondent, only to emphasize that the tribunal threw the burden wrongly on the petitioner having observed that the records relating to indent have not been produced, even though the arbitrators required production of the same. In the face of the finding recorded by the arbitrators that no details had been produced as regards the expenses incurred on account of idling of men and machinery, the calculation was totally unsustainable. Learned Counsel pointed out that there was no reference or an order indicating that the petitioners were directed to produce the necessary indent book. In the face of the specific allegation, the first respondent ought to have sustained its plea on the alleged delay leading to idling of men and machinery. He pointed out that under the contract, 30 days time was given for supply and that there was no delay to justify an award under this head.

19. As regards Claim No. 16, namely, compensation for carrying out guniting work, he pointed out that as per Clause 2.1, it was agreed that time was the essence of the contract. It was also provided that the petitioner reserved the right to revise the schedule at its discretion to keep up to the completion date and such alteration would not confer any right to claim extra amount. Under Clause 35, the Engineer could issue direction to the contractor to suspend the work or any part of it at such time as he may deem desirable. For this, no compensation would be payable for idle labour, staff and machinery or for any loss or damage sustained by the contractor. Referring to the award, learned Counsel appearing for the petitioner pointed out that granting relief at Rs. 2,10,000 was totally against the spirit of the agreement. Learned Counsel further pointed out that all claims considered for the grant of award are totally against the agreed terms; as such, the first respondent was not entitled to any payment. He made particular emphasis that for the work done beyond 01.01.1994, the agreed rate alone will prevail.

20. Referring to the claim of interest, i.e. Claim No. 26, relating to grant of interest at 18% per annum, he pointed out that Clause 58 of the contract specified that no interest should be paid till there was a final settlement of the bills. Placing reliance on the decision of the Supreme Court in Durga Ram Prasad v. Government of Andhra Pradesh : (1995)1SCC418 , he pointed out that the interpretation placed by the Supreme Court on a similar clause in the said decision will have a bearing on the issue. The date of reference was 15.10.1997 and the award was passed on 17.03.2001. For the period covered prior to the date of reference, no interest could be granted. He also referred to the decision in Hindustan Construction Co. Ltd. v. Tamil Nadu Electricity Board : (2004)4MLJ260 that in the light of the decision of the Supreme Court, the question of grant of interest from the date of reference does not arise. Further, he emphasized that after the decisions in Ramachandra Reddy & Co. v. State of Andhra Pradesh and Ors. : [2001]2SCR186 ; Himachal Pradesh Nagar Vikas Pradhikaran v. Aggarwal and Co. : [1997]1SCR582 ; and Bombay Housing Board (Now The Maharashtra Housing Board) v. Karbhase Naik & Co. Sholapur : [1975]3SCR407 , till the rates are settled, the employer was not under an obligation to pay interest. He further pointed out that in any event, the terms of the contract will prevail on this issue. Thus, he prayed for setting aside the award both on the question of limitation as well as on the ground that the award was against the agreed terms.

21. On the point of limitation as to when the cause of action arises, learned Counsel appearing for petitioner relied on the following decisions:

(i) Soundararajan & Co. v. Annamalai : AIR1960Mad480 ;

(ii) Union of India v. Seyadu Beedi Co. (supra);

(iii) S. Rajan v. State of Kerala (supra);

(iv) Panchu Gopal Bose v. Board of Trustees for Port of Calcutta (supra);

(v) Madras Metro Water Supply and Sewerage Board v. O. Ramakrishna Reddy (supra);

(vi) Oil & Natural Gas Corporation v. M. Gouthamchand Gothi 1999 (1) Arb. LR 162 (Mad.);

(vii) Vishindas Bhagchand v. Chairman, M.S.E.B., Mumbai (supra); and

(viii) J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. and Anr. .

22. Mr. R. Murari, learned Counsel appearing for the first respondent, disputed the claim of the petitioner on legal issues and on the factual aspect. Referring to Section 55 of the Indian Contract Act, 1872, particularly to the second part, he pointed out that as per the contract, the work was to be completed within 27 months from the date of handing over of the site. The site was handed over on 15.03.1991. Therefore, the work ought to have been completed on 14.06.1993. Originally, time was extended up to 31.12.1993. Although, the first respondent sought for extension of time, thereafter there was no formal order granting time. The work was completed on 16.12.1995. He pointed out that considering the extension originally granted, the plea that time was the essence of the contract could no longer survive. When the petitioner committed breach in observing the terms of the contract, as per Section 73 of the Act, damages are warranted in this case. He pointed out that the execution of the work fell under three situations, namely, the original period as per the agreement, agreed extension and the execution after 01.01.1994 where there was no formal extension. Going by the terms of the agreement, the original rate would apply only up to 31.12.1993. Thereafter, when there was no formal order on the extension of time beyond 31.12.1993, the question of applying the very same rate as per the original contract for the period after 01.01.1994 did not arise. Learned Counsel, hence, makes a plea that the arbitrators were well within their jurisdiction to pass an award without reference to the rate applicable for the period up to 31.12.1993 to the work executed after 01.01.1994.

23. On the question of limitation, he pointed out that on 14.11.1994, the first respondent appealed to the Chief Engineer for extension of time. This was rejected. He pointed out that he made a representation to the Chief Engineer on 15.01.1994 and prayed for revised rates for the work done beyond 01.01.1994. He pointed out to the series of correspondence between the first respondent and the petitioner requesting revised rates and submitted that going by the correspondence between the parties, in terms of the decision of the Apex Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority : [1988]3SCR351 , the cause of action could be said to have arisen only when the final bill was raised. He made further emphasis to the limitation prescribed as regards the claim under Clause 98 of the General Conditions of Contract and that the same would have relevance only to extra claims which need to be preferred within three months from the date of completion of the work. He pointed out to the course of correspondence as listed above to submit that, looked at from the series of letters written, the limitation had to be worked out for the cause of action to have arisen from the date when the Chief Engineer indicated the decision of the high level committee, rejecting the first respondent's plea on several claims. He submitted that applying the decision of the Supreme Court in Hari Shankar Singhania and Ors. v. Gaur Hari Sirtghania and Ors. : AIR2006SC2488 , when the parties are in correspondence over the claim, the limitation starts or has to be reckoned only from the time when a dispute arises and assumes a certainty between the parties; hence, going by the law declared by the Apex Court in the decision referred to above, the claim made was well within time. Factually too, going by the letter dated 14.11.1994, when the first respondent made a claim seeking the revised rate to be applied, which was rejected by the Superintending Engineer, an authority vested with the jurisdiction to consider the same under the terms of the contract, the first respondent invoked the arbitration clause, within three years, i.e. on 12.07.1997. He pointed out that the claims under letter dated 14.11.1994 and the claims under the letter dated 15.01.1994 are not one and the same to contend that the limitation has to be reckoned from the letter dated 15.01.1994. He pointed out that the majority of the claims under both these letters did not tally. He also pointed out that the letter dated 15.05.1994 could not be read as giving the starting point for limitation solely on account of the first respondent stating in its letter that the matter would be taken up before the appropriate forum at a later date as referable to arbitration proceedings. He pointed out that they really meant a reference to the hierarchy of authorities of the petitioner organisation before whom the first respondent could make their claim for consideration. In any event, he submitted that the first respondent indicated their desire to invoke the arbitration clause on receipt of the letter from the Executive Engineer as per the decision of the high power committee, and in any event, having regard to the claim made in the letter dated 14.11.1994, the dispute made before the Superintending Engineer, in terms of the agreement, the dispute could not be said to have arisen prior to 14.11.1994 when the issue as regards the rates was only under correspondence.

24. Coming to the question of extension of time, he pointed out that the first extension was granted on 29.02.1992. He pointed out that they sought for first extension under letter dated 29.02.1992 for extension up to 31.12.1993. By letter dated 23.04.1992, the Executive Engineer rejected the extension from 15.06.1993 to 31.12.1993. Again on 23.06.1992, the first respondent sought for extension up to 31.12.1993. On 19.11.1993, the Chief Engineer extended the time stating that the entire work under the contract should be completed within 33 months from the taking over of the site. By this, the petitioner accepted the request for extension of time and that the cause of delay was not attributable to the first respondent. Learned Counsel pointed out that in the letter addressed on 17.08.1992, all that the first respondent agreed to was not to make any monetary benefit other than escalation. This did not refer to the rate that has to be applied as different from what was originally contemplated under the agreement. He pointed out that the letter dated 19.11.1993 impliedly accepted the claim for revised rate and that there was no reference to the letter dated 17.08.1992. For the period 14.06.1993 to 31.12.1993, the petitioner did pay the escalation. The first respondent gave an undertaking in its letter dated 17.08.1992 not to claim any monetary benefit other than escalation. In the circumstances, it is too late in the day for the petitioner to contend that the first respondent deserved payment only at the agreed rate. He pointed out that even as per the letter dated 19.11.1993 granting extension, the first respondent was entitled to price variation formula and hence, there is no justification in the contention of the petitioner that the first respondent had no right to claim a rate other than what was considered for the work done for the period prior to 31.12.1993.

25. Learned Counsel submitted that for the work executed under the terms of the contract for the period covered post 01.01.1994, the arbitration clause was rightly invoked, considering the fact that the dispute was one in relation to and arising under the contract. He pointed out that the rate for the period covered beyond 01.01.1994 was not governed under a formal extension order. The duration referred to under the contract is referable to Clause 22 and the rate that was to be referred for the said period is as referred under Clause 8.3. On the admitted factual position that there is no formal order of extension, the work executed, hence, has to be viewed as not falling under the terms given under Clause 22. Hence, the execution of work from 01.01.1994 has to be considered on fresh terms, and not referable to Clause 22. Being a dispute referable to the work executed, covered under the terms of the agreement, Clause 49 had relevance and hence, the argument that there is no agreement for referring the dispute to arbitration if the work executed beyond 01.01.1994 is to be considered as a fresh agreement, does not hold water.

26. Referring to the individual claims, learned Counsel appearing for the first respondent made the following submissions:

As regards Claim No. 2 relating to idling charges, learned Counsel pointed out that Clause 2.8 has to be read in conjunction with Clause 35 as well as Clause 2.7. He pointed out that the arbitrators considered that idling charges were the result of the idle labour resulting from the instructions of the petitioner. He also referred to the idling time which was purely on account of the petitioner that the arbitrators considered the same to grant the relief. He made a particular reference to the petition under Section 34 of the Arbitration and Conciliation Act, 1996, that Clauses 2.7 and 2.8, on which much emphasis was placed by the petitioner, had not been raised as an issue in the petition. Referring to Claim No. 8, he pointed out that Clause 17.1 made no reference as regards paying transport charges. He placed emphasis on the reasons given in the award that there is no prohibition in the contract, express or implied, to grant the charges on extra cement. As regards Claim No. 9, he pointed out that 18% interest per annum was granted by the arbitrators for the delayed payment. The delay ran from 46 to 700 days; as such, no fault could be found on the reasoning. Similarly, on the question of Claim No. 12, he pointed out that Clause 35 had no relevance for underutilisation resulting from voltage fluctuations. Being technical members, taking note of the fluctuations and the loss caused thereon, the arbitrators gave the relief. As regards Claim No. 15 as to the delayed supply of cement, in reference to Clauses 17.1 and 17.3 of the General Conditions of Contract and to the correspondence whereby the petitioner assured the supply when the first respondent made a complaint that there was no supply of cement leading to idling, he pointed out that the issue of cement was recorded by the petitioner themselves in the movement book; as such, they ought to have produced the same to reject the claim of the first respondent. As regards Clause 16 as regards the additional work done after 13.12.1993, he submitted that Clause 2.1 merely speaks about re-adjustment of the execution within the time frame. It does not touch on the extra work done; as such, the reliance placed on Clause 2.1 is totally misplaced. Referring to the interest claimed, learned Counsel pointed out that the only restriction that Clause 58 contemplated was interest on arrears on certification. The claim made by the first respondent was on the bills kept pending without any certificate for an indefinite period. Referring to the decision in Hyderabad Municipal Corporation v. M. Krishnaswami Mudaliar : AIR1985SC607 , learned Counsel pointed out that there was no express or implied prohibition on interest or compensation to be paid on bills kept pending indefinitely. The prohibition is only on final payment after certification. In the above circumstances, learned Counsel submitted that the award passed was well within the terms of the agreement, the rate applied was just and fair and that the work done beyond 31.12.1993 could not be considered at the rate which applied to pre 31.12.1993, since, in the absence of a formal order of extension granted on the same conditions and terms as per the original agreement, the claim was well within time and having regard to the reasoned order based on appreciation of evidence and on the understanding of the terms of agreement, it is not open to this court to interfere with the award in exercise of jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996.

27. Heard learned Counsel appearing for both sides and perused the records.

28. The issues raised herein need to be considered under the following heads, namely:

(i) Whether the claim is barred by limitation ?

(ii) Whether there is an extension of contract in respect of work executed after 31.12.1993 and

(iii) Whether the award is made in terms of the agreement ?

29. On the first question of limitation, the issue has to be considered from the legal principles applied to the factual matrix. It is a well settled principle of law that a claim is sustainable only when it is saved by limitation. The question as to whether the Limitation Act has application to the proceedings governed under the Arbitration Act is no longer res integra.

30. Section 37(1) of the Arbitration and Conciliation Act, 1996 provides that all provisions of the Indian Limitation Act, 1908 shall apply to arbitration as they apply to the proceedings in court. Under Section 37(2), a cause of action for the purposes of limitation be deemed to have accrued in respect of such matter at the time when it would have accrued but for the term in the agreement. In Panchu Gopal Bose v. Board of Trustees for Port of Calcutta (supra) the Supreme Court held that 'For the purposes of Section 37(1), 'action' and 'cause of action' in the Limitation Act should be construed as arbitration and cause of arbitration. The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement'.

31. As to what is 'cause of action', in Rajasthan High Court Advocates' Association v. Union of India AIR 2001 SC 416 the Supreme Count held as follows:

17. The expression 'cause of action' has acquired a judicially settled meaning. In the restricted sense, cause of action means the circumstances forming the infraction of the right or the immediate occasion for the action. In the wider sense, it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but the infraction coupled with the right itself. Compendiously, the expression means every fact which would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. Every fact which is necessary to be proved, as distinguished from every piece of evidence which is necessary to prove each fact, comprises in 'cause of action'. It has to be left to be determined in each individual case as to where the cause of action arises.

The said declaration of law was applied in Om Prakash Srivastava v. Union of India and Anr. : (2006)6SCC207 and again applied in Eastern Coalfields Ltd. v. Kalyan Banerjee (2008) 3 MLJ 977. The circumstances indicating the infringement or violation or denial of a right are the basis on which the aggrieved party seeks relief in his favour. Hence, a cause of action is the situation or state of affairs which entitles an aggrieved party to maintain an action in a court of law. Touching on this, in S. Rajan v. State of Kerala (supra), the Apex Court held that cause of action arises when the differences between the parties have given rise to a dispute wherein the aggrieved party serves notice on the other side as to its intention to go for legal remedy. In the said decision, the Apex Court held that when the State worked out the loss suffered by it on account of the contractor's failure to carry out the work in accordance with the agreement and called upon the contractor to pay the loss through a demand notice dated 30.05.1974, then the dispute had arisen in the year 1974 with a service of demand notice. The contractor challenged the demand notice unsuccessfully in a writ petition. Thereafter, he referred the dispute to the arbitrator which was rejected by the State. Thereupon, the contractor filed an application under Section 20 of the Arbitration Act, 1940. The Apex Court held that the difference between the contractor, and the State arose on the date of service of demand notice on the contractor and not on the date when he applied to the State to refer the dispute for arbitration. The Apex Court held that the application under Section 20 filed after nine years after the right to apply accrued was barred by limitation. It observed:

Reading Article 137 and Sub-section (1) of Section 20 together, it must be said that the right to apply accrues when the difference arises or differences arise, as the case may be, between the parties. It is thus a question of fact to be determined in each case having regard to the facts of that case.

32. Applying the principles thus laid down in S. Rajan v. State of Kerala (supra) and followed in the decisions in Rajasthan High Court Advocates' Association v. Union of India (supra) and Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors. (supra), in Punjab State v. Dina Nath : AIR2007SC2157 , the Apex Court again reiterated the principle that when difference or dispute arises between the parties to the arbitration agreement, the right to seek reference of the dispute to arbitration in accordance with the agreement accrues and the same is required to be filed within a period of three years.

33. On the question of the starting point of limitation in moving a petition under Section 20 of the Arbitration Act, referring to the decision in Oriental Building and Furnishing Co. Ltd. v. Union of India AIR 1981 Del 293, in Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors. (supra), the Apex Court approved of the decision of the Delhi High Court that where the parties were negotiating on the issues in a series of correspondence, it is only when they come to the conclusion that they could not resolve all disputes between them, that it can be said that the disputes had arisen. The sum and substance of the decision is that entering into a correspondence on a difference for an amicable negotiation and for sorting out of the differences by itself, will not amount to a dispute arising for the purpose of working out the limitation under the Limitation Act. Only when the parties come to the conclusion that they cannot resolve a difference, then it could be said that the dispute has arisen. At that stage, it is open to the parties to go for arbitration to get the dispute settled. The Apex Court referred to the decision in Hughes v. Metropolitan Railway Co. (1874) All ER 187, wherein it was held that 'where negotiations for settlement are pending, the strict rights of the parties do not come into play'. The decision of the Apex Court relied on by the learned Counsel appearing for the first respondent certainly favours the contention of the first respondent on the question of limitation.

34. Learned Counsel appearing for petitioner, however, placed reliance on the decision in Vishindas Bhagchand v. Chairman, M.S.E.B., Mumbai (supra) to contend that the negotiation entered between the parties after accrual of the cause of action to refer the matter to arbitration does not have the effect of suspending the cause of action so as to arrest the running of limitation. He also referred to the decision in Soundararajan & Co. v. Annamalai (supra) to impress on the fact that when the first respondent had claimed a rate different from the original contracted rate to which the Chief Engineer had replied rejecting such claim, the cause of action arose then and there and from then the limitation began to run. He relied on this decision to impress on the fact that the ascertainment of the exact amount payable is different from the date on which the cause of action arose. He further relied on the decision in Madras Metro Water Supply and Sewerage Board v. O. Ramakrishna Reddy (supra), wherein a Division Bench of this court held that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders. This court pointed out that when there is a claim and a repudiation, the cause of action arises at least from the date of repudiation. In the aforesaid case, this court held that the cause of action has arisen only when the liability is repudiated. On the facts, this court held that after receipt of the final payment, the contractor issued notices long after three years and hence, applying Article 137 of the Limitation Act, this court held that the claim was barred by limitation; as such, there was no subsisting claim. I do not find that the decisions relied on by the petitioner, particularly in Soundararajan & Co. v. Annamalai (supra) and Madras Metro Water Supply and Sewerage Board v. O. Ramakrishna Reddy (supra), would help the petitioner in its contention on the point of limitation, having regard to the facts prevailing-herein in this case. This is not a case where the first respondent sent reminders to allow the limitation to run through after the cause of action had arisen.

35. The facts show that on 15.01.1994 the first respondent wrote a letter and called upon the Chief Engineer to apply the revised rates as regards the concreting work done beyond 01.01.1994 and also sought for payment under other different heads which ultimately were referred to for resolution before the arbitrators. The Chief Engineer wrote back on 23.02.1994 (Exhibit C-28) stating that no extra rate would be paid for concreting to be done after 01.01.1994. On the face of this letter, one can only say that at this point of time, a difference has arisen as regards a claim made by the first respondent. It is not necessary that a difference should, in all circumstances, give rise to a cause of action.

36. A dispute, in its wider sense, means differences between the parties and is not the same thing as a cause of action. In Canara Bank and Ors. v. National Thermal Power Corporation and Anr. , the Supreme Court held that a dispute is a controversy having both positive and negative aspects. It postulates the assertion of a claim by one party and its denial by the other. A party may either accept or take up the differences to a stage when it may give rise to a cause of action to have a resolution before a court of law or a tribunal.

37. In South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. and Ors. : [1996]3SCR405 the Supreme Court held as follows:

3. It is settled law that cause of action consists of bundle of facts which give cause to enforce the legal injury for redress in a court of law. The cause of action means, therefore, every fact, which if transversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts, which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action would possibly accrue or would arise.

38. In Kunjan Nair Sivaraman Nair v. Narayanan Nair and Ors. : AIR2004SC1761 the Supreme Court extracted the following passage from the Halsbury's Laws of England (Fourth Edition) as to what constitutes cause of action:

'Cause of action' has been defined as meaning simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person. The phrase has been held from earliest time to include every fact which is material to be proved to entitle the plaintiff to succeed, and every fact which a defendant would have a right to traverse. 'Cause of action' has also been taken to mean that particular act on the part of the defendant which gives the plaintiff his cause of complaint, or the subject matter of grievance founding the action not merely the technical cause of action.

39. While dealing with a question as to whether the claim and the counter-claim arose out of the same transaction giving rise to different causes of action when the bank approached the Debts Recovery Tribunal and the borrower before the civil court, the Supreme Court, in State Bank of India v. Ranjan Chemicals Ltd. and Anr. : (2007)1SCC97 , considered what constituted elements of a cause of action. It held 'The elements of a cause of action are-first, the breach of duty owing by one person to another and; second, the damage resulting to the other from the breach, or the effect of combination of facts which gives rise to a right to sue'. Therefore, the commission or an omission of an act by one party and damage to the other party on consequence thereof must unite together to give rise to a cause of action. It is a well-established proposition of law, no one of these facts, by itself, is a cause of action.

40. In Navinchandra N. Majithia v. State of Maharashtra and Ors. : AIR2000SC2966 the Apex Court held:

18. In legal parlance the expression 'cause of action' is generally understood to mean a situation or stale of facts that entitles a party to maintain an action in a court or a tribunal, a group of operative facts giving rise to one or more bases for suing; a factual situation that entitles .... one person to obtain a remedy in court from another person (Black's Law Dictionary).

19. In Strand's judicial Dictionary a 'cause of action' is stated to be the entire set of facts that gives rise to an enforceable claim; the phrase comprises every fact, which, if traversed, the plaintiff must prove in order to obtain judgment. In Words and Phrases (Fourth Edition) the meaning attributed to the phrase 'cause of action' in common legal parlance is existence of those facts which give a party a right to judicial interference on his behalf.

41. In the face of the law declared as to what constitutes and when a cause of action arises, the rejection letter dated 23.02.1994 by the Chief Engineer, or for that matter, the letter dated 15.01.1994 (Exhibit C-27) from the first respondent, cannot, per se, be viewed as one giving rise to a cause of action. On 15.05.1994, the first respondent addressed a letter to the Superintending Engineer. Referring to the letter dated 23.02.1994, addressed by the Chief Engineer to the first respondent herein, the first respondent stated as follows:

As per letter cited, the extra compensation and other charges claimed by us as per our letter dated 15.01.1994 have been completely denied. We would like to inform you that the claims preferred are bona fide and request you to reconsider the same at an early date. In case the same are not sanctioned, we would like to take up the matter at the appropriate forum at a later date.

The said letter was replied on 14.11.1994 (Exhibit C-126). Referring to the letter dated 15.01.1994 (Exhibit C-27) and the letter of acceptance dated 28.02.1991, the first respondent addressed a letter to the Superintending Engineer, submitting a detailed claim statement for the various works carried out by the first respondent and called upon the Superintending Engineer to examine and effect payment within sixty days from the receipt of the letter. The first respondent stated that if the Superintending Engineer failed to comply with this, it would be construed that the claim had not been accepted by the petitioner. A copy of the letter with the claim statement was also marked to the Chief Engineer. By letter dated 07.02.1995 (Exhibit C-129), the Superintending Engineer considered the claim only to inform that the claims are not feasible for compliance as per the terms and conditions of the contract. Thereafter, on 10.03.1995, the first respondent addressed a letter to the Member Generation, Tamil Nadu Electricity Board, requesting him to review the decision taken by the Superintending Engineer denying the claims and requested the Member Generation to issue orders on the claims as stated in the letter dated 14.11.1994. The first respondent again wrote a letter on 14.08.1995 to the Member Generation, Tamil Nadu Electricity Board, seeking release of payment against the final bill without prejudice to the entitlement to get payment against the claims on arbitration or otherwise. It was also stated that they may not be dragged for arbitration to settle the genuine claims. It was pointed out that the escalation claim was pending since extension of time was not granted beyond 31.12.1993. Hence, they requested the committee to examine the same so that the process of settlement could be expedited. Once again on 09.11.1995, the first respondent addressed a letter to the Chairman, Tamil Nadu Electricity Board in reply to the letter from the Tamil Nadu Electricity Board dated 07.09.1995 and requested that the claims may be considered favourably. By letter dated 30.03.1996, the Chief Engineer called upon the first respondent to give the necessary supportive data and details as to how the additional rates have been worked out in respect of items stated in their letter dated 14.11.1994. The letter from the Chief Engineer stated that calling for the details was without prejudice to the final outcome on the claims and without any prior commitment to both. The first respondent, thereafter, submitted its details on its claim and ultimately, by letter dated 25.03.1997 (Exhibit C-135), the Chief Engineer informed first respondent the decision of the high level committee meeting held on 14.02.1997 that the claims referred in their letter dated 16.05.1996 are not tenable. In continuation of the letter dated 25.03.1997, the Chief Engineer wrote yet another letter as regards the handling charges under Claim No. 8 on extra cement used. Thereupon, the first respondent wrote a letter on 12.07.1997 informing the petitioner of invoking Clause 49 of the General Conditions of Contract seeking settlement of disputes by means of arbitration. The first respondent pointed out to its letter dated 14.11.1994 listing out the various claims arising on account of breach of contract committed by the Board causing loss to the first respondent. It is also pointed out that although the work was completed in January 1995, the final bill was yet to be settled. The first respondent claimed interest at 18% per annum from March 1995 till date of payment. Thus, the various correspondence on this issue clearly show that the cause of action leading to the invoking of the arbitration clause arose on the rejection of the request by the Superintending Engineer vide letter dated 07.02.1995 (Exhibit C-129) which was in reply to the letter of the first respondent dated 14.11.1994 wherein, the first respondent called upon the petitioner to examine and make payment within sixty days of the receipt of the letter, failing which, it would be construed that the claim had not been accepted by the petitioner and again on a representation to the Member Generation, when the Chief Engineer informed the first respondent of the decision to reject the claim vide its letter dated 25.03.1997 (Exhibit C-135). The correspondence prior to the rejection by the Superintending Engineer dated 07.02.1995 are only in the stage of correspondence and the differences really boiled down to a stage of a dispute only on 07.02.1995. The claim made as early as on 14.11.1994, or even prior to that on 15.01.1994, certainly cannot be construed as the date on which the cause of action arose since they merely indicated the claim from the first respondent which might or might not have given rise to a dispute. As the Supreme Court in State Bank of India v. Ranjan Chemicals Ltd. and Anr. (supra) held the cause of action arises when there is a claim and a denial to unite to give rise to a cause of action. The cause of action in this case arose when in its letter dated 07.02.1995, the petitioner rejected the claim of the first respondent when it made its claim on 15.01.1994 followed by its letter dated 14.11.1994. The cause of action hence, arose on 07.02.1995 when the petitioner rejected the plea thus giving rise to a cause of action. The arbitration clause was invoked on 12.07.1997, which is well within the period of limitation.

42. Learned Counsel appearing for the petitioner, however, emphasized that the first respondent had indicated its decision as early as on 15.05.1994 to take up the matter 'at the appropriate forum' at a later date and hence, limitation has to be worked out from 15.05.1994, which means, the invoking of the arbitration clause as per the terms of the contract. I do not agree with the said submission of the learned Counsel appearing for the petitioner. As already noted, the first respondent made its claim first on 15.01.1994 which was rejected in the Chief Engineer's letter dated 23.02.1994. The first respondent once again made an attempt in addressing the Superintending Engineer vide its letter dated 15.05.1994 wherein, the first respondent stated that if the petitioner did not sanction the claim, the first respondent would take up the matter before the appropriate forum. The notice calling upon the petitioner to make payment was sent by the first respondent on 14.11.1994. The first respondent took up the matter before the Member Generation, who ultimately, by letter dated 25.03.1997 addressed by the Chief Engineer, rejected the claim made in the revised claim dated 16.05.1996. This ultimately led to the invoking of the arbitration clause by the first respondent's letter dated 12.07.1997. The arbitrators considered the pleadings of the parties herein to hold that the claims were not barred by limitation. Hence, as rightly submitted by the learned Counsel appearing for first respondent, the reference to the appropriate forum does not mean that the contractor has invoked the arbitration clause. On 14.11.1994, for the first time, the first respondent called upon the Superintending Engineer to consider the claims as per Clause 98 of the contract agreement and payment effected within sixty days of the receipt of the letter. On 07.02.1995, the Superintending Engineer replied informing the petitioner's decision rejecting the claims made. In the background of the conduct of the parties, it is difficult to accept the case of the petitioner that cause of action has to be taken as having arisen when the first respondent addressed a letter on 15.01.1994 rejected on 23.02.1994. The letter addressed by the first respondent on 15.05.1994 merely gives an indication that if the petitioner did not consider the claims, then the first respondent would take up the matter at the appropriate forum at a later date which does not mean that on that day the petitioner had expressed his desire to invoke the arbitration clause.

43. As rightly stated by the learned Counsel appearing for the first respondent placing reliance on Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors. (supra), the course of correspondence needs to be noted before reaching a decision on limitation. Learned Counsel appearing for the petitioner countered the claim of the first respondent that the claims made on 15.01.1994 and 15.05.1994 were different. Learned Counsel appearing for petitioner pointed out before me and rightly so that the claims made in the original letters dated 15.01.1994 and 15.05.1994 are one and the same as claims made before the arbitral tribunal. Yet, it may be seen that the petitioner sought for details vide its letter dated 30.03.1996 to the claim made in the letter dated 14.11.1994, which the first respondent furnished in its letter dated 16.05.1996. The high level committee's decision rejecting the claims was informed to the first respondent on 25.03.1997. The objection of the petitioner that the decision to go before the appropriate forum as referable to invoking of the arbitration clause as early as on 15.05.1994, does not survive, having regard to what has been stated in the preceding lines of the first respondent's letter dated 15.05.1994, which reads as follows:

We would like to inform you that the claims preferred are bona fide and request you to reconsider the same at an early date. In case the same are not sanctioned, we would like to take up the matter at the appropriate forum at a later date.

Quite apart from this, under the general definition of the terms and specification of documents, 'Engineer' is defined as follows:

'ENGINEER' shall mean the Superintending Engineer/Civil/Coimbatore Water Supply Project or any Engineer duly authorised by him for this work.

Under the general conditions of contract, under Clause 61.1, in the event of any dispute arising either as to the validity of the claim or as to the amount to be paid, the decision of the Engineer shall be final and binding on all parties. Under Clause 100 relating to disputes prevention, it is stated that in order to prevent disputes arising from either before commencement, during the progress or after the completion of work by the contractor or after entry on and taking possession of the works by the purchaser, rightly or wrongly or after the abandonment of the work by the contractor as to any and every claim by the contractor whether arising under or out of the contract or from the breach or alleged breach thereof or in anyway incidental thereto or connected therewith or not herein provided for, left to the decision, opinion, order or direction of the Engineer. His decision shall be final and binding upon the contractor and the purchaser (the petitioner). The clause further reads:

the purchaser shall not be liable in respect of any claim by the contractor in respect of any of the matters or things aforesaid unless and until the liability of the purchaser and the amount of such liability in respect of the claim shall have been certified by the Engineer, whose certificate shall be a condition precedent to any liability of the purchaser or any right of action against the purchaser in respect of such claim.

Going by the said clause, we find from the correspondence between the parties that the rejection of the claim came from the Superintending Engineer's letter dated 07.02.1995, followed by a high level committee's decision indicated through the Chief Engineer's letter dated 25.03.1997. Read in the context of the contractual clause, the reckoning of limitation could only be when the competent authority namely the Superintending Engineer intimated the decision on 07.02.1995, rejecting the same. Whether the limitation is worked out from this date, i.e. 07.02.1995 (Exhibit C-129) the letter of the Superintending Engineer rejecting the claim or the letter dated 25.03.1997 from the high power committee, the limitation for the purpose of cause of action has not expired to defeat the right of the first respondent to go for arbitration. Consequently, I overrule the objection of the petitioner.

44. The contention of the learned Counsel appearing for the first respondent that the course of correspondence between the parties could not be taken as the starting point for limitation in terms of the decision of the Supreme Court in Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors. (supra) is correct and no exception could be taken to the contention of the first respondent taken on the line of the decision cited above. As held by the Supreme Court, when the parties were in dialogue, the fact that there were differences, would not, by itself, be taken as disputes giving rise to a cause of action. The cause of action, hence, arose only when the Superintending Engineer rejected the claim from the date when the claim of the first respondent was rejected leading to a situation, the existence of which led to the first respondent invoking the arbitration clause.

45. The decisions relied on by the learned Counsel appearing for the petitioner are however distinguishable on the facts. As far as the decision in Soundararajan & Co. v. Annamalai (supra) is concerned, the situation herein is totally different from what prevailed in the decided case, so too, the decision in Union of India v. Seyadu Beedi Co. (supra). The decision in Union of India v. Seyadu Beedi Co. (supra) held that in a suit for compensation for using or injuring goods, the starting point of limitation would be the date on which the loss or injury occurred and the period of limitation could not be put to a later date when the extent of injury was ascertained. This court held that according to Column (3) to Article 30 of the Limitation Act, the starting point of limitation would be the date of the loss or injury to the goods, though after the goods were consigned by the consignor, he would not be in a position to know the precise date on which the loss on injury had occurred and that the burden would be on the railway administration who want to non-suit the plaintiff on the ground of limitation to establish that the loss of injury occurred more than one year before the institution of the suit. As already noted, the said decision has no relevance, considering the decision of the Apex Court in Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors. (supra). In the above circumstances, I reject the stand of the petitioner that the award suffers from illegality by reason of the claim being time barred.

46. As to the second contention of the petitioner that the work executed beyond 01.01.1994 was only an extension of the time granted under the original contract; as such, the old rate alone would be applied, learned Counsel appearing for the first respondent submitted that the extended period beyond 01.01.1994 called for fresh rate and that the original rate could have no relevance, since the execution of work during this period was not under the contract terms. It may be noted that the dispute as to the rate is restricted only for the period starting from 01.01.1994. The first respondent sought for extension till 31.12.1993, first on 29.02.1992 (Exhibit R-301). By letter dated 23.04.1992, the Chief Engineer, however, rejected the extension sought for from 15.06.1993 to 31.12.1993. On 23.06.1992, the first respondent once again reiterated their request for extension up to 31.12.1993. On 19.11.1993, the petitioner replied, referring to the first respondent's letter dated 23.06.1992, stating that the request for extension of time was considered as a special case on the ground 'causes of delay not attributable to you' (first respondent). Thus, under letter dated 19.11.1993, the period of 331/2 months from the date of taking over of the site was granted to the first respondent for completion. Learned Counsel pointed out that by letter dated 17.08.1992, in continuation of the letter dated 23.06.1992, the first respondent stated that the extension of time did not confer on them any monetary benefit other than escalation and hence, no claim in future would be made on this account. Learned Counsel appearing for the first respondent, pointed out that the letter dated 19.11.1993 by the petitioner made no reference to this letter and as such, there was no admission by the first respondent that they would not claim any escalation. Thereafter, on 29.12.1993, the petitioner informed the first respondent that the request for further extension of time beyond 31.12.1993 was receiving consideration and hence, the first respondent was asked to continue the balance work and complete the same as per the letter of the first respondent dated 29.11.1993.

47. In the letter dated 27.10.1997, the petitioner intimated the extension of time up to 15.01.1995. Apart from that they invoked the penal clause levying penalty of Rs. 5,47,309 for the belated execution. It may be noted that this letter came after the arbitration clause was invoked by the first respondent. A perusal of the various correspondence shows and as rightly contended by the learned Counsel appearing for the petitioner, there, is nothing to suggest that the first respondent treated this extension as a fresh contract and not as an extension. It is relevant to note, as rightly pointed out by the counsel for the petitioner, in the course of the hearing before the arbitrators, and when arguments were made by the petitioner herein on the 14th claim, the first respondent sought for an amendment to its prayer that the work done beyond 31.12.1993 was to be treated not an extension but as a fresh contract to apply a rate different from what was contracted for. The first respondent sought for an amendment to the stand taken originally that final extension of time was granted by the first respondent up to 15.01.1995 with levy of liquidated damages by them to contend that there was no final extension of time granted up to 15.01.1995. The arbitrators, in their award dated 10.01.1999, recorded that the first respondent accepted the work done beyond 31.12.1993 as work done under the extension of the present contract. Thus, the arbitrators rejected the plea for amendment of the prayer. Admittedly, this observation did not go, for challenge by the first respondent. In the wake of the admitted position that the work done from 01.01.1994 to 15.01.1995 was only an extension of the contract granted, the observations of the arbitrators need to be noticed.

47. In its order dated 08.10.1999, the arbitrators held that the amendment petition dated 10.07.1999 filed by the first respondent was not accepted and that the same was done without prejudice to the rights accrued or to be accrued to both the parties on account of the issue of extension of time of the completion of the subject work beyond 31.12.1993 up to 15.01.1995. I agree with the submission made by the learned Counsel appearing for the petitioner that the order of the tribunal treating the extension as an agreed one had become final. In the face of the order thus passed and the order having attained a finality, the question of the tribunal holding that there was no extension of time does not arise at all.

49. A reading of the award shows that the arbitral tribunal totally ignored its own orders dated 10.01.1999 and 08.10.1999 to hold that the letter dated 27.10.1997 issued after 33 months from the completion of the work and after 26 months since the last request for extension made on 28.08.1995 would not be construed as an agreed extension of time for completion. The tribunal held that this letter was only an afterthought issued with the specific object of denying the claimant compensation for the work done after 01.01.1994; consequently, the arbitral tribunal viewed that there had been no authorised or agreed extension of time beyond 31.12.1993. I do not find any justification in this line of reasoning of the tribunal, particularly when it had rejected the prayer for amendment sought for by the first respondent to treat the extension as not an agreed extension. The tribunal's observation in the order dated 08.10.1999 rejecting the amendment petition is final as regards this aspect of the matter. However, as noted by the tribunal, all that is preserved in that order, was the rights of the parties on account of issue of extension of time after completion of the work beyond 31.12.1995 up to 15.01.1995. The order thus preserves the rights of the parties alone as to the rate to be adopted as the case may be and for compensation for any extra work done. As rightly contended by the learned Counsel appearing for the petitioner, a reading of the award leaves no doubt that it had proceeded on a new line of pleading which was not raised by the first respondent and contrary to its own orders, rejecting the plea for amendment sought for by the first respondent. It may also be noted that in the letter dated 21.03.1996, the first respondent informed, referring to the letter dated 23.12.1995, that the extension of time was only to regularise the fact of completion within the period mentioned in the letter. In the above circumstances, I have no hesitation in holding that the view of the arbitrators on this question really is unsustainable, amounts to misconduct and hence, deserves to be rejected. Hence, the work done beyond 01.01.1994 till 15.01.1995 was only an extension of the contract and not a new contract.

50. This takes us to a related question, namely, the rate to be applied for the period beyond 01.01.1994.

51. Learned Counsel appearing for the petitioner pointed out that the arbitrators erred in granting a rate not contemplated under the terms of the contract. The first respondent contended that since there is no agreed extension, the rate under the contract will not apply. In this connection, the clauses under the contract need to be noted. As per Clause 8.3 of the instruction to bidders what was agreed to by the first respondent was that the prices and rates quoted.were to be firm for the entire duration of the contract and even during any agreed extension thereto. Under Clause 2.7, extension of the contract period for the completion of work would be granted by the Board equal to the period if and when force majeure conditions were in existence. In terms of the contractual clause that time is the essence of the contract, Section 55 of the Indian Contract Act needs to be noted. Section 55 provides for cases as regards the performance of a contract at or after a specified time. As per the first clause of Section 55, if the intention of the parties is that time was the essence of the contract where a party to a contract promises to do certain thing at or before a specified time and fails to do such a thing, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee. The second part of Section 55 deals with a case where time being not of essence, the contract does not become voidable by reason of the failure to do such thing at or before a specified time. The promisee was entitled to compensation for any loss occasioned by such failure. The third part of Section 55 states that if the promisee accepts performance of the contract at any time other than agreed and the contract is voidable, on the failure to perform at the time agreed, the promisee cannot claim compensation for any loss occasioned for the non-performance at the time agreed unless he gives notice to the promisor of his intention to do so at the time of acceptance.

52. Learned Counsel appearing for the petitioner placed reliance on the third part of Section 55 and contended that the contractor should have given notice of the intention to demand compensation for the extended period. Per contra, Mr. R. Murari contended that having regard to the extension granted, the second part of Section 55 applied to this case that time was not the essence of contract. He pointed out that as per Section 73, the first respondent is entitled to damages, having regard to the breach committed by the petitioner herein. As already noted, even though the contract provided for execution originally, it got extended more than twice, the contract terms also contained clause for damages for not executing the contract within the time. The provisions on extension of the time as well as for damages clearly show that time is not the essence of the contract and despite the provision making time the essence of contract, parties did contemplate extension if the circumstances warranted. It is relevant to note here that Clause 49 contemplates that irrespective of the stage of the arbitration proceedings, the contractor was to perform his obligations under the contract.

53. In McDermott International Inc. v. Burn Standard Co. Ltd. : (2006)11SCC181 the Supreme Court held that the question whether or not time was of the essence of the contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. In Hind Construction Contractors v. State of Maharashtra : [1979]2SCR1147 the Supreme Court held:

7. The question whether or not time was of the essence of the contract would essentially be a question of the intention of the parries to be gathered from the terms of the contract [See Halsbury's Laws of England, 4th Edn., Vol. 4, Para 1179].

8. Even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental [See Lamprell v. Billericay Union (1949) 3 Exch 283 ; Webb v. Hughes (1870) LR 10 Eq 281; and Charles Richards Ltd. v. Oppenheim (1950) 1 KB 616].

As already seen, going by the extension granted and the delay admitted under several heads as may be seen under the individual heads, the second part of Section 55 covers the case. The contract also provided for extension of time. In the face of the above said factual position, the claim for increased rate and additional cost flows out of the contractual terms.

54. We had already noted the clauses pertaining to the rates to be kept as firm. Learned Counsel appearing for the petitioner pointed out that in the background of the terms of the contract, the respondent cannot raise a dispute over this issue that the rates adopted by the arbitral tribunal have no basis. It is seen from the award that as regards certain claims, the tribunal has awarded a rate which is different from what was claimed by the first respondent. The tribunal took note of the working given by the parties herein and the contractual clauses relating to the claims.

55. If one looks at the various claims, particularly with reference to the rate adopted, the letter written by the first respondent on 17.08.1992 needs to be noted. While seeking extension, the first respondent submitted that they would not seek any monetary benefit other than escalation and hence, no claim in future would be made on this account. Again, on 21.03.1996, the first respondent stated that apart from the claims already admitted, the extension of time did not confer any right to make any further claim in future. The first respondent's contention is that the revised rate sought for is only in terms of second part of Section 55; as such, the claim for revised rates, particularly with reference to concrete lining, was well in order. It is no doubt true that the terms and conditions of the contract document are binding on the parties and any award beyond the scope of the contact is illegal. At the same time, when the matter has received consideration at the hands of the expert body chosen by the parties themselves, considering the scope of the jurisdiction of this court under Section 34, I do not find any ground to disturb the award passed by the arbitral tribunal. In the circumstances, I reject the plea of the petitioner in this regard.

56. In this connection, the merits of the individual claims and the award passed thereon need to be noted. The tribunal passed the award as follows:

S. No. Claim No. Amount Amount

Claimed Aioarded

Rs. Rs.

1. Claim No. 1 83,25,610 Rejected

2. Claim No. 2 7,24,451 3,83,000

3. Claim No. 3 9,96,972 Rejected

4. Claim No. 4 3,19,800 Rejected

5. Claim No. 5 31,100 Rejected

6. Claim No. 6 83,203 Rejected

7. Claim No. 7 1,01,159 Rejected

8. Claim No. 8 3,63,936 1,70,000

09. Claim No. 9 3,92,674 2,60,000

10. Claim No. 10 64,088 Rejected

11. Claim No. 11 7,46,274 Rejected

12. Claim No. 12 17,78,000 7,00,000

13. Claim No. 13 6,48,365 2,40,000

14. Claim No. 14 7,62,554 Rejected

15. Claim No. 15 3,33,740 2,80,000

16. Claim No. 16 4,00,000 2,10,000

17. Claim No. 17 18,55,488 4,00,000

18. Claim No. 18 13,03,432 2,80,000

19. Claim No. 19(a) 14,30,134 4,70,000

20. Claim No. 19(b) 12,91,491 4,40,000

21. Claim No. 19(c) 13,20,624 3.00,000

22. Claim No. 19(d) 20,46,800 4,30,000

23. Claim No. 19(e) 2,77,064 50,000

24. Claim No. 19(f) 49,200 10,000

25. Claim No. 19(g) 81,279 20,000

26. Claim No. 20 56,000 Rejected

27. Claim No. 21 37,757 10,000

28. Claim No. 22 20,000 Rejected

39. Claim No. 23 36,080 5,000

30. Claim No. 24 11,520 6,000

31. Claim No. 25 4,71,121 3,30,000

_______________ __________

Total 2,63,59,916 49,94,000

_______________ __________

32. Claim No. 26 Interest at 18% Interest at 18%

on the above sum

33. Claim No. 27 Cost of arbitration No award

(Amount not

quantified)

57. The petitioner herein challenges the award in respect of individual claims namely Claim Nos. 2, 8, 9, 12, 13, 15, 16, 17 to 19 and 26 that the award goes against the specific terms of the contract rate and the clauses therein.

58. The award as regards the various claims now under challenge are as follows:

Claim No. 2-Idling of establishment, machinery and electricity charges between July 1993 to December 1993;

Claim No. 8-Handling charges for extra cement used; Claim No. 9-Compensation for delayed escalation payments;

Claim No. 12-For underutilisation of resources for mining of tunnel due to low voltage;

Claim No. 13-Delayed payments for withheld quantity of mining;

Claim No. 15-For loss incurred due to shortage of cement;

Claim No. 16-For carrying out guniting work;

Claim Nos. 17 to 19-Compensation on lining work from January 1994; and

Claim No. 26-Interest on amounts claimed.

59. As regards Claim No. 2 on idling charges, the first respondent made a claim for Rs. 7,24,451. The petitioner's contention is that the same was not an arbitrable claim, since the contract contained a prohibition on idling charges. Apart from that, the contractor also gave an undertaking vide its letter dated 17.08.1992 that it would not claim idling charges. Learned Counsel pointed out that in any event, there are no materials to show that machinery and men were idling on account of any default committed by the petitioner. It may be noted that under 'Instructions to Bidders' Clause 2.8, there is a specific prohibition that for any reason whatsoever, idle time charges shall not be entertained by the owner. The arbitrators considered the said claim and held that as per the instructions of the Chief Engineer, contractor had stopped concreting work from inlet with effect from 17.07.1993. They had also informed the Superintending Engineer about the stoppage of work of lining in RWT between inlet and shift in their letter dated 18.07.1993. In the letter dated 30.07.1993 the first respondent informed about the frequent power failure and breakdown. As regards, concreting, they informed that they had stopped the same as per the instruction from the petitioner. Again, on 01.09.1993, the first respondent informed of the frequent power failure and brought to their attention that stopping of concreting work had affected the turnover of the project. They impressed on the petitioner that concrete lining was a concurrent activity and hence, sought for permission to do concrete lining along with tunneling. On going through the documents, the tribunal came to the conclusion that the concrete lining work, a concurrent activity along with tunneling which was carried out accordingly by the contractor, was stopped as per the orders of the petitioner on 17.07.1993 and resumed after 31.12.1993. The period in between resulted in idling of machinery, establishment and electricity charges. The tribunal pointed out that the first respondent was entitled to compensation, since the suspension of work resulted in prolonging of contract beyond the extended time of completion, i.e. 31.12.1993. The claim was however granted partially on the view that since mining work was also in full progress since July 1993 to December 1993, reasonable compensation would be Rs. 3,83,000 as against a claim of Rs. 7,24,451. The submission of the learned Counsel appearing for the petitioner is that Clause 2.8 has to be read along with Clause 2.7 which contemplates extension of the contract period equal to the period of force majeure conditions; consequently, Clause 2.8 prohibiting idle time charges has to be read in the context of Clause 2.7, and not independent of it. However, it is pointed out by the petitioner that under Clause 35 of the General Conditions of Contract for civil work, it was stated that no compensation would be payable for idle labour, staff and machinery due to the occasional power failure or any causes beyond the control of the Board and pre-arranged shut downs in the supply of electricity for which prior notice has to be given.

60. Learned Counsel appearing for the petitioner pointed out that the first respondent had given an undertaking under letter dated 17.08.1992 that they would not claim any monetary benefit except escalated payment during the extended period. There are no averments anywhere to deny the undertaking. He further pointed out that even as per the claimant's stand, no concreting could be done, as marking was not completed; consequently, the claim for idling charges was not sustainable. In the circumstances, the claim for idling charges needs to be substantiated by material evidence and proved whether in fact there was idling of machinery and men to warrant payment of compensation.

61. A reading of the award shows that the charges paid under this claim were for the stoppage of work during July 1993 to December 1993. On a consideration of the materials available by way of a statement filed before the arbitrators, ultimately the decision was arrived at to award a compensation at Rs. 3,83,000. The petitioner has not shown that the reasoning arrived at is unreasonable or arbitrary. As rightly contended by the first respondent, Clause 2.8 has to be read in conjunction with Clause 2.7. Learned Counsel appearing for the first respondent pointed out that the above said clauses were not raised as an issue at all in the petition filed before this court; consequently, the petitioners cannot improve on their case by placing reliance on the said clauses. Whatever be the correctness of this claim by the petitioner, the fact remains that the tribunal granted the relief based on what is contained in the letter dated 17.07.1993 from the petitioner. Since the award is based on the reasoning that the causes leading to the claim were on account of the petitioner, in the absence of any material to the contrary, the award being not against the contractual clause as contended by the petitioner, I do not find any ground to disturb the same.

62. As regards Claim No. 8, relating to handling charges for extra cement used, Clause 17.1 is the relevant clause dealing with the supply of cement. Under Clause 17.1, the rate of cement which is supplied at the petitioner's stores at Karamadai was stated to be Rs. 1,951 per tonne. It was also stated that the contractor should make its own arrangement for loading the cement and conveying to work spot. The general conditions of contract also stipulate that the contractor should acknowledge the daily issue of cement and empty bags in the register maintained in the departmental stores. The contract also specified the distance to be covered in transporting the cement. Thus, Clause 17.1 indicates that there shall be no claim for transport of cement and the price was all inclusive. However, under Clause 17.4, it is stated that cement would be issued free of charge subject to the limits specified in the said clause. It further states that cement, for this purpose, shall be arranged to be transported from Karamadai Stores by the contractor himself without any extra charges. In the decision taken after discussion on the submission of the bid, it was also agreed that for increase in use of cement, adjustment would be given at the Board's issued rate of Rs. 1,951 per tonne at Karnmadai Stores. The first respondent submitted its letter dated 30.10.1990 and the supplemental price bid.

63. Learned Counsel appearing for the first respondent pointed out that they had not made any claim for cement under Clause 17. The charges claimed are towards extra cement only and not towards free cement as per Clause 17.4. Even the discussions and the decision arrived at made no reference as regards extra cement handling and the transport charges. The said contentions of the parties were considered by the tribunal which granted a relief to the extent of Rs. 1,70,000 as against the claim of Rs. 3,63,936. The arbitral tribunal held that the claim was with reference to extra quantity of cement used over and above the agreed specified quantity and that the petitioner themselves considered this claim after rejecting it once and even offered to pay an amount. In the circumstances, the tribunal fixed the compensation at Rs. 1,70,000 as reasonable as the learned Counsel for the first respondent pointed out, the prohibition in Clause 17.1 related to the contracted quantity. Even in the discussions and the decision arrived at after the meeting, there was no reference as regards the transport and handling of cement over and above the contracted extent. The correspondence referred to by the learned Counsel appearing for the petitioner have relevance to the strength specified vis-a-vis the cement to be used and since the desired strength required extra cement, the first respondent sought for extra supply of cement at Rs. 1,951 per tonne. It is not denied by the petitioner that the handling charges were for the extra cement used. In the absence of a specific prohibition, either express or implied, I do not find that the award traverses the contract. As rightly submitted by the learned Counsel appearing for the first respondent, the claim does not fall for consideration under Clause 17.

64. As regards Claim No. 9 relating to compensation for delayed escalation payment, the first respondent claimed a sum of Rs. 3,92,674. The award was made for a sum of Rs. 2,60,000. The tribunal held that the escalation was sought for on account of the delay in certification by the Engineer and the payment thereafter. Admittedly, this does not relate to delay in payment after certification. The tribunal pointed out that the evidence available shows that the delay in certification and payment ranged from 46 days to 777 days from the due date. The tribunal worked out the compensation at 18% as realistic. It may be noted that although the petitioner raised an issue on this, yet, the delay in certification could not be denied by any material to find fault with the reasoning in the award. The petitioners could not dispute the facts stated by the tribunal to support their conclusion. Consequently, I do not find any ground to disturb this.

65. As regards Claim No. 12 to the tune of Rs. 7,00,000 granted by the tribunal as against the claim of Rs. 17,78,000, under the head 'compensation for underutilisation of resources during mining of tunnel due to low voltage', the assurance given by the petitioner was that they would provide three phase workable electric supply and the contractor agreed to provide energy meters at their cost. The grievance of the first respondent is that the low voltage and fluctuation therein resulted in underutilisation of resources thus leading to loss. The contractual clauses under Clause 35 of General Conditions of Contract provided that no compensation would be payable for idle labour, staff and machinery only under three circumstances, namely,

(1) occasional power failure;

(2) cause beyond the control of the Board; and for

(3) pre-arranged shut down in electricity for which prior notice would be given.

66. Admittedly, the first respondent had at its disposal, generators as per the contractual obligations. The compensation claimed was not under any other circumstances referred to in Clause 35 of the General Conditions of Contract. The arbitral tribunal pointed out that the first respondent had filed periodical reports regarding voltage drop and power failure from January 1992 to December 1993, voltage as low as 280 volts onwards against 440 volts. Power failure had occurred not less than 340 days from the period January 1992 to December 1993, 24 months - 720 days. The low voltage problem persisted for a long period ranging from 2 hours to 20 hours for 9 days in January 1993, 28 days in February 1993 and 7 days in March 1993, i.e. 44 days out of 900 days. The tribunal pointed out for tunneling the major items of work, power failure for even one hour can retard one cycle of operation of 89 hours. The arbitral tribunal pointed out that the magnitude of the loss on account of underutilisation of resources on account of this prolonged failure and low voltage would be enormous. Voltage drop was well within the control and capacity of the petitioner. Under the circumstances, the tribunal evaluated the loss by assessing the same to arrive at a figure of Rs. 7,00,000. I do not find any ground in the argument of the petitioner to disturb this. It may be noted, the claim does not fall under any of the clauses specified under Clause 35. The letters written by the first respondent revealed the complaint made on the frequent low voltage and fluctuation. Rightly the tribunal pointed out that maintenance of the required voltage was within the domain of the petitioner. Prolonged power failure and low voltage are totally different from stopping the supply on notice. As already noted, the clause does not cover the claim made on account of low voltage. In the circumstances, I reject this plea of the petitioner. The facts narrated in the award speak for themselves to justify the compensation.

67. As regards Claim No. 13, the tribunal awarded a sum of Rs. 2,40,000 as against the claim of Rs. 6,48,365 under the head 'compensation for delayed payment for withheld quantity of mining'. The arbitrators pointed out that mining operations have been completed by December 1993 and that it was a common practice in tunneling work to leave a very small quantity of finer muck at the invert level of the tunnel to facilitate movement of loaders and rail wagon. The petitioner failed to pay the agreed rate for the quantity of work done by taking full measurement from which small amount could have been deducted for muck removal at a reasonable basis. The tribunal further pointed out the delay in the action of the Engineer on certification and making the payment. As rightly contended by the learned Counsel appearing for the first respondent, the view expressed by the arbitrators is a pure technical issue. I do not find any justification in the feeble attack made by the petitioner.

68. As regards Claim No. 15, as against the claim of Rs. 3,33,740 under the head 'compensation for loss incurred due to shortage of cement', the award was to the tune of Rs. 2,80,000. Under Clause 7.2 of the technical specification for tunnel work, the contractor has to give not less than 30 days' notice in writing of his requirement of cement. The supply of cement is entered in a register maintained by the departmental stores (Clause 17.3, General Conditions of Contract). The petitioner contended that there was no delay in the supply of cement as per the contractual terms. He pointed out that the evidence placed before the arbitral tribunal disclosed no details to claim the compensation. He pointed out that Exhibit C-107 would show that there was no delay to warrant compensation. He further pointed out to the contention of the first respondent in the counter filed that the petitioner had failed to produce the log book and indent book and that the presumption has to be drawn against the petitioner. On the other hand, the burden of proof was on the first respondent to prove the loss, which they failed. The petitioner, however, stated that the arbitral tribunal never held that the compensation awarded was not on account of the petitioner not producing the indent book. He further pointed out that there were no averments that the petitioner was asked to produce the indent book.

69. It is not denied by the petitioner that all supplies are recorded in the book maintained by the petitioner. The indent book maintained by the petitioner records the details as regards the indent placed, the release of the cement and the date on which the requirement was notified giving thirty days' time and the date of supply. In the face of the admitted position that the indent book was necessarily under the custody of the petitioner, the question of the first respondent producing the same did not arise. The tribunal pointed out that during the period 21.05.1994 to 03.07.1994, there had been many instances showing delay varying from 3 days to 12 days. Short delays up to 2 days were however ignored as evident on Exhibit C-107 of P-3. The tribunal held that the delay was indicative of breach of promise on the part of the petitioner; consequently, the award was made. In the face of Exhibit C-107, there are no materials through which the petitioner could substantiate their case that there was no delay on their part in producing before the tribunal, the indent book considering the finding recorded by the tribunal, I do not find any justification in the submission of the petitioner that the first respondent had failed to produce the indent book, which, admittedly, is a record maintained by the petitioner. It may also be noted that in one of the letters, Exhibit C-106 dated 11.06.1994, the first respondent pointed out to the delay in the supply of cement and in Exhibit C-105, one finds a telegram by the Superintending Engineer assuring continuous supply of cement without affecting the progress of work. Even the details furnished by the first respondent on the basis of which the tribunal pointed out to the delay could not be denied by the petitioner as incorrect. In the face of the abundant materials available, the tribunal arrived at a just conclusion which does not require any interference.

70. As regards Claim No. 16 for compensation for carrying out guniting work, the tribunal awarded a sum of Rs. 2,10,000 as against the claim of Rs. 4,00,000. The tribunal held that the instructions as regards carrying out the guniting work were issued in March and April 1994 and later in October 1994 to do additional guniting work over and above the work ordered to be done in March and April 1994. The tribunal pointed out that it involved additional inputs, re-mobilisation of equipment and skilled labour. Consequently, for the work done after the agreed time of completion, the first respondent was entitled to a compensation based on the cost, increase in rates of labour and materials, etc. The petitioner pointed out that the Board had the right to revise the work schedule as per the pert chart. He pointed out that under Clause 2.1 of the instructions to bidders, the petitioner had the right to revise the schedule at its discretion in order to keep up to the completion date and to suit the project requirement. This, however, will not entitle the contractor to any extra payment. He pointed out that in the wake of the above said condition, the tribunal erred in granting the compensation. As rightly pointed out by the learned Counsel appearing for the first respondent, all that this clause contemplates is a re-adjustment in the time frame. The extra work done has nothing to do with the revision of the schedule in the execution of the work and hence, the same fell for consideration under Clause 62. In the circumstances, the tribunal rightly accepted the plea of the first respondent, but however restricted the same to Rs. 2,10,000. Having regard to the reasoning given by the tribunal, I do not find any justification to sustain the ground taken.

71. As regards Claim Nos. 17 to 19, the same fall for consideration as work done beyond 01.01.1994. The arbitral tribunal fixed a rate as regards Claim Nos. 17, 18, 19(a) to 19(g) as follows:

Claim No. 17 : Rs. 4,00,000Claim No. 18 : Rs. 2,80,000Claim No. 19(a) : Rs. 4,70,000Claim No. 19(b) : Rs. 4,40,000Claim No. 19(c) : Rs. 3,00,000Claim No. 19(d) : Rs. 4,30,000Claim No. 19(e) : Rs. 50,000Claim No. 19(f) : Rs. 10,000Claim No. 19(g) : Rs. 20,000

72. Learned Counsel appearing for the petitioner pointed out that when the tribunal rejected the rate claimed by the first respondent and fixed its own rate, notice ought to have been given to the parties herein. As such, when the arbitrators failed in this aspect, the award suffers an illegality. It may be noted that the claim under these heads relates to the period from 01.01.1994, the question as to whether this is a case of a new contract or an extension of the old one has already been considered by me in the preceding paragraphs to hold that the work done from 01.01.1994 has to be construed as an extension of the contract period. The work done was admittedly related to and one arising under the contract. The grievance of the first respondent was that the claim was the result of the stoppage of work imposed by the petitioner which resulted in the first respondent re-mobilising men and material solely for the purpose of completing the contractual obligations. Learned Counsel appearing for first respondent pointed out to the various correspondence from the petitioner giving instructions as to the lining work as well as concreting. He pointed out to the letter dated 01.02.1994 wherein, referring to the letter of the Superintending Engineer dated 24.01.1994, it was pointed out by the first respondent that they have been requesting the petitioner right from July 1993 onwards to allow them to do the lining work; that the delay caused by reason of the petitioner's instruction to stop the work in July 1993 had resulted in great loss. They also pointed out that concreting was a concurrent work envisaged in the tender and that preventing them from doing the same would result in heavy loss and hence, they sought for enhancing the rates. It was further pointed out that the first respondent had to restart the lining work on 24.01.1994 as per the requirement of the Tamil Nadu Water Supply and Drainage Board.

73. Learned Counsel appearing for petitioner contended that when the contract specifies the rates to be firm, the agreed rate alone would be available and no revision in rates could be entertained. It may be seen from the award that the tribunal recorded a finding that the parties to the agreement went in for extension more than once and that the extension was on account of the delay attributable to the petitioner. The tribunal further pointed out that the delay had resulted in the first respondent suffering increase in the cost of materials and labour from 1991 to December 1994 and hence, the first respondent deserved to be compensated under these heads. While considering Claim No. 2, the tribunal pointed out this aspect to come to the conclusion that the revision in rates under the heads was justifiable. The arbitral tribunal took note of various aspects of the work executed and the claim involved therein under the various heads. A reading of the various claims leaves no manner of doubt that in the technical aspect of the work, executed and the assessment thereof, the arbitrators, in their wisdom, have arrived at a rate and 1 do not find any ground to disturb the same in exercise of jurisdiction under Section 34.

74. As regards the interest awarded, the arbitral tribunal granted interest at 18% per annum on the entire amount awarded from the date of entering into reference, i.e. 15.10.1997 till the date of payment. The tribunal pointed out that Clause 58 of the General Conditions of Contract states that no interest could be paid on account of any default in making the payment due upon certification and that the contractor would not be entitled to interest on any arrears of balance found to be due on the final settlement of the account.

75. Learned Counsel appearing for the petitioner pointed out that in terms of the said clause, the first respondent is not entitled to any interest. In this connection, he pointed out that the similar clause of this nature came up for consideration in the decision in Durga Ram Prasad v. Government of Andhra Pradesh (supra). He also referred to the decisions in Bombay Housing Board (Now The Maharashtra Housing Board) v. Karbhase Naik & Co. Sholapur (supra); Ramachandra Reddy & Co. v. State of Andhra Pradesh and Ors. (supra); and Himachal Pradesh Nagar Vikas Pradhikaran v. Aggarwal and Co. (supra) to contend that until the rates are settled, the petitioner was not under an obligation to pay interest. I do not agree with the said submission of the learned Counsel. The clause relied on by the petitioner related to amount remaining outstanding after certification. The claim before the arbitrators was on bills kept pending without certification. Considering the fact that the prohibition as regards interest payment was only with reference to the arrears, in the absence of any express or implied prohibition on payment of interest on bills pending, I do not find any impediment to the granting of interest. The decision relied on by the learned Counsel is distinguishable on facts and hence, does not help the petitioner herein in their contention. Learned Counsel appearing for the petitioner referred to the Division Bench decision of this court in Hindustan Construction Co. Ltd. v. Tamil Nadu Electricity Board (supra), which granted interest from the date of reference. Having regard to the claim that the interest payment was on the bills which were not cleared for certification, the claim of the petitioner cannot be accepted in toto. Hence, the reliance placed in Hindustan Construction Co. Ltd. v. Tamil Nadu Electricity Board (supra) is misplaced and has no bearing on the issue. However, considering the decision of the Apex Court in J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. and Anr. (supra), the award of interest, however, stands reduced to 9% per annum from the date of reference till the date of payment.

76. Learned Counsel appearing for the petitioner made submissions, touching on the jurisdiction of this court under Section 34 demanding interference with an award which was contrary to the terms of the agreement. He made this submission with particular reference to the rate adopted for the work executed from 01.01.1994 which was not the one given under the agreement. He referred to the decision in Ramachandra Reddy & Co. v. State of Andhra Pradesh and Ors. (supra) that mere grant of extension of time would not entitle the contractor to claim extra payment for increase of rate in labour and material. He further referred to the decision in Himachal Pradesh Nagar Vikas Pradhikaran v. Aggarwal and Co. (supra) to impress on the fact that when cement was supplied by the petitioner, the award based on a rate different from the contractual rate would be contrary to the terms of the award and that the contractor was not entitled to the enhanced rate. He pointed out that as per the decision in O.N.G.C. Ltd. v. Garware Shipping Corporation Ltd. , if the conclusions are perverse and the basis of the award itself is wrong, this court would certainly interfere with an award. Hence, he prayed that the award be set aside.

77. It is no doubt true that in the case of a perversity, the jurisdiction of this court under Section 34 is wide enough to disturb an award. But at the same time, it should not be forgotten that the court can set aside the arbitral award only under exceptional circumstances. While elaborating on the grounds on which the court can set aside an award in exercise of jurisdiction under Section 34, in O.N.G.C. Ltd. v. Saw Pipes Ltd. : [2003]3SCR691 , the Apex Court held that where an award is contrary to the substantive provision of law or Act or against the terms of the contract, it would be patently illegal justifying interference under Section 34. The Apex Court held (para 54 of Arb. LR):

53. It is true that if the arbitral tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator--

(a) If there is a general reference for deciding the contractual dispute between the parries and if the award is based on erroneous legal proposition, the court could interfere;

(b) It is also settled law that in a case of reasoned award, the court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application;

(c) If a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit of its being set aside, unless the court is satisfied that the arbitrator had proceeded illegally.

78. In McDermott International Inc. v. Burn Standard Co. Ltd. (supra) while reiterating the principle as to the supervisory role of the courts under Section 34, the Supreme Court held (paras 55, 56 and 57 of Arb. LR):

35. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. However, this court, as would be noticed hereinafter, had the occasion to consider the matter in great detail in some of its decisions.

36. In Primetrade AG v. Ythan Ltd. (2006) 1 All ER 367 jurisdictional issue based on interpretation of documents executed by the parties fell for consideration having regard to the provisions of the Carriage of Goods by Sea Act, 1992. It was held that as the appellant therein did not become holder of the bills of lading and alternatively as the conditions laid down in Section 2(2) were not fulfilled, the arbitrator had no jurisdiction to arbitrate in the disputes and differences between the parties.

Referring to Section 55 of the Indian Contract Act, the Apex Court pointed out that where the contract provided that time is the essence of the contract, such a stipulation has to be read along with other provisions of the contract. The conduct of the parties, hence, is a relevant factor in understanding and in the construction of the various clauses in the contract.

79. As far as the present case is concerned, the arbitration clause is a widely worded provision. Clause 49 prescribes that dispute or difference whatsoever arising between the parties upon or in relation to or in connection with contract shall be referred to the arbitration of two persons. It further stipulates that the pendency of arbitration, however, shall not affect the execution of the work and payments due to the contractor shall not be withheld on account of such proceedings. In Rajasthan State Mines & Minerals Limited v. Eastern Engineering Enterprises and Anr. : AIR1999SC3627 the Supreme Court held 'in order to determine whether the arbitrator had acted in excess of his jurisdiction what has to be seen is whether a claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction'.

80. A reading of the award under the various heads as already seen, show that some of the claims were on account of:

(a) Delay caused by the petitioner herein, vide Claim No. 2;

(b) Handling charges for extra cement used not covered under the terms of the agreement, vide Claim No. 8;

(c) Delayed escalation payments which are factual, vide Claim No. 9;

(d) Loss on account of low voltage fluctuation for which the tribunal had given reasons based on materials, vide Claim No. 12;

(e) Delayed payment for withheld quantity for mining which is based on the arbitrator's technical knowledge, vide Claim No. 13;

(f) The loss on account of shortage of cement which was admitted in the letter of the petitioner himself assuring the first respondent of the adequate supply, vide Claim No. 15;

(g) Compensation for carrying out guniting work in the course of the extended period leading to increase in rate of labour, material, etc. vide Claim No. 16;

(h) For the lining work done in January 1994 till the completion; where the arbitrators have taken a view that a revision was granted on account of the work executed after the agreed time of completion and taking note of the increased cost of materials and labour, to award a portion of the amount claimed, vide Claim Nos. 17 to 19;

(i) Interest payment on the entire award amount of all the claims at 18% from the date of reference 15.10.1997 till the actual date of payment vide Claim No. 26.

It may be seen that the issue raised herein, although related to the execution of the contract, the determination of the amount payable does not fall under specific clauses of the agreement to adopt the rate given under the contract. Tine claims raised were not contemplated under the various clauses referred to by the petitioner. As for example, the loss on account of low voltage and power fluctuation, the handling charges for extra cement used, the loss on account of shortage of cement supply and interest on delayed certification for payment. There are claims which require consideration in the expert's point of view. As for example, Claim No. 13, Claim No. 16 and Claim Nos. 17 to 19. As far as Claim Nos. 17 to 19 are concerned, I have already taken a view that it is only an extension of the contract. The claim itself is on the work executed under the contract. The reading of the various correspondence produced before this court and the contention taken by the first respondent, read in the light of the order of the arbitral tribunal rejecting the plea of the first respondent, show that the extension granted was at the request of the first respondent and that there was no denial of the fact that the work executed was by reason of extension granted more than once specifically by an order and the last one, on a request made by the first respondent. There is every indication to show that the work executed beyond 01.01.1994 was not a fresh contract, but only an extension of the period for the execution of the contract granted. The tribunal's view in this regard that the work executed beyond the agreed time of completion was a fresh contract is not supported by any material. Although the contract says time is the essence of the contract, yet, by reason of the extension granted, both parties agreed that they intended to stand by the terms of the agreement to have the work executed as per the terms agreed. The letter written on 17.08.1992 by the first respondent states that extension of time did not confer on them any monetary benefit other than escalation, in the letter dated 18.07.1993, the first respondent further pointed out that as per the instruction of the Superintending Engineer, the first respondent had discontinued the concreting work from inlet, with effect from 17.07.1993. Again, on 23.07.1993, referring to the letter of the Superintending Engineer dated 14.07.1993, the first respondent informed reiterating what had been stated and informed that labour force has been disbanded. In the letter dated 24.07.1993, the Chief Engineer informed that lining work interfered with the marking operation and hence, lining work had been stopped. The materials as regards the intermittent drop in voltage and stopping of concreting work, which was a concurrent activity along with tunneling, were also placed before the tribunal. In the above circumstances, even though the contract states that the rates are firm and I have taken a view that the work done beyond 01.01.1994 was an extended period and hence not a new contract, the award made has to be upheld that there is no illegality in granting an award under these heads on the calculation different from what had been provided for under the contract, considering the fact that the contractual terms on the payment do not cover the claims for the purposes of rates to be adopted, particularly when the finding was that the delay was on account of the petitioner. There are no materials to disturb the finding that the delay was attributable to the petitioner alone. In the circumstances, even though the contract states that the rates are firm, since the work executed beyond 01.01.1994 and the claims made thereon are not covered under specific clauses for the purposes of working out the reliefs, the award could not be faulted with as one contrary to the terms of the agreement. Taking note of the various claims related to the works executed and the material supporting the same, even though the view of the arbitrators that there was no agreed extension but only a fresh contract to award a rate is rejected by me, yet, I am constrained to uphold the award under the various heads, as I do not find any material to disturb the same. As held by the various decisions of the Apex Court, even if the court feels that an amount different from what had been awarded could have been a reasonable one, yet, having regard to the scope of jurisdiction of this court under Section 34, confirm the award as it is. It may be noted that the arbitral tribunal consisted of experts in the field and chosen by the parties to the proceedings. As such, I do not find any illegality in the award granted by the body of experts demanding interference under any of the clauses under Section 34(2) of the Arbitration and Conciliation Act, 1996.

81. Claim No. 26 alone calls for interference. This relates to interest awarded by the tribunal on the award passed to carry an interest from the date of reference. Considering the fact that I had confirmed the grant of interest at 18% under Claim No. 9, I do not find any justification in awarding interest at 18% per annum on the award amount. I accept the contention of the learned Counsel appearing for the petitioner that in the context of the decision of the Apex Court in J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. and Anr. (supra), the interest on the award amount merits to be reduced to 9% per annum from the date of reference, i.e. 15.10.1997 till the date of payment. In the circumstances, while upholding the contentions of the petitioner on the issue as to whether there was an extension of the contract from 01.01.1994 onwards, reject the plea of the petitioner in all other aspects, namely on the question of limitation as well as on the individual claims. The interest on the award amount stands revised to 9% per annum. I confirm the award and consequently, the OP is dismissed. In the light of the view that I have taken, there is no order as to costs.


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