FAO No.4290 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO No.4290 of 2013 Date of Decision: 11.2.2014 M/s Bharat Enterprises ....Appellant Versus Union of India and others ....Respondents CORAM:- HON'BLE Mr.JUSTICE RAJIV NARAIN RAINA Present : Mr.Manohar Lall, Advocate for the appellant Ms.K.K.Kahlon, Standing Counsel for Union of India 1.
To be referred to the Reporters or not?.
Yes.
2.
Whether the judgment should be reported in the Digest?.
Yes.
RAJIV NARAIN RAINA, J.
(Oral) It is not disputed that the final bill was presented by the appellant- contractor on 13.2.2002.
The final bill against the claim application of the Contractor in respect of the contract agreement was paid on 25.11.2003 vide Voucher No.21/1307/BR-II.
The Engineer-in-Chief certified that the maintenance/guarantee period of the contract expired on 18.1.2003.
The Arbitrator made an award in favour of the Contractor and against the employer by his reasoned award dated 16.7.2009.
The respondents feeling aggrieved by the award filed objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act”.) before the District Judge, Chandigarh.
The District Judge, Chandigarh has non-suited the Contractor and reversed the award by holding that the Contractor's claim was deemed to have been waived and stood extinguished by virtue Khan Md.Firoz 2014.02.17 14:43 of Clause 65-A of the Contract agreement.
Clause 65-A reads as follows:- I attest to the accuracy and integrity of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 2 “65-A.
Final Bill (Applicable only to Term Contracts).- The Final Bill shall be submitted by the Contractor on I.A.F.W.-2262 in duplicate, accompanied by all supporting abstracts, voucheRs.etc., except I.A.F.W.-2158 and 1833 prepared in the manner prescribed by the G.E.within three months of physical completion of the Works to the satisfaction of the Engineer-in-Charge.
In respect of works orders arising out of unit requisitions or M.E.S.inspections for maintenance and repaiRs.any portion of such an order which remains uncompleted at the date of the next subsequent requisition or inspection may, purely to facilitate payment of completed Work and without prejudice to any other right or remedy of Government in respect of any such delay, be deleted and the Works Order, as so amended forthwith, billed for final payment.
No further claims shall be made by the Contractor after submission of a Final Bill and these shall be deemed to have been waived and extinguished.
The Contractor shall be entitled to be paid the full measured value of the Works Order, less the value of payments made on account and of any charges properly preferred under the Conditions of Contracts for Government Stores, etc.supplied on repayment, subject to the certification of the final bill Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity by the G.E.of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 3 When fractions of a rupee occur in the totals of bills, fractions less than half a rupee shall be disregarded and half a rupee and over taken as a rupee.
No charges shall be allowed to the Contractor on account of the preparation of a final bill (Emphasis supplied).”
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Clause 65 of the Works Contract would also have some bearing on the case since it also contains disclaimer, and is, therefore, reproduced below:- “65.
Final Bill (Applicable only to Measurement and Lump Sum Contracts).- The Final Bills shall be submitted by the Contractor on I.A.F.W.-2262 in duplicate within three months of physical completion of the Works to the satisfaction of the Engineer-in-Charge.
It shall be accompanied by all abstracts, voucheRs.etc., supporting it and shall be prepared in the manner prescribed by the G.E.No further claims shall be made by the Contractor after submission of the Final Bill and these shall be deemed to have been waived and extinguished.
The Contractor shall be entitled to be paid the final sum less the value of payments already made on account, subject to the certification of the final bill by the G.E.No charges shall be allowed to the Contractor on Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity account of the preparation of the final bill (Emphasis of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 4 supplied).”
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The contract terms and conditions require submission of the final bill within three months of physical completion of the works to the satisfaction of the Engineer-in-Charge.
There is no dispute that the final bill was presented within the time prescribed.
Clauses 65 and 65-A, though set a boundary on the Contractor to submit its bill, but does not speak of the time within which the final bill is to be discharged by the employer.
Admittedly, when the dispute was referred to Arbitration, the Contractor made further claims before the arbitrator which were adjudicated in arbitral proceedings after hearing the employer and the claims were by and large allowed.
If the final bill was presented on 13.2.2002, and payment of the same was made belatedly on 25.11.2003 to the pecuniary disadvantage of the Contractor, then it would appear not to lie in the mouth of the Engineer-in-Charge/employer to invoke an exclusionary clause as is found embedded in Clause 65-A.
If such a clause were to operate, then it would even take away the Arbitrator's discretion and jurisdiction to award interest pendente lite and future interest etc.which the law permits and such a claim would also constitute a valid claim which can be awarded.
In any case, such a clause I am inclined to think would be opposed to public policy and operate unfairly, and should be understood in the light of what the Supreme Court enunciated in Central Inland Water Transport Corporation & Anr.
versus Brojo Nath Ganguly & Anr., AIR1986 SC1571 thus expanding the sphere of the law of contracts and subjecting it to the test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power.
Extracts from the judgment can be profitably quoted:- Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity "Article 14 of the Constitution guarantees to all persons of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 5 equality before the law and the equal protection of the laws.
This principle is that the Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract entered into between parties who are not equal in bargaining power.
The above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties.
It will apply where the inequality is the result of circumstances, whether of the creating of the parties or not.
It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them.
It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however, unfair unreasonable or unconsionable a clause in that contract or form or rules may be.
This principle will not apply when the bargaining power of the contracting parties is equal or almost equal.
mis principle may not apply where both parties are businessmen and the contract is a commercial transaction.
In today's complex world of giant corporations with their vast infrastructural organisations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power.
The Court must judge each case on its own facts and circumstances when called upon to do so by a party under section 31(1) of the Specific Relief Act, 1963.
" Then further; " In the vast majority of cases, however, such contracts with unconscionable term are entered into by the weaker party under pressure of circumstances, generally economic, which results in inequality of bargaining power.
Such contracts will not fall within the four corners of the definition of "undue influence" as defined by section 16(1) of the Indian Contract Act.
The majority of such contracts are in a standard or prescribed form or consist of a set of rules.
They are not contracts between individuals containing terms meant for those individuals alone.
Contracts in prescribed or standard forms or which embody a set of rules as part of the contract are entered into by the party with superior bargaining power with a large number of persons who have far less bargaining power or no bargaining power at all.
Such contracts which affect a large number of persons or a group or Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity groups of persons, if they are unconscionable, unfair and of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 6 unreasonable are injurious to the public interest.
To say such a contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to Court to have the contract adjudged voidable.
This would only result in multiplicity of litigation which no Court should encourage and also would not be in public interest.
Such a contract or such a clause in a contract ought, therefore, to be adjudged void under section 23 of the Indian Contract Act, as opposed to public policy."
And still further; " The Indian Contract Act does not define the expression "public policy" or "opposed to public policy".
From the very nature of things, such expressions are incapable of precise definition.
Public policy, however, is not the policy of a particular government.
It connotes some matter which concerns the public good and the public interest.
The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time.
As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a well-recognized head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy.
The principles governing public policy must be and are capable on proper occasion, of expansion or modification.
Practices which were considered perfectly normal at one time have today become abnoxious and oppressive to public conscience.
If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declares such practice to be opposed to public policy.
Above all, in deciding any case which may not be covered by authority Indian Courts have before them the beaCo.light of the Preamble to the Constitution.
Lacking precedent, the Court can always be guided by that light and the principles underlying the Fundamental Rights and the Directive Principles enshrined in our Constitution."
It is not the case that the payment of the final bill was made promptly and delay in payment alone should constitute a separate ground for submission of the bills by the Contractor on closer scrutiny of his claims to make fresh claims which may have escaped contractor's notice at Khan Md.Firoz 2014.02.17 14:43 the time of presentation of the final bill.
In human affaiRs.such situations I attest to the accuracy and integrity of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 7 can and do arise and the courts can and should make an allowance for them to be accommodated for adjudication on the merits of such claiMs.Therefore, I find myself unable to subscribe to the reasoning adopted by the learned District Judge, Chandigarh in non-suiting the petitioner and shutting out his case for examination of the 'further claiMs.beyond those pressed in the original claim petition on the materials on record and that too only by virtue of oppressive exclusion in Clause 65-A.
Delay in payment of dues would itself give rise to an actionable claim for interest accruing by virtue of default in payment of final bills, keeping money beyond reasonable time in the pocket of the employer.
Mr.Manohar Lall, learned counsel appearing for the appellant points out that the Arbitrator in the present case was appointed under Section 11 of the Act by the Chief Justice of this Court excercising jurisdiction under the Act by order dated 12.11.2007 after recognizing and identifying the dispute and difference which had arisen between the parties that demanded resolution through arbitration process in terms of the arbitration clause signed by the parties.
This jurisdictional issue was pressed before the Arbitrator by the employer itself and a preliminary issue was accordingly framed and answered in favour of the appellant and Clause 65-A was duly noticed and interpreted in a manner which appeals to this Court as a correct exposition of the law.
Besides, the Arbitrator in his award dated 4.3.2009 (Annexure A-3) found from the agreement dated 22.11.2007 that dispute still exists between the parties, which is evident from the recitals in the agreement, which reads as follows:- “The new arbitrator shall decide all the disputes between the parties.”
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Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity The award ought not to have been tinkered with by the Learned of this document punjab and haryana high court chandigarh FAO No.4290 of 2013 (O&M) 8 District Judge, Chandigarh for the reason that jurisdiction stood denuded by operation of the offending part of Clause 65-A underlined for emphasis as above.
Clauses 65 and 65-A cannot be read as waiver or extinguishment of right of a contractor, much less by deeming fiction as Clause 65-A does, to lay further claims after the presentation of the final bill if money or interest is demonstrably owed by the offeror of the contract to the contractor.
Thus, these two clauses justly deserve to be read against the offeror of the works contract in the light of the well established doctrine of contra proferentum applicable to the law of contracts.
For the foregoing reason, this appeal is allowed and the impugned judgment dated 10.7.2013 passed by the learned District Judge,Chandigarh is set aside.
(RAJIV NARAIN RAINA) JUDGE112.2014 MFK Khan Md.Firoz 2014.02.17 14:43 I attest to the accuracy and integrity of this document punjab and haryana high court chandigarh