HIGH COURT OF ORISSA : CUTTACK ARBA No.30 of 2004 & 33 of 2005 In the matter of an apeal under Section 37(i)(b) of the Arbitration and Conciliation Act, 1996. -------------In ARBA No.30 of 2004 Durga Charan Routray …… Appellant -VersusSecretary, Water Resources Department, Government of Orissa & Others. …… Respondents For Appellant : M/s. D. Routray, G.Routray, S. Routray & D.Chatterjee For Respondents : Additional Government Advocate In ARBA No.33 of 2005 State of Orissa represented through the Secretary to Government Water Resources Department & Others. …… Appellants -VersusDurga Charan Routray …… Respondent For Appellants : Additional Government Advcoate For Respondent : M/s. D. Routray, G.Routray, S. Routray & D.Chatterjee --------------- 2 PRESENT: THE HON’BLE MR. JUSTICE INDRAJIT MAHANTY. Date of judgment : 18.06.2014 I. Mahanty, J.Both the aforesaid appeals arise out of challenges made by the claimant as well as the State to a common judgment dated 08.09.2004 passed in Arbitration Misc. Case No.225 of 2002 by the learned District Judge, Khurda at Bhubaneswar, in a proceeding under Section 34 of the Arbitration & Conciliation Act, 1996 (in short ‘the Act, 1996). The State of Orissa in Arbitration Appeal No.33 of 2005 have sought to challenge the arbitral award under Section 34 of the 1996 Act before the Court of the learned District Judge, Khurda at Bhubaneswar whereby the learned District Judge by judgment dated 08.09.2004 came to uphold the Arbitral award but set aside a part of the award relating to the grant of interest in favour of the claimant. The claimant-contractor has sought to challenge that part of the order of the learned District Judge where he set aside the award of interest, in Arbitration Appeal No.30 of 2004.
2. On the consent of the learned counsel representing the respective parties, both the aforesaid appeals were taken up together for disposal by a common judgment, since the challenge in both the 3 appeals are to a common judgment of the learned District Judge, Khudra passed in Arbitration Misc. Case No.225 of 2002.
3. The State of Orissa in ARBA No.33 of 2005 has sought for setting aside of the impugned judgment dated 08.09.2004 passed in Arbitration Misc. Case No.225 of 2002 by the learned District Judge, Khurda, by which, the learned District Judge was pleased to upheld the award under Section 34 of the Act, 1996, except to the extent of holding that the award of interest from 12.01.1988 till date of award i.e. 06.03.2002 was No.sustainable. It was submitted on behalf of the State that the claim was grossly barred by limitation, and that the limitation was to be computed on the residue clause of Article 137 of the Limitation Act, where the period of limitation prescribed was three (3) years from the date, the cause of action arose. It was asserted on behalf of the state that cause of action arose for the first time on 04.03.1983 when the contract was rescinded and secondly on 04.12.1986 when the 34th Running Bill (RB) was treated as final bill and thirdly when the claims of the claimant was repudiated. It was stated that even assuming for the sake of argument that the claimant sought for the appointment of an Arbitrator vide his letter dated 21.09.1991, the application for appointment of Arbitrator having been made only on 10.01.1997, the claim was grossly barred 4 by limitation. It was further asserted on behalf of the State that, since the final bill had already been prepared, the period of limitation could No.have continued till payment of the same and thus the award passed by the sole Arbitrator being barred by limitation was also, therefore, opposed to public policy and hence the award ought to be set aside.
4. Apart from the aforesaid contentions, learned counsel for the State also submitted that the learned Arbitrator, as well as, the learned District Judge, Khurda had ignored the provision of Clause11 & 23 of the F-2 Agreement entered into between the parties. Whereas Clause-11 specified that, in case of “extra item”. or “extra quantity of work”., the claimant-contractor ought to have obtained written permission from the Executive Engineer. In the absence of any “written permission”. in respect of “extra item”. of claim, the claimant is No.entitled in terms of the contract to any amount towards extra item of claim. In the case at hand, since no such written permission from the Executive Engineer had been obtained, the claim towards extra item ought to have rejected on this ground alone.
5. Insofar as the amount of interest as claimed by the claimant is concerned, it was averred on behalf of the State that, since the payment of interest was No.stipulated in the agreement between the 5 parties, the claimant was No.entitled to get any amount towards interest.
6. Insofar as, “revision of minimum wages”. was concerned, it was submitted on behalf of the State that the claimant was No.entitled to the same, in the absence of any evidence to show that he had actually paid the revised rate to the workers. In the absence of any such evidence regarding payment of revised rate in favour of claimant-workmen, the award stood vitiated on that count.
7. Mr. D. Routray, learned counsel appearing for the claimant (appellant in Arbitration Appeal No.30 of 2004 and respondent in Arbitration Appeal No.33 of 2005) responded to the aforesaid contentions of the State in the following manner. Insofar as the question of jurisdiction is concerned, Mr. Routrary, submitted that the Hon’ble High Court in M.J.C. No.10 of 1997 vide order dated 09.04.1999 in an application under Section 11 of the Act, 1996, on the consent of both the parties, had appointed Justice Lingaraj Rath (Retd.) as the sole Arbitrator. The parties thereafter appeared before the learned Arbitrator and participated in the proceedings. The State had filed a Review Petition No.136 of 1999, seeking review of order dated 09.04.1999 passed in M.J.C. No.10 of 1997. This review came to be rejected on the ground that since:- 6 “the parties have participated in the case, cost have been deposited and counter has been filed.”
. Thereafter, the State had filed a Special Leave Petition No.8414 of 2000 challenging the order dated 01.03.2000 passed in O.J.C. No.843 of 2000. The Hon’ble Supreme Court vide order dated 31.07.2000 after hearing the argument of both the parties, dismissed the said S.L.P. The learned Arbitrator also took note of the aforesaid fact in the award which is quoted hereunder: “(i) With their consent only the arbitrator was appointed. (ii) In the present case undoubtedly the respondents have participated in the appointment of the Arbitrator and it canNo.be said that they have become aware of the reasons of the grounds of the challenge after the appointment has been made.”
. The self-same issue was once again raised by the State before the learned District Judge, Khurda in the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 which was registered as Arbitration Misc. Case No.225 of 2002. In its judgment the learned District Judge held as follows: “As discussed above, the petitioners participated in all judicial proceedings and had never filed a petition before the Arbitrator to decide the question of jurisdiction as a preliminary issue as required under Sub-Sections (2), (3) and (4) of Section 16 of the Act. As the petitioners have No.chosen to so object there will be a deemed waiver u/s.4 of the Act and it is No.open for the petitioners to raise that issue again at this stage.”
. 7 Mr. Routray in support of the aforesaid contention, placed reliance upon judgments of Hon’ble Supreme Court in the case of Banwari Lal Kotiya v. P.C. Aggarwal, 1985(3) S.C.C. 255 and the case of BSNL v. Subash Chandra Kanchan, (2006) 8 S.C.C. 279 and contended that, where a reference was consensual and the Arbitral Tribunal was opened on consent, it was no longer open to either party to contend that no such concession was made. He further submitted that the present objection of the State on the issue of jurisdiction of Arbitrator had been raised by the State before the High Court as well as the Hon’ble Supreme Court and the same having been ultimately dismissed by the Hon’ble Supreme Court, vide order dated 31.07.2000, such an issue ought No.to be permitted to be raised once again since raising of such issue would be barred by the principle of res judicata.
8. On the issue of limitation, Mr. Routrary, learned counsel for the claimant submitted that, it is a matter of regret that when M.J.C. No.10 of 1997 was filed before the Hon’ble High Court under Section 11 of the Act, 1996, the Hon’ble High Court issued notice to the State vide order dated 17.01.1997 calling upon a show cause as to why the appointment of the Arbitrator as requested should No.be made and the State in their counter affidavit has stated as follows. “…….the final bill of the petitioner is pending with opposite parties for verification and approval. So 8 when the bill is No.sanctioned and paid, there does No.arise any question of dispute with regard to the claim amount of the petitioner…..”
. In view of the aforesaid categoric admission by the State that the final bill was finally prepared on 29.03.1997, the application seeking appointment of Arbitrator under 1996 Act having been filed on 10.01.1997, no question of the claims being barred by the Law of Limitation could or does arise. It was further asserted on behalf of the claimant that the Executive Engineer vide his letter dated 22.04.1989 denied the claims raised by the claimant and also stated that the final bill would be paid after sanction of the extra items and deviation statement by the competent authority. It was also asserted on behalf of the claimant that the Executive Engineer had also confirmed to the Income Tax Authority vide his letter dated 01.01.1997 that, the final bill of the claimant had No.been paid due to want of sanction of the deviation statement and extra items. In the said letter it was stated as follows: “The work ‘Construction of Randa M.I.P”. was awarded to Sri D.C. Rautray contractor vide Agreement No.5 F-2 of 79-80. The final bill has No.been made to Sri D.C. Rautray contractor due to want of sanction of deviation statement and extra items”. It was further asserted that the purported final measurement was done (in absence of the claimant-contractor) only 9 after the filing of the application seeking appointment of Arbitrator before this Court in M.J.C. No.10 of 1997. Insofar as issue of limitation is concerned, the learned Arbitrator, Hon’ble Justice Lingaraj Rath (Retd.) had dealt with the self same issue in its award and stated as follows: “…..in the very letter of 22.04.1989 it was stated that the additional quantities beyond the agreement had been paid provisionally as part payment and that the deviation statement in respect of the same had been submitted to higher authorities for approval. It was further stated that the final bill would be finalized after sanction of the deviation statement in respect of the extra items and additional quantities. This was a categorical admission on the part of the respondents that the final bill had No.been paid and was in the process of sanction….”
. “….. Since the 35th bill was termed as the final bill and that was prepared in the year 1997, the limitation has to be counted from that date…..”
. “…..Since admittedly in the present case the final bill on the one hand was No.prepared by the competent authority and on the other hand was purported to be prepared after filing of the M.J.C. No.10 of 1997, there could No.be any question of the claim being barred by limitation or the application filed in the court for appointment of the Arbitrator to be barred by limitation.”
. “…..respondents have through out held out of the final bill having No.been prepared and as late as on 5.12.1996 when the claimant wrote to the Executive Engineer in Ext.4 to intimate him regarding the position of the final bill, the Executive Engineer to have intimated the Income Tax Officer on 1.1.1997 (Ext.7) that the final bill in respect of the work had No.been paid to the claimant due to 10 want of sanction of Deviation Statement and the extra items. In view of such categorical assertion, the plea subsequently advanced by the respondents that the 34th bill was for all practical purposes treated as the final bill is to be rejected and it has to be held that there has been no delay in coming before the court in filing the application for appointment of the Arbitrator and neither the application itself No.the claims are barred by limitation.”
. Similarly, the learned District Judge, Khurda while considering the application under Section 34 of the Act, 1996 filed by the State, also perused the award and in particular, the finding on the question of limitation and held as follows: “In the present case the dispute arose between parties when final bill was prepared 29.03.1997 and thus there is no delay in commencement of arbitration proceeding and claims are also No.barred by time.”
. the on the the Mr. Routray, reiterated the submission that the Executive Engineer clearly admitted that the final bill had been prepared by him only on 29.03.1997. Apart from that the Executive Engineer under Exhibit-7 had written a letter to the Income Tax Officer on 01.01.1997 to the effect that the final bill in respect of the work had No.been paid to the claimant, due to want of sanction of deviation statement and extra items. He further asserts that the Executive Engineer under Ext.2 vide his letter dated 22.04.1989, had admitted that the final bill to the respondent would only be paid after necessary sanction of the extra item and the deviation statement 11 obtained from the concerned authority. He further asserted that, in the said letter, it was admitted by the Executive Engineer that the additional quantities beyond the agreement had been “paid provisionally as part payment”.. Therefore, in view of such admission on the part of the State, no dispute could be said to have been arisen between the parties, necessitating the appointment of an Arbitrator in the year 1989 or within a period of three years thereafter. In this respect, reliance was placed by the learned counsel for the claimant on various judgments of the Hon’ble Supreme Court in the following cases: 9. (i) Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1998) 2 S.C.C. 338 (para-4) (ii) R.P. Souza and Co. v. Chief Engineer, P.W.D., A.I.R. 2000 Bombay (para-10) (iii) Executive Engineer, R.E. Division, Dhenkanal v. J.C. Budharaj, A.I.R. 1981 Orissa 172 (para-4). Insofar as the contention raised by the State vis-à-vis non- compliance of Clauses-11 & 23 of the Contract between the parties is concerned, Mr. Routray, learned counsel for the claimant has submitted that, such a ground is being raised by the State for the first time before the Hon’ble High Court in the present appeal and such issue No.having been raised anytime earlier either before the 12 Arbitrator or before the learned District Judge, the appellants canNo.in law be permitted to raise such a new issue in the present appeal. Mr. Routray further submitted that the Executive Engineer, Mr. Jagadananda Nanda, who had been examined as R.W-2, in his cross-examination on 10.01.2000 before the learned Arbitrator had stated that, “the tender for the work had been floated without finalization of the drawings and designs”.. It was further admitted by him that the estimated cost of the said work was Rs.21,10,436.30 but the same increased as the specifications and designs from time to time was changed and that the claimant has in fact executed additional and extra items of work 100% over and above the tendered work. The evidence of the said Executive Engineer was recorded in course of the arbitration proceedings on 10.01.2000, the relevant portion is quoted herein below. “5. No record is available to show that drawings and designs of the work had been finalized before the commencement of the work. No order is available on the records to show that the claimant had been asked to execute any particular quantity of extra work or additional work. I have seen the F2 Agreement. The estimate cost of the work, as per that Agreement, is Rs.21.36,770.00. The tender amount was Rs.21,10,436.30. The total amount paid to the claimant under the contract is Rs.34,01,289.00. I have No.come across any order in the records asking the claimant to execute any particular work or works for this excess payment of Rs.13,00,000/- and odd. It is a fact that without any specific order to the claimant extra and additional works were being got executed through 13 him by the Department……..A tender in respect of any work is floated some times on draft drawing and designs even though the codal provision is that tender is to be floated only after drawing and designs are finalized. In respect of the work under this Agreement the tender had been floated without finalization of the drawing and designs.”
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10. The State in the present appeal has sought to contend that the learned Arbitrator as well as the learned District Judge has ignored Clauses-11 & 23 of the Agreement, and the learned District Judge ought to have considered the same and set aside the award. In this respect Mr. Routray submitted that such an assertion on the part of the State is wholly baseless. He further submitted that the award of the learned Arbitrator itself would indicate that the Arbitrator had taken into consideration the factual aspect of the case and also taken into consideration the admission made by the witness for the State. The learned Arbitrator made a finding of fact in view of admission made by the witness for the State i.e. R.W.2 during his cross-examination is as follows. “Both the Codal provisions and the evidence of R.W.2 show that before the tender was floated the drawings and designs had No.been made ready even though it was mandatorily required to be so. It stands to reason to agree with the claimant’s version that in the absence of the drawing and design the work could No.be executed except on daily instructions basis which was hazardous in itself as it can be well imagined that in the absence of drawings and designs the work could No.proceed systematically and would 14 need various changes and corrections from time to time involving extra time and attendant difficulties.”
. Apart from the above, insofar as the judgment of the learned District Judge is concerned, there can be no reference to Clause-11 by the learned District Judge No.the Arbitrator since the State had never raised such issue before the learned District Judge. It was also submitted that the State throughout the arbitral proceedings contended that the final bill had No.been paid to D.C. Rautraycontractor, due to want of sanction of deviation statement and extra items. The Executive Engineer himself has stated in his examinationin-chief, that the claimant-contractor was entitled to payment for extra items but the same had No.been done due to want of sanction of deviation statement and extra items. Insofar as claim item Nos.11.8 and 11.9 are concerned i.e. for excavation of D.I. rock (Disintegrated rock) and stony earth, the State have sought to counter the said claim in their counter statement by stating that “this item of work was an extra item of work executed by the claimant and he had been paid provisionally awaiting sanction of the deviation statement from the competent authority.”
. It is further submitted that the plea of ignorance of Clause-11 of the Agreement by the learned sole Arbitrator, are completely devoid of merit and frivolous in view of the factual findings arrived at by the 15 learned Arbitrator in his award. Based on the admission made by the R.W.2 during his cross-examination before the learned Arbitrator formed the basis for the learned Arbitrator to arrive at a findings of fact that “before the tender was floated the drawings and designs had No.been made ready even though it was mandatorily required to be so”.. The Arbitrator also held that “in the absence of the drawing and design the work could No.be executed except on daily instructions basis.”
. It was also the admitted case that the claimant-contractor has been paid a sum of Rs.34,01,289.00 as against the original estimate cost of work as per the Agreement being Rs.21,36,770.00. It was submitted by Mr. Routray that the aforesaid findings, documentary evidence and admission of the State, demonstrate that the State have No.followed the Codal provision, when tendering the work and have acted on “daily instruction basis”. and in absence of the drawing and design of the work, most item of works were executed by the claimant-contractor as an additional/extra item and the conduct of the State, including their pleadings would demonstrate that No.only have the State paid the claimantcontractor “provisionally for extra items”. but had also assured the claimant-contractor to make balance payment necessary sanction from the competent authority. after obtaining 16 11. Mr. D. Routray, learned counsel for the claimant-contractor responded to the contention of the State vis-à-vis non-payment of minimum wages by the claimant-contractor to its employee raised by the State. In this respect, Mr. Routray submits that the learned Arbitrator had framed the issue No.7 relating to the claim for minimum wages by the respondent and the same is to the following effect. “7. Whether the claim of payment of wages at the enhanced rate is payable?.”.
12. The State had contended that the findings of the learned Arbitrator on the aforesaid issue in favour of the claimant was erroneous since, “(1) there was no provision in the F-2 agreement stipulating payment for enhance labour; (2) Even if such wage is payable, it has to be calculated on the basis of number of mulias (labourers) as stipulated in the schedule of rates”..
13. It was stated on behalf of the claimant that Clause-33 of the Agreement related to payment of fair wages by the contractor and enjoins upon the contractor an obligation to pay, No.less than the fair wages to the labourers engaged by him. It was also stipulated that, if fair wages was No.paid by the contractor, the Executive Engineer or the Sub-Divisional Officer had the right to deduct from the money due to the contractor any sum required or estimated to be required, for making good the loss suffered by a worker or workers by 17 reason of non-fulfillment of the conditions of the contract regarding payment of wages.
14. Further, the O.P.W.D/Electricity Department Contractor’s Regulation”. which formed part of the contract, required a contractor to display before he commenced work and also regularly maintain and continue to display and correctly maintain in a clean and legible condition in conspicuous places of work notice in English and in local Indian language spoken by the majority of the workers, giving the rate of wages prescribed by the State Public works Department and send a copy of such notice to the Engineer-in-Charge of the work.
15. It was contended on behalf of the State that there was no provision in F-2 agreement stipulating payment of enhanced labour and that wage had to be calculated on the basis of number of mulias (labourers) as stipulated in the schedule of rates. In this regard, learned counsel for the claimant referred to the award of the learned Arbitrator which is as follows: “….There has been no case of the respondents of the claimant of No.having acted in accordance with the fair wages clause and the contractors regulations. Nothing has been adduced on the side of the respondents to show of any action to have been taken by them against the contractor of having No.paid the fair wages of their having received any complaint regarding such nonpayment.”
. 18 16. It was also asserted on behalf of the claimant that the learned Arbitrator had allowed the claim of the claimant-contractor, based on the submission of an analysis of the labour charges filed by the State itself from which the learned Arbitrator computed that the claimant-contractor was entitled to Rs.2,21,610/- towards enhanced minimum wages. Reliance was placed by the learned Arbitrator on Ext.R-1 which stipulates the formula/method to calculate the cost of increased/decreased labour and amended the F-2 Agreement stating such increase in cost of labour to be payable. It was further submitted that this ground of challenge to the award was sought to be raised for the very first time before this Court and was No.a ground taken either before the learned Arbitrator or the learned District Judge. Therefore, the State ought No.to be allowed to raise such ground in the present appeal against the judgment of the learned District Judge. Accordingly, learned counsel for the claimant has submitted that the appeal filed by the State i.e. ARBA No.33 of 2005 having no merit and ought to be rejected out right.
17. Thereafter, Mr. D. Routray, learned counsel for the claimant advanced his arguments in ARBA No.30 of 2004 where the contractor has sought to challenge the award of the learned District Judge, refusing to award interest and submits that the Clause-23 of the 19 Agreement was amended on 18.05.1979, providing that, in no case the Tribunal shall award interest in respect of the claim for any period prior to the date of the award as well as till the date of decree. Office Memorandum dated 30.10.1978 provides that all the disputes are to be referred to the Arbitration Tribunal at Bhubaneswar consisting of three members belonging to: (i) Orissa Superior Judicial Service (Senior Branch). (ii) Engineer in active service of Government No.below the rank of Superintending Engineer and; (iii) Officer belonging to Orissa Financial Service No.below rank of Class-I Officer. In pursuance of the aforesaid amendment, the Government framed the Orissa Arbitration Tribunal Rules 1979, providing for the constitution of the Arbitration Tribunal, in the manner as provided therein and in such manner the Arbitration Tribunal came to be constituted as “persona designata”. for adjudicating disputes. The Arbitration Act, 1940 (in short ‘the Act, 1940’), subsequently came to be repealed by the Arbitration and Conciliation Act, 1996 and the Arbitration Tribunal constituted under the 1940 Act could, therefore, only adjudicate disputes that were governed by the 1940 Act. Mr. Routrary submits that since the present dispute was No.referred to the statutory Arbitration Tribunal but was referred with the consent of the parties to a sole 20 Arbitrator under the provisions of the Act, 1996, the limitation for awarding interest in respect of claim for any period prior to the date of award, as well as, till the date of decree no longer applied to the sole Arbitrator. In this respect, it was submitted that a question was raised before the learned sole Arbitrator, as to whether the amended Clause-23 of the F-2 Agreement, restraining a statutory Arbitration Tribunal from awarding interest, could be invoked to restrain him as a Tribunal, different from that contemplated by the parties under the Agreement, was one that required interpretation of the amended Clause 23 of the Agreement.
18. Based on an interpretation of the contract between the parties herein, the learned sole Arbitrator in the award came to hold as follows:“….The Arbitration Tribunal as defined in Sec.2(d) of the 1996 Act is different Tribunal No.in any way restricted by the provisions of 1940 Act and the reference in the O.M. of 18.5.1979 to the Tribunal in the amended Clause-23 of the F-2 contract could No.have referred to the Arbitration Tribunal constituted under the 1996 Act. Thus while it is No.in doubt and indeed this is No.so urged that this Arbitration Tribunal has no power to award interest, the only question to consider is whether the parties have otherwise agreed that no interest could be claimed by the claimant. On a plain reading of the O.M. of 18.5.1979 along with the O.M. of 30.10.1978 it ex facie appears that while on the one hand the Arbitration 21 Tribunal is constituted, on the other hand by the later amendment an injunction was issued to the Tribunal No.to grant interest. Though it formed part of the agreement yet the real injunction was against the Tribunal. The amendment did No.provide clause-23 to say, as an agreement between the parties that even if disputes arise between the parties and matter is referred to arbitration yet, either of the parties canNo.claim interest on any sum found due to them.”
. “….Moreover the fact remains that even the amendment of 18.05.1979 did No.prevent the parties to lay claim to interest and hence there has been no agreement between the parties that interest shall No.be claimed. The exception of Section 31(7) of 1996 Act i.e. the words “Unless otherwise agreed by the parties”. would No.be attracted to the claim of interest by the claimant as there has been no such agreement between the parties.”
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19. Learned counsel for the claimant, submitted that the order of the learned District Judge, insofar as “interest”. is concerned, was contrary to the well settled law that, a Court should No.interfere with an arbitral award, merely because another view was possible on the interpretation of the contract. It was submitted on behalf of the claimant that, an Arbitrator under Section 2(d) of the 1996 Act, is No.the Arbitration Tribunal under the earlier enactment which was injuncted from awarding interest under the amended F-2 Agreement. It was submitted that the interpretation of contract being in the exclusive domain of the Arbitrator, an award could No.have been set aside by the learned District Judge, merely because, another view 22 was possible. In this regard, Mr. Routray, learned counsel for the claimant placed reliance on various judgments of the Hon’ble Supreme Court in the following cases: (i) P.V. Subba Naidu v. Govt. of A.P, (1998) 9 S.C.C. 407 (ii) K.R. Raveendranathan v. State of Kerala, (1998) 9 S.C.C. 410 (iii) H.P. State Electricity Board v. R.J.Shah and Company, (1999) 4 S.C.C. 214 (iv) 20. Pure Helium Ltd. v. O.N.G.C., (2003) 8 S.C.C.
593. Mr. Routrary further submits that while the amended Clause-23 of the F-2 Agreement prohibited the statutory Arbitral Tribunal constituted under the 1940 Act from awarding interest, such a limitation canNo.be said to be imposed on a sole Arbitrator appointed in terms of the 1996 Act. Mr. Routray placed reliance on a judgment of the Hon’ble Supreme Court in the case of Board of Trustees for the Port of Calcutta v. Engineers-De-Spare-Age, (1996) 1 S.C.C.
516. 21. Placing reliance on the aforesaid judgment of the Hon’ble Supreme Court, it was submitted on behalf of the claimant that Clause-23 of the F-2 Agreement had to be strictly construed and the learned District Judge erred in construing the contract in a different manner and then proceeded to set aside a part of the award relating to interest, by observing that the Arbitrator had exceeded his 23 jurisdiction in making the award, only because another view was possible.
22. Mr. Routray, learned counsel for the claimant prayed that, that part of the judgment passed by the learned District Judge, Khurda on 8.9.2004 in Arbitration Misc. Case No.225 of 2002 setting aside the award of interest from 12.01.1988 till the date of award i.e. 6.3.2022 may be quashed, and the rest part of the judgment be affirmed.
23. In the light of the submissions made by the learned counsel for the respective parties as noted hereinabove, the first issue that to be adjudicated relates to the claim by the State (Appellants in ARBA No.33 of 2005) as to whether the claim raised by the claimantrespondent was barred by limitation.
24. It was submitted on behalf of the learned Addl. Government Advocate on behalf of the State that the claim was grossly barred by limitation and that, the limitation was to be computed on the basis of the residuary clause of Article 137 of the Limitation Act where the period of limitation prescribes was 3 years from the date of cause of action arose. It was asserted on behalf of the State that the cause of action arose for the first time on 4.3.1983 when the contract was rescinded and secondly, on 4.12.1986 when the 34th running bill (RB) was treated as final bill and thirdly, when the claim of the claimant 24 was repudiated. It was further asserted on behalf of the State that since the final bill has already been prepared, the period of limitation could No.have continued awarding payment of the same and consequently, the award passed by the sole Arbitrator and the confirmation thereto by the learned District Judge was erroneous in law since all the claims were barred by limitation. It is further buttress by the fact that admittedly, the State prepared the final bill on 29.3.1997. Insofar as this issue is concerned, this Court takes note of the fact that the claimant-respondent had moved the High Court in M.J.C. No.10 of 1997, under Section 11 of the Act, 1996. The Hon’ble High Court issued notice to the State on 17.1.1997 calling upon it to show cause as to why the appointment of an Arbitrator as requested by the respondent-claimant could No.be made and the State in their counter affidavit categorically stated that “the final bill of the petitioner is pending with the opposite parties for verification and approval. So, when the bill is No.sanctioned and paid, there does No.arise any question of dispute with regard to the claim amount of the petitioner.”
. Apart from the above, the concerned Executive Engineer on a query made by the Income Tax Department as to whether final bill of the claimant had been paid or not, stated in his letter dated 1.1.1997 that “the Final bill has No.been made to Sri D.C.Routray 25 (the contractor) due to want of sanction of deviation statement and extra items”.. In view of the aforesaid evidence which forms part of Arbitrator’s record as well as finding, I am of the considered view that there has been no delay in commencement of the arbitration proceeding and consequently, the claim is No.barred by the law of limitation.
25. The State has further contended that the State had entered into the contract with the Respondent-Contractor in F-2 agreement and in particular, Clauses-11 & 23 thereof specified that in case of any “extra item”. or “extra quantity”. of work, written permission from the Executive Engineer had to be obtained and in the absence of any written permission, in respect of such extra item or extra quantity of work, the claimant would No.be entitled to make any claim in terms of the contract. It is further asserted that in the absence of any written permission from the Executive Engineer, no claim towards extra items or quantity should have been entertained by the Arbitrator and the same ought to have been rejected.
26. In this respect, learned counsel for the respondent- contractor raised an objection on the ground that such a contention has been raised by the State for the first time before this Court in the present appeal. Such an issue No.having been raised any time 26 earlier either in course of arbitral proceeding or before the learned District Judge, the State-appellants ought No.to have been permitted to raise such a new issue in the present appeal. From the records of the arbitral proceeding, it is clear therefrom that the concerned Executive Engineer who had been examined as R.W.2 in his crossexamination on 10.1.2000 stated that “the tender for work had been floated without finalizing of the drawing and designing.”
. “ … … it is a fact that without any specific order to the claimant extra and additional works were being got executed through him by the Department”. and the Hon’ble Arbitrator has dealt with the issue in the following manner: “It stands to reason to agree with the claimant’s version that in the absence of the drawing and design the work could No.be executed except on daily instructions basis which was hazardous in itself as it can be well imagined that in the absence of drawings and designs the work could No.proceed systematically and would need various changes and corrections from time to time involving extra time and attendant difficulties.”
. It was also relevant to note that the counter statement filed on behalf of the State before the Arbitrator relating to certain particular item of extra work which was executed by the claimant and he had been paid provisionally awaiting sanction of the deviation statement from the competent authority. 27 The aforesaid evidence and the admission of the State clearly indicates that the State had No.followed the cordial provision while tendering for the work and the Contractor had to act on the basis of daily instruction in the absence of drawing and designing of the work and many items of work executed by the claimantContractor was additional/extra item and certain provisional payments have been made for such extra item subject to the necessary sanction from the competent authority. Therefore, I am of the considered view that both on fact as well as on law, the contention raised by the State in this regard merits no further consideration and stands rejected.
27. The further contention of the State was that the Respondent-claimant ought No.to have been awarded any sum of money towards “revision of minimum wages”. since the claimant had No.produced any evidence to show that he had actually paid the revised rates to the workers and in the absence of such evidence regarding payment of the revised rates of minimum wages, the award should be vitiated on that account. It appears from the record that the learned Arbitrator had framed an Issue No.7 on the question as to “whether the claim of payment of wages at the enhanced rate is payable”. and has categorically noted in the contention of the State as well as the claimant and based its award on the analysis of the 28 labour charges as filed by the State itself and that too, on the basis of the formula/methodology to calculate the cost of increased or decreased labour as available in the F-2 agreement itself.
28. In this respect, it would also be important to take note of the fact that Clause-43 of F-2 Agreement requires the Contractor to pay guarantee payment of fare wages to all his employees and also stipulated that the fare wages was No.paid by the Contractor to his employees, the Executive Engineer or Sub-Divisional Officer has the right to deduct from the money due to the Contractor any sum required or estimated to be required for the loss suffered by the workers by reason of non-fulfillment of the condition of the contract regarding payment of fare wages. Apart from the above, the contractor was required to display at the work site prior to commencement of work that the workmen were entitled to fare wages and was also required to regularly maintained and continued to display and correctly maintained in a clean and legible condition in a conspicuous places of work notice both in English and local Indian language, the rate of wages prescribed by the State (Public Works Department) and to send a copy of such notice to the Engineer-incharge of the work. Since the State has No.brought any evidence on record to be contrary, it has to be assumed that the Contractor had complied with the mandatory requirement of law and the State 29 having No.initiated any action against the Contractor in any case when non-payment of fare wages to its employees, the plea of the State to deny payment of increased minimum wages of the claimantcontractor, is wholly unjustified. It would be important to reiterate therein that F-2 contract itself contains the formula and/or methodology for competition of increase or decrease of cost of labour.
29. Therefore, this Court finds no substance on such issues being raised by the State and consequently, concludes that the appeal filed by the State-appellants in ARBA No.33 of 2005 bears no merits and hence, stands dismissed. ARBA No.30 of 2004 30. Insofar as ARBA No.30 of 2004 is concerned which is filed by the claimant-contractor, the appeal has sought to be argued that the order of the learned District Judge refusing to confirm the award of interest by the Arbitrator in favour of the claimant-appellant is sought to be challenged herein. Learned Addl. Government Advocate on behalf of the State supported the findings arrived at by the learned District Judge for refusing to concur the award of interest made by the Arbitrator in favour of the claimant-contractor and submitted that the Arbitrator was bound to the terms of agreement between the parties made in Clause-13 in the F-2 agreement by the parties. Therefore, the order of the learned District Judge to the said extent is absolutely correct. 30 31. Admittedly, the State had entered into an agreement with the appellant-Contractor known as “F-2 agreement”.. This agreement was amended by the Government in the Works Department vide office Memorandum dated 30.10.1978 providing for Constitution of an Arbitrational Tribunal which alone would act as an Arbitrator. As a consequence of the said Office Memorandum, Clause-23 of the F-2 agreement was amended on 18.5.1979 proving that, “in no case the Tribunal shall award interest in respect of any claim for any period prior to the date of the award as well as till the date of decree”.. In pursuance to the aforesaid amendment, the State Government framed the Orissa Arbitration Tribunal Rules, 1979 providing for the Constitution of the Arbitration Tribunal. The Arbitration Act, 1940 (in short ‘the Act, 1940) was amended by the Arbitration (Orissa Amendment) Act, 1982 incorporating Section 41-A and providing for the Constitution of Arbitration Tribunal in the manner as decided by the State in its office memorandum dated 30.10.1978. Consequently, the statutory Arbitration Tribunal had come to constitute as the “persona designata”. for adjudicating dispute. The Arbitration Act, 1940 was repealed by the Arbitration and Conciliation Act, 1996 and the Arbitration Tribunal constituted under 1940 Act. Thereafter, could only adjudicate disputes that were pending before it as on date of coming into force of the Act, 1996. It 31 would be most relevant to note herein that in the case at hand, the final bill raised by the appellant-claimant on the State was finalized by the State only on 29.3.1997 and no dispute have been referred to the statutory Arbitral Tribunal under Section 41-A of the Act, 1940. On the contrary, as would appear from the records of the present proceeding, M.J.C. No.10 of 1997 had come to be filed by the appellant-claimant before the High Court under Section 11 of the Act, 1996 and by order dated 9.4.1999 on the consent of both the parties, “Hon’ble Justice Lingaraj Rath (retired) was appointed as the sole Arbitrator.”
. Thereafter, the State filed Review Petition No.136/1999 which came to be rejected and thereafter, the State had approached the Hon’ble Supreme Court in Special Leave Petition (SLP) No.8414/2000 and the Hon’ble Supreme Court after hearing both the parties, dismissed the SLP on 31.7.2000. The learned Arbitrator also has taken into account the aforesaid backdrop of appointment and categorically noted that his appointment was under the Act, 1996 and No.under the Act, 1940 and consequently, the limitation imposed on an Arbitral Tribunal under Section 41-A of the Act, 1940 could in no manner limit the power and authority of the learned Arbitrator for the purpose of considering the issue of interest. 32 32. The learned District Judge while dealing with the issue of interest placed reliance on sub-Section 7(a) of Section 31 of the Act, 1996 and came to hold that, it is only in the absence of any agreement to the contrary, the Arbitral Tribunal may include in the sum awarded by the Tribunal, interest at such rate as it deems reasonable on the whole amount or a part and for the whole period or any part thereof between the date on which the cause of action arose from the date of the award. The learned District Judge further came to hold that the F-2 agreement was amended by the State Government in the Works Department in his memorandum dated 18.5.1979 having provided that in no case, the Tribunal shall award interest in respect of any claim for the period prior to the date of the award as well as for the period from the date of the award till the date of the decree. Such Clause in the agreement was binding on the Hon’ble Arbitrator and consequently, the awarding interest on the sum payable from 12.1.1988 @ 12% per annum till the date of the award i.e. 6.3.2002, had exceeded his jurisdiction and was No.competent to award interest in view of Clause-23 of the F-2 agreement.
33. On this issue although the appellant-contractor has placed reliance on various judgments, in my considered view, it would be suffice to take note of the judgment of the Hon’ble Supreme Court in 33 the case of Board of Trustees for the Port of Calcutta (supra) wherein the appellant contended that the Arbitrator had awarded interest pendente lite notwithstanding the prohibition contained in the contract against the payment of interest on delayed payments. Clause 13(g) of the contract was relied upon in this behalf and that clause reads as hereunder: “No claim for interest will be entertained by the Commissioners with respect to any money or balance which may be in their hands owing to any dispute between themselves and the Contractor or with respect to any delay on the part of the Commissioners in making interim or final payment or otherwise.”
. It was thus, contended that the Arbitrator had to function in terms of the contract and No.de hors the contract and he had no power to travel beyond the contract and if he did so he would be acting without jurisdiction. Hon’ble the Supreme Court in para 4 therein held as follows: 4……No.the term in Sub-clause(g) merely prohibits the Commissioner from entertaining any claim for interest and does No.prohibit the Arbitrator from awarding interest. The opening words ‘no claim for interest will be entertained by the Commissioner’ clearly establishes that the intention was to prohibit the Commissioner from granting interest on account of delayed payment to the contractor. Clause has to be strictly construed for the simple reason that as pointed out by the Constitution Bench, ordinarily, a person who has a legitimate claim is entitled to payment within a reasonable time and if the payment has been delayed beyond reasonable time he can 34 legitimately claim to be compensated for that delay whatever nomenclature one may give to his claim in that behalf. If that be so, we would be justified in placing a strict construction on the term of the contract on which reliance has been placed. Strictly construed the term of the contract merely prohibits the Commissioner from paying interest to the contractor for delayed payment but once the matter goes to arbitration the discretion of the Arbitrator is not, in any manner, stifled by this term of the contract and the Arbitrator would be entitled to consider the question of grant of interest pendente lite and award interest if he finds the claim to be justified. We are, therefore, of the opinion that under the clause of the contract the Arbitrator was in no manner prohibited from awarding interest pendente lite.”
.
34. In view of the authoritative pronouncement by the Hon’ble Apex Court, I am of the considered view that Clause-23 of the F-2 agreement has to be strictly construed and the learned District Judge has clearly erred in construing the contract in a different manner by observing that the Arbitrator had exceeded the jurisdiction in making the award. I am of the considered view that in the facts and circumstances that arises for consideration in the present case, the learned Arbitrator was entitled to consider the question of grant of interest pendente lite and awarded interest since he found the claim to be justified and, therefore, I am of the considered view that under the clause of the contract since the Arbitrator had been appointed by an order under Section 11 of the Act, 1996, the learned Arbitrator was in no manner prohibited the award of interest pendente lite. 35 Consequently, the order of the learned District Judge dated 8.9.2004 passed in Arbitration Misc. Case No.225 of 2002 to the extent of refusing to uphold the award of interest on 12.1.1988 till the date of award i.e. 6.3.2002 is No.sustainable and is hereby quashed. Accordingly, the ARBA No.30 of 2004 is allowed and ARBA NO.33 of 2005 is dismissed as noted in Para-28 hereinabove. ……………………. I.Mahanty, J.ORISSA HIGH COURT : CUTTACK 18th June, 2014/PKP/RKS