ORDER
N.Y. Hanumanthappa, J
1. These two appeals arise out of the common order passed by the Principal Subordinate Judge, Visakhapatnam in OP Nos.306/92 and 291/92 dated 26-2-1996. Accordingly, these appeals are clubbed and disposed of by this common Judgment.
2. These two appeals are filed by M/ s. Engineering Projects (India) Ltd, New Delhi aggrieved by the order in OP No.291/ /96, whereby the Subordinate Judge passed an order making the Award of the Arbitrator as 'Rule of the Court'. Whereas CMA No.662/96 is filed aggrieved by the order in OP No.306/92 dated 26-2-1996, whereby the Principal Subordinate Judge, Visakhapatnam refused to set-aside the Award of the Arbitrator.
3. The appellant Engineering Projects (India) Ltd., a Public SectorUndertaking, hereinafter referred to as 'Company', entered into a contract with the Stale organisation of Buildings, Ministry of Housing of the Republic of Iraq for construction of building under the name and style of 'Council of Ministers Building' at Bhagdad. The Company entered into a sub-contract with M/s. K.P.R. Reddy for 'Civil Engineering Works'. M/s. K.P.R. Rcddy hereinafter referred to as a 'Contractor', is a Proprietary concern represented by one Sri. Pattahhirama Reddy of Visakhapatnam who is the first respondent herein by signing a contract dated 5-3-1980 known as the first agreement. Subsequently it entered into two more agreements dated 20-8-1981 called second agreement and 31-5-1984 called the third agreement. Clause 5 of the first agreement dated 5-3-1980 provided that in case of any dispute between the parlies the same shall be referred to the sole arbitrator to be appointed by the Chairman-cum-Managing Director of the appellant company and if the Chairman fails to act as such then the dispute shall be referred to the sole arbitrator to be appointed by the Managing Director of the company. The value of the work that was to be completed under the first agreement by 14-5-1981 was initially fixed at Rs.34.11 crores which was subsequently increased to Rs.93 crores. The company was authorised to sub-contract the work. Out of 24 months provided to the company for construction ten months were lost in the process. Accordingly the Contractor was identified to carry out part of the contract on labour contract basis. The company had to supply all material construction equipments, drawings and also to provide accommodation to the contractor's order. The Contractor had lo execute the work as provided in the agreement dated 5-3-1980 and to be completed on or before 14-5-1981. There was a sub contractor by name Aravind construction (ACCPL). Some other piece of labour contract was given to ACCPL. This was pursuant tothe agreement dated 5-3-1980 with condition that the same shall be completed on or before 14-5-1981. Apart from KPRR Contractor and ACCPL there were also other sub contractors who were entrusted with some other work. On 17-2-1980 IDBI gave its approval stipulating that company to supply material and equipment. No penalty be imposed on contractor for default and delay in supplying material and equipment by EPIL. Further Contractor will not be entitled to borrow any money from outside. The required material will be supplied by the company itself. The first contract dated 5-2-1980 was called as the 'main contract'. By an agreement dated 20-8-1981 the work (external service contract) was awarded to the contractor. This was called second agreement. Another agreement dated 30-5-1984 was also entered into between these parties known as 'modification one'. According to the Contractor the Company was supposed to give mobilisation advance, but delayed in releasing the said mobilisation fund. As such the Contractor was not able to carry out such work for which material, equipment etc., were not made available by the company. The company committed several lapses in not supplying proper machinery to carry out the work. Due to supply of defective and used equipment by the company the work carried by the contractor had an adverse effect on the progress of the work, the indifferent attitude of the company resulted in not utilising the competent workmen of the contractor to the fullest extent. There was also delay in supply of material, steel, cement, bricks etc., as a result of which the progress of the work was affected. There was also delay in erecting the structures, designs and other drawings. There used to be frequent break down of power. The material that was supplied was poor quality and delay in supply of other equipment. When the work was in progress there was outbreak of war between Iraq and Iran which resulted in suspension ofwork. As a result of which the work had to be reentrusted at the instance of the company. Later the work force was mobilised in January and February 1981. The Contractor requested the company' to revise the rates in June 1981. In the meeting of the company the work that was carried by the Contractor as appreciated. Accordingly, the second work pursuant to the agreement dated 20-8-1981 was entrusted to the Contractor. By letter dated30-8-1982, the company asked the contractor to stop the work. Such suspension of work continued upto31-12-1984 during which time the work was given up. Due to the delay in supply of work material coupled with outbreak of war between Iraq and Iran the work was suspended from August 1982 till 31-3-1984. The entire plan of the contractor was upset, which resulted in prolonging the work. A request was made to honour the escalation of prices but not considered by the company. In spite of such request to revise the rates the Chairman of the company asked the Contractor to continue the work upto 31-3-1986. Subsequent to this, instead of considering the just claim of the Contractor, the Company terminated the contract as a result of which the entire work, which the Contractor was carrying on, was stopped. The Company also invoked Bank Guarantees. The Contractor aggrieved by the invoking of Bank Guarantees by EPI filed application under Section 20 of the Arbitration Act (hereinafter referred to as the Act). Further a suit in OS No.214 of 1986 was filed in the Court of Principal Subordinate Judge, Visakhapatnam. The said suit was disposed of by the learned Subordinate Judge by judgment and order dated 11-8-1987 directing the company to file into the Court three agreements dated 5-2-1980, 20-8-1981 and 3-5-1984. The Court also directed the company to appoint arbitrator within four weeks from the date of the said decree and directed to refer all the disputes between the parties includingas to correctness or otherwise of the cancellation of the contract and invoking of the bank guarantees. Failure to refer the matter to the arbitrator the Court would appoint arbitrator at the expense of the company. The said order dated 11-8-1987 passed by the Principal Subordinate Judge in the above suit was challenged before this Court by filing appeal. This Court passed order directing the stay of operation of the order of the lower Court for appointment of Arbitrator. Subsequently one Shri Madhusudhana Rau, retired Judge of High Court of A.P. was appointed as sole arbitrator and he entered upon the reference on 26-9-1988. The parties filed their claims and counter claims. When the proceedings were pending, the arbitrator namely Justice Madhusudhana Rao tendered his resignation to the Chairman-cum-Managing Director of the Company. Accordingly, the 2nd respondent namely Mr. Asthana, former Chief Justice of Allahabad was appointed as sole arbitrator. The 2nd respondent entered upon the reference on 4-3-1990 and started proceedings from the point from where it was left by his predecessor.
4. By an order dated 11-10-1991 in CRP No. 1293/91 in CWP No.2511/87 and appeal against order dated 11-8-1987, this Court modified its order dated 22-7-1987 permitting the arbitrator to pass award. Accordingly, the Contractor filed its claim before the Arbitrator. The particulars of the claim of the Contractor are as follows:
Claim NoDescriptionAmount
IDRs.
1. War Claim ID 1,95,147.548 2. Extra items/deviation in permanent/temporal bills machinery hire charges etc.,
2.1extra items main work ID 1,40,36,603 2.2variation order and part rates main work ID 18,511.410 2.3othercontract claim (main work) ID 1,70,098.539 2.4temporarybills mail work ID 13,837,151 2.5extraitems (site work) ID 7,834.906 2.6variation order and part rates site work ID 30,904.396 2.7temporarybills site work ID 13,260.339 2.8extra item(mod-ficalion work) ID 26,091,190 2.9variation order (modification work) ID 35,779.566 2.10othercontract claims (modification works) ID 11,004.567 3. Contractual claim for reduced out turn for various hazards timeover-rum and revision of rates
ID 8,08,764.790 4. Claim for wages and salary including remittances for January 1986 to June 1986
ID 54,256.065 5. Miscellaneous purchases of tools consumables etc., for January 86 to June 1986
ID 2.344.940 6. Medical expenses for January 86 to June 86
ID 1,630.895 7. Lawyer's fees and professional fees etc., January 86 to June 86
ID 5,100.000 8. Petrol, Oil and lubricants for January, 86to June, 86
ID 768.175 9. Benefits for workers and staff for January, 81 to June, 1986
ID 4.493.136 10. Office expenses from January, 86 to June 1986
ID 3,543.130 11. Direct expenses at site from July 86 till demobilisation
ID 29,520.863 12. H.O. over headsfrom Jan. 1986 tilldemobilisation
ID 6,04,586.78 13. Claim for loss in turn over from Sep. 82 till date of mobilisation Nov. 87 and business losses sustained
ID 6,13,309.839 14. Interest on claims amount as adjudicated by the Hon'bleArbitrator
15. Cost on arbiiration 16. Claim for compensation arising out of wrongful and illegaltermination of contracts
ID 74,000.00 17. Claim for losses and damages arising out of wrongful and illegalinvocation of bank guarantees amounting tc Rs. 61.07 lakhs
25,83,173.00 18. Refund of bank guarantees for Rs.9.40 lakhs
9,40,000.00 19. Interest on bank guarantees encashed at 18.5% p.a. and business losses from 13-8-1988
20. Final bill amount ID 59,797.970 21. Retention money refund ID 89,704.460 22. Return of bank guarantees 1.Performance guarantees for main works Rs.23.32 lakhs
2.Performance guarantee for site works Rs.23.32 lakhs
3.Performance guarantee for modification works Rs. 10.30 lakhs
4.Mobilisation advance guarantees Rs.6 lakhs
23. Refund of amount withheld from site worksID 2,88,507.557 24. Suspension claim ID 10,000.00
5. The Company filed counter denying the claim of the contractor alleging that the contractor was not fully organised. The workers did not have proper experience or skill. Adequate men were not employed. There was failure to meet the financial obligation, and that there were hostilities between the Iraq and Iran Government and the company did not ask the contractor to demobilise. On the other hand the Company was asking the contractor to improve the quality of the work. In order to help the contractor the company bad entrusted other two works at second and third agreements. The rates shown in the second and third agreements do not reflect the prevailing market rate. To enable the contractor to work properly the company used to give advance. There was no default on the part of the company. As the work of the Contractor was not satisfactory it had to invoke the bank guarantees. The Company also made a counter-claim against the whose particulars are as under:
Claim No. Description of ClaimClaim
USS Amount
IDS
1. Refund of amount overdrawn by Associate by way of adhoc advances
USS 5,60,076.44 2. Recovery of interest accrued on account of overdrawn byassociate
USS 11,55,954,10 3. Mobilisation advance recoverable USS 29,537.71 4. Amount recoverable on account of penalty for delay in completionof project
ID 44,236.133 5.Amount recoverable on account of material consumed forrectification of defects
ID 78,890.280 6. Amount recoverable on account of excess wastage of material
ID 50.601.460 7. Amount recoverable on account of repairand maintenance cost of construclionequipment used by associate
ID 15,301.334 8. Amount recoverable on account of missing/ damages components ofconstruction equipment
ID 8,807.000 9. Amount recoverable on accouni of shortages/ missing components in furnitureand fixtures
ID 18,019.020 10. Amount recoverable on account of shortage in materials removed from theworks after installation
ID 17,260.075 11. Amount recoverable or accouni of maintenance liability
ID 57.000.000 12. Amount recoverable on account of non-clearance of site
ID 8,299.00 13. Amount recoverable on account of repair of roof
ID 37,347.000 14. Provisions for income tax liabilities ID 1,84,701.055 15. Provision for income tax on interest paid on over drawn amounts on behalf of the associatefrom banking
ID 58,718.302 16. Recovery of Rs.6760/- for payment made to Shri Jagbali Sharma on behalf K.P.R.R.
17. Recovery of ID 2240. 500 arising out of claim made by insurance company in respect of Sri Jagbir Singh, Driver of K.P.R.R.
18.Recoverv of ID 138-240 paid toMedical City Hospital on behalf of KPRR.
6. On the basis of the above pleadings, the Arbitrator framed the following Issues:
1. Whether time was essence of contract?
2. Whether the termination of contract was wrongful, irregular and illegal?
3.Whether the claimant is entitled to plead claims?
4. Whether the respondent is entitled to plead claims?
5. Whether the interest is payable and at what rates?
6. Cost of proceeding,
7. To what relief?
7. In support of rival contentions, both sides lead evidence. The Arbitrator after considering the evidence both oral and documentary and after hearing both parties, passed a detailed award dated 21-10-1992 holding that Company is liable to pay to Coulractor a net sum of ID 4,86,887.732 which is equivalent to U.S.S 16,44,598-00 at U.S.S 3.377778, and applying prevailing rate of exchange on the day, Company shall pay to Contractor in Indian Rupees 4,61,14,527.00 (Rupees four crorcs sixty one lakhs, fourteen thousand five hundred and twenty seven only). The learned Arbitrator further held that Company shall also be liable to pay an interest at 14% (fourteen percent) per annum with effect from 1-8-1986 upto the date of award on 4,61,14,527.00 and further interest at 18% (Eighteen percent) per annum from the date of award upto the date of payment of decree, whichever is earlier.
8. Subsequent to the award passed by the Arbitrator the Contractor filed OP 291/92 before the Principal SubordinateJudge, Visakhapatnam under Section 17 of the Act to make the award of the arbitrator a rule of the Court. Whereas the company opposed the said application, by filing another application and requesting ihe Court to set aside the said award, which was numbered as OP No.306/92.
9. The company challenged the award of the arbitrator before the trial Judge on the following grounds.
10. The arbitrator misconducted himself i.e., ignoring the provisions of the agreement he allowed the claims of the contractor under various heads. The award of the arbitrator is in total disregard of the evidence that was given by the parties. There has been a total non-application of mind on the part of the arbitrator. The award of the arbitrator is perverse. The reasons given by the arbilrator are not correct. He failed to note that work that was entrusted to the contractor was a labour contract. Without prior permission of the Reserve Bank of India none can get foreign exchange. The arbitrator committed mistake in awarding interest at 14% from 1-8-1986. The awarding of claim of the contractor is not supported by any evidence. The arbitrator disallowed several claims of the company on their ground that there is no evidence to establish it and at the same time accepted the claim of the contractor. Awarding of interest on the amount claimed in the absence of any stipulation in the contract is quite incorrect. The arbitrator committed mistake in holding that time was not the essence of the contract, on the ground that time was excluded to complete the work and there was also to offer liquidated damages. The arbitrator committed mistake in holding that there was default and delay on the part of the company in supplying the material to the contractor. The arbitrator committed mistake in determining the revision of rates in increasing it by 126% for the period of suspension rates and for the period from 1-1-1986 to 30-6-1986, even though the market rate was not 126% over and aboverates awarded in the main contract. The contractor committed an error in holding the claim under items 3 and 13. The arbitrator committed an error in awarding ID 98,000-00 as claim which is beyond the jurisdiction. Also urged that the award of the arbitrators otherwise bad in law and deserves to be set aside.
11. Whereas the contractor in OP 291/ 92 urged that the Court of Visakhapalnam has gol jurisdiction which is clear from the conduct of the company in not challenging the order of the lower court before the Court. The contract that was given to the contractor was not labour contract. On the other hand the nature of work entrusted to the contractor establishes that the work entrusted was complete contract. Allowing of the claim made by the contractor is just and reasonable. It is well-established principle of law that the award of the arbitrator is final and cannot be interfered with unless it is shown that such an award is erroneous. As such to interfere in such award is not open for the Court. Except alleging that the award of the arbitrator is perverse the same not substantiated. The second contract was entrusted taking into consideration the prevailing rates as such revision of rates at 126% is justified. The allegation that second contract was entrusted to the contractor only just as adhoc is incorrect and the same is denied. That there is no reference to additional claim as incorrect. The Contractor was not at all at fault. Adopting the valuation of rates on the date of award is just one. Likewise awarding interest at 14% from 1-8-1986 and 18% subsequent to award is proper. The arbitrator raised necessary points and considered entire evidence and found that there was delay and default on the part of the company in supplying the material required to carry on the work entrusted. It is incorrect to say that the arbitrator without application of mind simply granted the entire claim made by the contractor. On the other hand the arbitrator allowed only such of the claimof the contractor which according to him is permissible and the contractor is entitled and disallowed other items. Lastly urged that the award of the arbitrator is just one and no reasons to set aside.
12. On the basis of the averments made in both the petitions, the Court below framed the following points forconsideration.
13. Whether the award passed by the arbitrator is liable to be set aside ?
The Court below before going to the merits of the case first it tried to consider the legal aspect namely the effect of Section 30 of the Indian Arbitration Act, 1940. According to the Court below that as per Section 30 of the Act interference of the Court in the award passed is only under exceptional cases. Approach of the Court shall be to uphold the Award than to set aside the same. According to him the award can be set aside if it is shown that as required under Section 30 of the Act the arbitrator has misconducted himself. To answer the above questions the Court below referred to various decisions cited by both sides for and against. For the proposition that when it can be said that the arbitrator has misconducted himself of the proceedings and when interference is needed, the Court below placed reliance on some of the authorities. The view of the Court below is that the duty of the Court is to support the award of the arbitrator and not to destroy it. For this placed reliance on some of the following authorities. Decision of the Supreme Court in the case of Santa Sila Devi v. Dhirendranath Sen, : [1964]3SCR410 , wherein it is held that the arbitrator need not give his findings on each plea and that he need not express his decision on each matter that where the award is made. The award need not be reasoned one and interference of the Court in the award of the arbitrator is only when erroneous proposition of law is stated or sucherroneous proposition of law becomes the basis for such award as reported in Chellappan v. Kerala Slate Electricity Board, : [1975]2SCR811 . If award is''' reasoned one on challenge on the ground that award is contrary to Section 70 of the Indian Contract Act as held by the Supreme Court in Hindustan Tea Company v. Sashikant & Co., : AIR1987SC81 . the reasonableness of the reasons cannot be gone into when there is no evidence of violation of the principles of natural justice as held by the Supreme Court in Delhi Municipal Corporation v. Jagcmnath Ashok Kumar, : [1988]1SCR180 . According to the Court below the award of the arbitratof need not be a detailed one as held by the Supreme Court in Indian Oil Corporation v. Indian Carbon Limited, : [1988]3SCR426 . Further the Court shall not substitute its own evaluation of the claim as against the one drawn by the arbitrator as held by the Supreme Court in K.V. Subba Rao v. Government of AndhraPradesh, AIR 1988 SC 890. According to the Court below while considering the award it cannot sit in appeal against such award as held by the Supreme Court in Gujurat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., : [1989]1SCR318 . Where, from the evidence available two views are possible, one taken by the arbitrator shall be accepted as held by the Supreme Court in M/s. Hind Builders v. Union of India, : [1990]2SCR638 . The Court should not embark upon the reappreciation of evidence which was already considered by the arbitrator as held; by the Supreme Court in State of Rajasthan v. Puri Constructions, : (1994)6SCC485 . The Court below also took into consideration the decisions relied upon by the Company when arbitrator misconducted the proceedings and the award is result of non-application of mind as held by the Supreme Court reported in Associated Engineering Co v. Government of A.P., : [1991]2SCR924 , wherein it is held that the arbitrator cannot act arbitrarily, irrationally,capriciously and he cannot go beyond the terms of the contract. Refusal to refer the Supplemental agreement in award which prohibits grant of additional compensation of and extra rates amounts to misconduct on his part and deserves to be set aside, the same as held by the Supreme Court in State of Kerala v. V.P. Jolly, : AIR1992Ker187 . In State of Punjab v. Chahal Engineering & Company, , and in Fertilizer Corporation of India v. M/s Bharat Painters, : AIR1986Ori82 , wherein it is held that erroneous application of law by the arbitrator liable to be interfered with. Again the Court can interfere in the award passed by arbitrator if the findings of arbitrator are perverse as held by the Supreme Court in Chahal Engineering Co. v. Irrigation Department, : AIR1993SC2541 .
14. In the light of the principles laid down by the Supreme Court and other High Courts on the point whether arbitrator misconducted himself of the proceedings the Court below examined the correctness or otherwise of the claims allowed and rejected by the arbitrator including the question as to absence of the essential ingredients of the contract.
15. The lower Court also found that the (i) arbitrator took into consideration all the three agreements, relevant clauses, breaking of hostilities between the two countries namely Iran and Iraq during which suspension of work occurred and (ii) the Company in its counter-claim conversion rate claimed as one I.D. is equivalent to U.S. dollars of 3.377778. The Court below further took into consideration the 11th report submitted by the Company showing that they made claims to the tune of Rs.24.26 crores against the Iraq Company. The Lower Court further held that the award passed by the learned arbitrator is correct and dismissed OP No.306 of 1992 filed by the Contractor, while OP No.291 of 1992 was decreed making the award as rule of the Courtgranting interest upto the date of making the payment in terms of the award by applying the fixed conversion rate of one I.D. is equivalent to U.S. Dollars'' is 3.377778. Aggrieved by the same this appeal by the Company.
16. In the grounds of appeal the Company sought to challenge the order passed by the Court below on several grounds.
17. According to the company, allowing claims of the contractor in respect of claim No.3 and 13 is quite incorrect. The lower Court and also the arbitrator failed to take into consideration the effect of clause 5.11. 5.2.5 and 6 of agreements. The Court below committed mistake in accepting revision of rates from I.D. to U.S. $ and then to Indian Rupees. The Court below should have noticed that agreement dated 31-5-1984 suggested certain amendments to the earlier agreements which agreed by both parties but the same was not considered. Awarding claim of 91,000 in Iraq Dinar as war claim due to demobilisation is quite illegal and contrary to clause 45. The trial Court should not have placed reliance on the annual report with reference to claim No.l as the same has no relevance. The Court below should not have placed reliance on the files produced by the contractor. The bill prepared by the contractor should not have been accepted by the Court. Clause 13. 2 of special conditions in respect of agreement dated 31-5-1984 says that there shall be no valuation by the Contractor. The claim No.2 should have been disallowed. The conversion ordered by the arbitrator and accepted by the Court below namely one Iraq Dinar is equal and 3.377778 of U.S. Dollars is contrary to agreement dated 20-8-1981. Further the conversion of currency is contrary to the minutes of the meeting dated 19-8-1992 wherein it was agreed that conversion shall be in the Iraq Dinars. As such awarding of interest upto the payment of the amountdecreed is bad. Awarding of interest at high rate is impermissible. In the absence of any evidence, to hold that the appellant company committed default is quite incorrect and arbitrary.
18. To substantiate the above contentions, Sri. V.R. Reddy, learned senior Counsel urged as follows : He took us through some of the clauses in all the three agreements dated 5-3-1980, 20-8-1981 and 31-5-1984. According to him, the award of the arbitrator and the order passed by the Court below are illegal. He submitted that the arbitrator committed a mistake while disallowing the counter-claim made by the appellant but allowing the claims only in respect of small amounts. According to him, the arbitrator should not have allowed Claim No.2 for a sum of ID 1,57,374.000 in respect of extra items namely Item EI/MW/2, that is, Mudmat; Item EI/MW/9 Marble Gradding and Item CC/MW1 and CC/MW2 pile culling and excavation between piles for the reason these items along with others were included in the final bill signed by both the parties during the year 1987. The payment against these items were made by the Company as per the final bill which was accepted by the claimant. Further wherever the claimant had put forth his objection regarding extra items, the same was recorded in the final bill. None of the items of extra claim under Claim No.2 was included in the items protested in the final bill. According to Sri V.R. Reddy, allowing Claims 3 and 13 regarding revision of rates and loss in turn over at ID 2,50,000 and ID 60,000 is quite incorrect. On the other hand, there was settlement between the parties in that agreement dated 31-5-1984 that there should not have been further enhancement of rates or loss of turnover. Allowing revision of rates and loss in turnover is contrary to the terms of the contract, wherein the third agreement it was understood the amount over-drawn during the second contract be adjusted fromthe amount payable to the claimant under the third agreement. The learned Counsel attacked the award of the arbitrator allowing the Claim No.1 under War Claims heading for ID 98,000.000. Awarding additional amount towards excavation between piles though no such differentiation for such excavation was contemplated under the contract is bad. When the contractor had accepted the terms of the contract that the payment payable towards includes excavation between the piles which was calculated at the rates specified under the Contract, the contractor is not entitled for the said amount. On the other hand, he is estopped from raising any claim for additional amount. Yet the Arbitrator awarded it. Thus it amounts to misconduct of the proceedings. Many of the items were covered under the final bill and settled. But ignoring the same, the Arbitrator allowed the claims. The Arbitrator committed a mistake in observing that the protraction of work was at the instance of the company ignoring Clause No.5.3 and 5.4 of the third agreement which stipulate that the extension of time was mutually agreed by the parties and the company had partially waived its claim to levy penalty. Non-consideration of the same has vitiated the award. The finding of the Court below that the Company had not pleaded the effect of Clause Nos.5.1.1 and 5.2.5 is incorrect. The Court below also committed a mistake in holding that there was oral reduction of 24.79% in all the three agreements and 30.32% in the main contract, namely the first contract. Infact the work executed in the earlier two contracts was continued in terms of the third agreement. The third contract was only the modification of the works of earlier two contracts. The value of the third agreement should not have been considered as a fresh item of the work. Thus the value of the two contracts namely the first and second contracts should have been treated as total contract value of ID 8,92,000 for the first contract and ID10,20,000.000 for the second contract, the total being ID 19,20,000.000. Whereas the work done as per final bill for the first and second contracts and modification work is ID 17,78,079.010. Thus, there was oral reduction in contract value upto 7.02%. In other words in case of 1st contract the total value of the work done along with modification/variation as per final bill conies to ID 7,53,014.856. The reduction in contract value is only 15.62%. Thus, the finding of the Court below that the percentage of reduction in value of work is quite incorrect.
19. Mr. V.R, Reddy, learned senior Advocate for the appellant urged that the foreign exchange conversion from Iraqi Dinar to U.S. Dollar and then to Indian Rupees is quite incorrect and contrary to the very terms of the contract. The terms of the first contract explain that bill of quantities provides for the rates of item-wise in Iraqi Dinar. Likewise in case of works of the second contract. It is provided in the Addendum to Special Conditions of the Contract that payments shall be made on running bills. The claim made by the claimant in ID upto 30% and for the balance 70% US $. But the Arbitrator awarded the amount in Iraqi Dinar and converted the amount in U.S. Dollars as per the rate provided under the agreement dated 20-8-1981. He further converted the amount into Indian Rupees at the conversion rate prevailed as on the date of the award whereas direct rate between Iraqi Dinar and Rupees is available in the agreement dated 20-8-1981. As such there was no reason for the Arbitrator to convert the currency from Iraqi Dinar into U.S. Dollars and then Indian Rupees. Any amount that was payable to the respondent had become payable only during August 1986. If that amount was not paid during that period, the claimant would have no option except to accept it by bringing it to India by converting it Indian Rupees at the rate prevailing in the month of August,1986. If that amount was paid, at best the claimant would have been entitled to up a claim for compensation by way of damages or interest on the amount so converted but he should not have converted the Iraqi Dinar into U.S. Dollars and then to Indian Rupees. The learned Counsel submitted that no reliance should have been placed by the Court below on the principle laid down in the case of Forasol v. ONGC, as the said decision related to the amount payable in French Frank which is a hard currency having conversion rate quoted as on that dale. Further in Foraxol case the party had to take the amount in French Frank as on the date of the decree. As such, it made the claimant to take his amount in French Frank by adopting conversion rate as on the date of the decree. The learned Counsel lastly contended that awarding of interest from the date of demand till the date of Award at rate of 14% and from the date of Award till the date of realisation at the rate of 18% is impermissible in the absence of any contract to levy interest on the amount demanded. Thus arguing, he sought the appeal be allowed.
20. As an answer to this, Sri D.V. Subba Rao, learned Counsel for the respondent while supporting the Award of the Arbitrator and the judgment passed by the Court below contended that there is no merit in any one of the contentions of the learned Counsel for the appellant. According to him, the Award of the Arbitrator is the result of application of mind. It is a well-considered one. The Arbitrator considered each and every claim. He discussed the claims with the evidence available and reached correct conclusion. This was considered by the Court below and held that there were no reasons to interfere with the Award passed by the Arbitrator. According to him, the Arbitrator is a final judge of fact and law. Even if any mistake is committed on fact and law, the same is not open to challengebecause the Court cannot sit as a Court of appeal to reassess the evidence and come to another conclusion. The Court cannot substitute its conclusion to the one reached by the Arbitrator merely it is possible for the Court on the evidence available to take a view other than the one taken by the Arbitrator. According to him if a clause is capable of giving two interpretations, the interpretation given by the Arbitrator is reasonable interpretation. The Court cannot change the same. According to the learned Counsel for the respondent that the duty of the Court as far as possible is to accept the Award as it is instead of destroying it unless it is shown that the Award of the Arbitrator is quite erroneous or he applied the law which on facts is inapplicable. According to Sri Subbarao, learned Counsel appearing for the respondent, Clause 5.1.1 suggests that the claims made prior to the modification agreement are to be dealt with in accordance with the terms and conditions of the sub-contract. The modification agreement was only in respect of suspension claim for the period between August, 1982 and 31-5-1984. According to him, the same is a full and final settlement of the suspension claim only. Any other claims such as low productivity or extension consequential on suspension are settled. Clause 5.2.5 does not affect the future claim of the claimant. These claims relate to the first and second contracts relating to the period prior to August, i 982 and, thus, they are saved and not affected. Regarding final bill, Sri Subba Rao learned Counsel appearing for the company submitted that the so-called final bill was not a final bill. If it was a final bill, the company would have urged before the Arbitrator that the final bill was brought about the full and final settlement of all the claims. It did not plead accord and satisfaction. So there was no final bill. To explain that it was not a final bill, the learned Counsel argued that OS No.214 of 1986 was filed for the appointment ofan Arbitrator and also for an injunction restraining encashment of the bank guarantees. The said claims which were alleged as settled under final bill were included in the claim petition. The Subordinate Judge directed the Company to appoint an arbitrator. Pursuant to the said direction, the so-called final bill was signed on 17-11-1987. When the Court directed the Company to appoint an arbitrator to go into various disputes and give an Award, it is difficult to accept the contention of the appellant that any contractor would sign a final bill. If it were to be a final bill, no opportunity would have been given to the company to settle the claims. Another act of the company that belies its plea is that there was a final bill is that the company sought time to file additional counter on 15-3-1989. According to the learned Counsel, the question of estoppel does not arise as the company did not plead accord and satisfaction or estoppel. The Company did not show that from the revision of the claim the company altered its position and suffered detriment. Even otherwise the plea of final bill was raised against extra items under Claim No.2 but not in respect of other items. If the final bill was really a final bill, the company would have taken a stand in its counter that all the claims made by the claimant are barred. Alternatively, it was urged that from the modification agreement the so-called full and final settlement refers to only suspension claim. According to him Clause 5.1.1 though says 'Save those items for which new prices have been agreed, original sub contract items of work shall be carried out by the Associate at the price applicable to respective original sub contracts. However, the contractual claims other than those settled in this Addendum and submitted by the Associate before suspension of the works will be dealt in accordance with the terms and conditions of the main and site works contracts.' This Clause was interpreted by the learned Counsel for thecontractor namely claims other than those settled under this agreement and submitted before suspension will be dealt with in accordance with the terms and conditions of the main and site works contract, as the claims prior to August, 1982 and as such they are saved.
21. The learned Counsel for the contractor took us through other clauses of the agreement namely 5.2.3, 5.2.4 and 5.2.5 and contended that they all suggest that the claims prior to August, 1982 are not affected. According to him; the claims made under Claim No.2 were included in the final bill. Otherwise there would not have been counter-claim by the Company. He also placed reliance on the decision of the Delhi High Court in the case of M/s. Ram Nath Mehra & Sons v. Union of India, AIR 1982 Delhi 164. According to Sri Subba Rao, Claim Nos.3 and 13 are quite tenable. When there is change in rates, the contractor is entitled for revision of rates. To support his contention, he placed reliance on the decision of the Supreme Court in Haricharan Singh v. Union of India, : AIR1991SC945 . Regarding Claim No. 13 he stated that any claim subsequent to signing the modification agreement is not affected. According to the learned Counsel, the Arbitrator was right in allowing Claim No. 13 also. Taking into consideration the rates prevailing at the time of the first and second contracts, the Arbitrator held that there was increase of rates by 126% and thus the rate was less than 75%. As such the rates by percentage is permissible. In support of his contention he placed reliance on the decision of the Delhi High Court and the Supreme Court in M/s. Metro Electric Co. v. Delhi Development Authority, AIR 1980 Delhi 266. M/s. A.T. Brij Paul Singh & Bros. v. State of Gujarat, : AIR1984SC1703 .
22. Regarding the conversion rate on foreign currency, Sri Subba Rao contained that converting Iraqi Dinar into U.S. Dollarand from that to Indian Rupees namely one Iraqi Dinar is equal to U.S. $3.377778 is quite correct. According to him, the first contract dated 5-3-1980 there was no mention of any conversion rate. But the running bills of the contract were determined at the fixed rate of one Iraqi Dinar is equal to 3.377778 U.S. Dollars. In the second contract dated 20-8-1981 relating to site work, the conversion rates for currency was adopted as follows :
U.S. $ 3.377778 = one I.D.
Rs. 28.57 = one I.D.
In the third contract dated 31-5-1984 namely modification works, the fixed rate of foreign exchange on one Iraqi Dinar is equal to 3.208889 U.S. Dollars. But the fixed conversion rate of one Iraqi Dinar is equal to 3.377778 U.S. Dollars was accepted by the Company. In the counter-claim, the Company itself mentioned conversion rate of one Iraqi Dinar is equal to 3.377778 U.S. Dollars. Such a conversion was admitted by the witness of the Company, namely RW2 who stated in his cross-examination that when he was in the Company they adopted the standard rate currency between Iraqi Dinar and U.S. Dollars and that standard was a fixed rate of conversion for this contract. Sri Subba Rao gave another instance that how conversion ordered by the Arbitrator and accepted by the Court below as correct, namely that the Company while encashing the bank guarantee of the contractor for a sum of Rs.9,40 lakhs in 13-8-1988, the Company first converted the Indian Rupees into U.S. Dollars at the prevailing exchange rate on the date of encashment of Bank guarantees. After converting exchange rate on 13-8-1988 i.e., 1 US $ = Rs.13,456 and adopting the fixed conversion rate of 1 ID $ 3.377778, they arrived at the value of 1 ID = Rs.45.45 (Rs.13,456 x US $ 3.377778 = Rs.45.45). Thus, the claim set up by the company was allowed by the Arbitrator. The said conversion was only in respect of running bills and not final bills. The said amountwas paid. As such when the award was made the entire amount was converted into Indian currency. One more reason for currency converted into dollars was there was no parity between Iraqi Dinar to Indian Rupees. When the claim is made in ID the same coutd not have been straightaway converted info rupees. On the oilier hand the same was required to be converted into US dollars and from then to Indian Rupees. According to Mr. Subba Rao, the rate of conversion will be one prevailing on the date of the judgment namely that when the award was made as rule of the Court. To support his contention he placed reliance on the following decisions of the Supreme Court in Forasol v. Oil and Natural Gas Commission, : [1984]1SCR526 and Renusagar Power Co. Ltd. v. General Electric Company, : AIR1994SC860 .
23. Regarding interest, Sri Subba Rao submitted that the contractor is entitled for the interest awarded by the Arbitrator as confirmed by the Court below. He lastly contended that if for any reason the contention of the appellant that some of the claims on extra items under Claim No.2 are not tenable, is accepted only a few items namely E1 (MW)/2, E1 (MW)/9 and CC(MW) /1,2 & 4 are to be excluded and the rest of the claims will remain valid. Thus urging, he sought the companies appeal be dismissed.
24. From the pleadings of both sides, the award passed by the Arbitrator and the order of the award making as rule of the Court including the grounds urged by both sides for and against the award and the order passed, we have to see how far the award and the order passed by the Arbitrator and the Court respectively are correct. The first ground of attack was as to the finding given by the Court below and the arbitrator that according to the company the time was the essence of the contract. Whereas the arbitrator and the Court took into consideration the variation in the terms of the contract and the conductof the parties and held that in the present case time was not the essence of the contract. Under Issue No. 1 the learned Arbitrator discussed this aspect and observed that the contract contained the provisions for extension of time, variation of work and penalty for delay. According to him, when the contract contained a provision for extension of time and also for levying of damages, time was not the essence of the contract. The said finding was confirmed by the Court below.
25. Regarding Issue No.2 whether the termination of the contract by the company entered into between the company and the contractor was wrongful, irregular, illegal, the learned arbitrator held such termination as illegal. According to him, the evidence that was given by the parties showed that the required equipment and other material was not provided to the contractor by the company. The company also failed to engage architects to prepare the same. The learned Arbitrator found that the Register maintained by the Company showing the date of issue of drawings and the date of approval was not produced by the company. The Arbitrator found that there was delay in supplying of material. This was also admitted by the company witness in his evidence who stated in his cross-examination that there was short supply of cement and material like bricks, sand and stone. There was short supply in reinforced steel. This delay in supply of material was not related to the first contract and also to the second contract. The Arbitrator refused to accept the contention of the company that the second contract was given to the claimant with a view to support the contractor. From the evidence he found that the rates prevailing between the first contract and the second contract as admitted by the company witness in his cross-examination, that there was raise in prices during the relevant period by 126%. Those rales were prevailing on the date of the first contract. This fact was borne outfrom the minutes of the company drawn in during the meeting held on 6-2-1986, 17-4-1986 and 24-4-1986. Added to this in the co-ordinating meeting held on 17-4-1986, minutes were drawn to the effect that Mr. Nehru of the Company expressed satisfaction over the progress made in the work which is again repeated in the next meeting held on 24-4-1986 saying that the Company was satisfied with the work in the past three months by the contractor. The learned Arbitrator found that even the Indian Ambassador in the meeting held on 8-5-1986 complimented the work turned out by the claimant. Again in the 11th Annual Report dated 30-9-1986 of the Company there was a reference that because of the hostilities between Iraq and Iran, work could not be progressed for six months. The learned Arbitrator agreed that because of force majuere conditions in and around the work area, the claims were raised by the company to the tune of Rs.25.25 crores with Iraq Government. This was further confirmed in the 13th Annual Report of the Company for the year 1982-83 dated 29-9-1983 to the effect that the project work was suspended at the instance of the employer as he wanted certain modifications. The same was endorsed by the Company's 15th Annual Report dated 9-12-1985. Thus, in several meetings of co-ordination and other reports noncompliance of V1P area and other work clearly evident. According to the Arbitrator the evidence adduced on behalf of the contractor disclosed that there were delays and defaults on the part of the Company and the prolongation of the work was not due to any default on the part of the contractor. Because of such defaults and delays the cost of performance was increased and the loss that flew out of such prolongation has to be compensated. The delay on the part of the Company in making the requisite funds available, increased the cost of production. For the above reasons, the Arbitrator held that the termination of the contract overlooking its own breach iswrongful and irregular and as such whatever the contractor incurred had to be refunded.
26. Issue No.3 deals with the claim of the contractor on different items. The contractor set up number of claims. Among them, the important are Claim No.3 and Claim No.13 and preparation of final bills etc. Some of them were allowed and many were rejected by the Arbitrator by giving reasons item-wise. The Arbitrator took into consideration the evidence given in respect of the counter-claim as opposed by the claimant and ultimately allowed the claims which were tenable and disallowed others as not substantiated. The learned Arbitrator took up Claim Nos.3 and 13 for consideration as they form important and were result of prolongation of the work due to the fault on the part of the Company. Though Claims 3 and 13 were similar, they relate to different period. They were in respect of reduced out turn, time over run, revision of rates consequent on the breach of the respondent. The claim made under Claim No.3 was ID 3,52,718.219 and it was based on the approved Chartered Accountant Report which was also accepted by the Company. The learned Arbitrator found that during the first period and the second period the rates of the work had gone upto 126%. According to him, if the said 126% raised in rates is applied, it works out to ID 7,51,000. Thus, the increased entitlement will be ID 4,43,000 whereas the Arbitrator held that the claimant was entitled for compensation of ID 250,000/- which will be less than 75% whereas the raise in rates was 126%. In other words, as against the claim of ID 8,08,764,790 a sum of ID 2,50,000 was only awarded under Claim No.3. Claim No.13 was made for ID 6,13,309 which was for the period from 1-1-1986 to 30-6-1986. But the Arbitrator awarded ID 60,000. Again the said figure was based on taking into consideration the raise in prices at 126%.
27. The next claim is war claim. It is not disputed that hostility broke between Iraq and Iran. Because of out-break of hostility, at the instance of the company, the contractor had to send back the workmen. Later they were repositioned after restoration of normal conditions. The same is mentioned in the 11th Annual Report for the year 1980-81 dated 30-9-1981. Due to the hostilities and compulsion to stop the work and send back the workmen to India, the Company itself had made a claim of Rs.25.25 crores with Iraq Government on the ground of force majeure conditions. The case of the contractor was that the company had assured the contractor that this claim will be made good after settling its claim with Iraq Government. Thus, as against the War Claim of ID 1,95,147.548, the learned Arbitrator awarded ID 98,000.
28. Claim No.2 relates to different extra items. They are claims under different rates. In respect of extra item, the stand taken by the Company is that the contractor is not entitled to claim the same as there was a settlement of final bill and the same was signed by the Contractor. The same was disputed by the Contractor saying that it was not a final settlement but it was only in respect of those items which the Company had accepted. The Contractor contended that it has filed an application under Section 20 of the Arbitration Act in July, 1986 which includes the work carried out under extra item. The learned Arbitrator, from the evidence available found that the company did not dispute that whatever bill prepared was full and final settlement of all the claims. According to the Arbitrator, the rates claimed under extra work are fair and reasonable.
29. When the Arbitrator after perusing material produced has given such a finding, it is not open for this Court to take a different view. Because, in this appeal re-appreciation of evidence is not available.Under this head the conclusion reached by the Arbitrator and agreed by the Court below stands to reason. E1(MW/1) relates to the construction of full brick thick was ordered by changing the specification and substituting for membrance water proofing. This made the Company to make claims which are contrary to the terms of the contract. This change in the work was admitted by the Company. Accordingly, the Arbitrator held that the claimant is entitled for ID 1123.720.
30. E1(MW/2) relates to carry out mudmat of 8 mm thickness under the pile caps. On the basis of the evidence, the Arbitrator accepted the claim of the claimant and allowed differences ID 4,696.513. E.l(MW/3), E1(MW/4) and E.l(MW/4) relate to the construction of brick arches with RCC brackets. The claim under this item was rejected by the Arbitrator. As there was no serious dispute as to the claim under E.1(MW/6), the Arbitrator allowed it at ID 208.380. E.1(MW/7) relates to 40 mm of thick plastering with ribbmetal lath. The Arbitrator held that the claimants 'are entitled for extra payment of ID 90.353. E.1 (MW/8) relates to ceiling of the floor expansion in joints at different levels to avoid leakage of water during rainy season. The Arbitrator found that the work was carried out which was an extra one and as such the claimant is entitled for ID 271.014. E. l(MW/9) relates to finishing of internal walls from Granite to Marble. The Arbitrator allowed the claim of ID 20,554.719. Under E.1(MW/10) to E.I(MW/14), the Arbitrator from the evidence found that the claimant is not entitled for the said claim and hence rejected the same. El (MW/15) is in respect of the payments made to engage extra labour for sorting out and selection of marble. The Arbitrator allowed the claim of ID 2812.500. EI(MW/16) to EI(MW/ 19) pertain to fabrication of articles required to be fixed in the work. But thesame was rejected by the Arbitrator. E1 (MW/20) claim relates to cutting the drop walls. Here the Arbitrator allowed only ID 1465.231. EI(MW/21) is a claim for dismantling of partition refixing and realignment. Under this claim the Arbitrator allowed ID 35,131.440. Arbitrator rejected the claim under EI(MW/22) which relates to cutting of marble. EI(MW/23) relates to cladding to the toilet wall with hung panels. The Arbitrator allowed to an extent of ID 7118.000 under this claim. EI.(MW/24) a claim for cutting hung panel wall cladding. The Arbitrator disallowed the same.
31. The claim under CC(MW/1), CC(MW/2) and CC(MW/4) relate to piling carried out by another agency of the company after 5-3-1980. Later the work carried out by another company was found defective. The same had to be made good by the claimant. Accordingly, the Arbitrator allowed ID 29,540.00. CCMW/3) relates to the claim for formation of drains for dewatering which was rejected by the Arbitrator. CC(MW/5) to CC(MW/10) relate to manufacture of shuttering. But the Arbitrator after considering the evidence found that the claim made for this work in a sum of ID 14,962.072 is not tenable and accordingly rejected the same. CC(MW/11) relates to the unloading of cement, conveying to loading platform, cut and open the cement bags, load into cement pump hopper manually. The same was rejected by the Arbitrator. CC(MW/12) relates to certain purchases made by the contractor to meet the immediate requirement. Such material was not provided by the Company immediately. Under this, the Arbitrator awarded ID 16,533.390. CC(MW/13) relates to carry out excavation. In this connection, the contractor had to hire some machinery though such machinery was required to be supplied by the Company. As such the contractor had to incur the expenses. Under this head, the Arbitrator awarded ID29034.500. CC(MW/14) is the claim for screening of sand which was rejected by the Arbitrator. CC(MW/15) is the claim for rewinding charges for the motor of tower crane which was rejected. CC(MW/16) is the claim relating to Okabe tie rods. Under this, the Arbitrator awarded ID 1726.720. CC(MW/17) relates to providing butterfly wall type ties between RCC and brick work etc. Under this head, the learned Arbitrator awarded ID 1143.430. CC(MW/18) to CC(MW/20) relate to cleaning before mobilisation etc. But this claim was rejected.
32. Claim 2.3 and 2.4 relate to variation order and temporary work bills relating to main works. This claim was disallowed. Claim 2.5 relate to extra item for site work. EI(W/1) is a claim relating to applying red oxide anti-corrosion which was rejected. EI(SW/2) relates to manufacture of anchors. The learned Arbitrator allowed ID207.090. EI(SW/3) is a claim pertaining to preparation and fixing up second layer mesh for exte'rnal tiling which was rejected. EI(SW/4) relates to crash barriers made up of steel. Under this head only ID 813.200 was allowed. EI(SW/ 5) is a claim relating to fixing the channels to walkaway edges. Here the learned Arbitrator awarded only ID 1809.447. EI(SW/6) relates cutting external wall tiles for fixing the corners, which was rejected. EI(SW/7) is the claim for making concrete tiles which was also rejected. EI(SW/8) relates to making foundation block for electrical fixtures. Under this claim the learned Arbitrator allowed ID 239.000. Under EI(SW/9) the Arbitrator allowed ID 963.000 and under EI(SW/10), he allowed ID 1169.600. Claim Nos.2.6 and 2.7 were rejected. Claim No,2.8 i.e., El (MOD)/1 relates to the difference in unit of measurement. This claim was rejected. EI(MOD)/2 pertains to extra filling of earth and the same allowed. The claim under EI(MOD)/3 was disallowed. The claim under EI(MOD)/A was allowed to an extentof ID 837.748. The claim under EI(MOD)/ 5 was allowed for ID 704.479. Claim No.2.9, Claim No.2.10 i.e., CC(MOD)/1 and CC(MOD)/2 were disallowed. Claims 4 to 10 were rejected and Claims 11 and 12 were disallowed by the learned Arbitrator.
33. Claim No.14 is a part of Issue No.5 which relates to the payment of interest. The learned Arbitrator found that the contractor is entitled for interest at the rate of 14% p.a. from the date of demand i.e., 25-6-1986 and at the rate of 18% p.a. from the date of Award till the date of payment. Claim No.16 was disallowed. Claim Nos.17, 18 and 19 relate to Bank Guarantee. The learned Arbitrator found that the company is not justified in seeking encashment of bank guarantees. Claim No.20 was disallowed. Claim No.23 relates refund of money withheld from site works. The same was disallowed. Claim No.24 relates was also disallowed. As against the claims made by the claimant, some were granted and others were rejected.
34. The Arbitrator also considered the counter-claims made by the company as required in Issue No.4. The Arbitrator found that some incorrect entries have been made in the account books of the contractor. Counter-claim No.l relate to unadjusted advances which the company is entitled to recover from the contractor. The learned Arbitrator taking into consideration the evidence given in respect of this claim held that the company is entitled for a sum of ID 159742.210 and after giving set off the company is entitled for ID 70,037.61 only. Regarding counterclaim No.2, when the advance was fully set off, the Arbitrator held that the company is not entitled for interest. Counter-Claim 3 relates to out-standing mobilisation of ID 8448.658 which is equivalent to US $ 28537.71. The same was awarded. Counter-claim No.4 relates to penalty etc., which was disallowed, Counter-Claim No.5 is in respect of material consumedfor rectification of defects. But the learned Arbitrator disallowed the same as not established. Counter-Claim No.6 relates to wastage of material in excess of the standard engineering practice which was rejected. The learned Arbitrator also disallowed the Counter-Claim No.7 relating to recovery of amount on account of repair and maintenance cost of construction equipment. Likewise Counter Claim No,8 in respect of missing of some material which was disallowed. Counter-Claim No.9 relates to providing of accommodation at free cost at the time of winding up of the work and at the time of finding shortages or missing of components. But the Arbitrator disallowed the same. Counter-Claim No. 10 relates modification works etc., which was disallowed. Again Counter-Claims 11 and 2 were also disallowed. Counter-Claim No. 13 relates to repairs for roof works was also disallowed. Counter-Claim No.14 relates to provision of income tax liability. Counter-Claim 15 relates to payment of tax on interest paid on overdrawn amounts. Counter-Claim Nos.16 to 18 were all rejected.
35. Thus, the learned Arbitrator against number of claims made by the Contractor awarded only the following items :
Claim No.l ..... ID 98,000.000
Claim No.2 ..... ID 1,57,374.000
Claim Nos.3& 13 ..... ID 3,10,000.000
36. In respect of counter-claims made by the Company, the learned Arbitrator awarded the following claims :
Counter Claim No.l ...... ID 70,037.610
Counter Claim No.3 ..... ID 8,448.658
37. In other words, the learned Arbitrator awarded the claim of the contractor for a sum of ID 4,86,887.732 which is equivalent to US $ 16,44,598.00applying conversion of one Iraqi Dinar = US $ 3.377778. The learned Arbitrator also awarded interest at the rate of 14% p.a. on the said sum from the dale of demand i.e., 1-8-1986 and also at the rate of 185 p.a. from the date of Award till the date of payment.
38. From the above discussion, we have to see how far the Award passed by the Arbitrator and the judgment passed by the Court below are just and proper. It need not be repeated that the scope to interfere with the award passed by the Arbitrator is very much limited, because the proceedings under Section 30 of the Act not in the nature of appeal against the award as held by the Supreme Court in the case of Stale of U.P. v. Harish Chandra, : (1999)1SCC63 , wherein their Lordships held as follows:
'Arbitration Act, 1940 - Section 30 -Question purely on merits of the award cannot be raised in objection under Section 30 - Proceedings under Section 30 not in the nature of appeal against the award - Hence contention that claims regarding work of cutting of rock were wrongly granted by Arbitrator, cannot be made subject-matter of objection under Section 30.'
39. Interference with the award is only when the award is erroneous or the Arbitrator exceeded the jurisdiction and it suffers from patent errors as held by the Supreme Court in the case of Chahal Engineering & Construction Co., v. Irrigation Department, Punjab, wherein it is held that;
'The misconduct of the Arbitrator referred to in Section 30(a) and the expression 'is otherwise invalid' in Section 30(c) would include an error apparent on the face of the record. Where the award suffers from several patent errors, a party could raise objections for getting it set aside under Section 30.'
40. Number of decisions have been cited at the Bar for and against the judgment and the award which have been referred to in the beginning itself. Now there is no necessity to repeat the same: If the award of the Arbitrator is a reasoned one and the award suggests there is application of mind, the same is valid. Merely because two views are possible one supporting the view of the Arbitrator and the other against it, the former shall prevail. It is sufficient if the findings reached by the Arbitrator suggest that there is application of mind on the part of the Arbitrator.
41. In the case on hand, both parties gave evidence both oral and documentary. They made claim and counter-claims. The contractor though made his claim on a very high side, but the Arbitrator allowed for Rs.4.61,14,527/- only under three heads mentioned above. Likewise, the Arbitrator allowed certain counter-claims set up by the company also. The same were confirmed by the Court. We went through the entire award of the Arbitrator and the order of the Court and or disallowed, the Arbitrator considered such claims with reference to the evidence given and passed award by giving reasons for reaching such conclusion. Taking into consideration the terms of the contract, the conduct of the parties and other correspondence between the parties, the Arbitrator found that time was not the essence of the contract.
42. Regarding validity and admissibility of final bill, accepting the Claim Nos.2, 3 and 13 the same were allowed by the Arbitrator by giving sufficient reasons.
43. Regarding conversion in respect of foreign exchange is concerned, the learned Arbitrator found that conversion as claimed by the contractor is correct. This view of the Arbitrator was supported by the conduct of the company itself which made a similar claim of conversion rate inits counter-claim. This rate of conversion was also made by another contractor namely ECCL against the Company for similar work done which was accepted by the High Court of Delhi. There cannot be two types of conversion rates one for the company and another for the contractor regarding conversion. What applies to the Company shall also apply to the contractor. Prolongation of work due to the out-break of hostility between Iraq and Iran which resulted in suspension of work during the out-break of war and later resulted in increase in rates, the Company made a claim against Iraq Government for a sum of Rs.25 crores and above. But refusing to honour the similar claim of the contractor is quite incorrect. Thus it is well settled that as far as the rate of conversion is concerned the rate which is prevailing as on the date of judgment shall be taken into consideration as held by the Supreme Court in Forasol (supra) and Renusagar Power Co. Ltd. (supra).
44. Regarding interest, it is not disputed that the contract between the parties was a commercial one. Claiming interest is neither restricted nor prohibited in the agreement. The contractor made a claim for interest from the date he made a demand against the Company. The Arbitrator awarded interest at 14% p.a. from the date of demand till the date of award and by exercising his discretion awarded interest at the rate of 18% p.a. from the date of award till the date of realisation, The same is in accordance with Section 34 of CPC. The contention of the Company that there should not have been interest prior to the award has no merit in the light of the law laid down by the Supreme Court in the following decision to the effect that interest pendents lite is permissible. In the case of Irrigation Department v. G.C. Roy, : [1991]3SCR417 , the Supreme Court held as follows :
'The question still remains whether arbitrator has the power to award interestpendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where me agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge :
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the Arbilrator entering upon the reference. This is the principle of Section 34, CPC, and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) an Arbitrator is an alternative form for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties, if the Arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the Arbitrator. This would lead to multiplicity of proceedings.
(iii) An Arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The Arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the Arbitrator must have the power to award interest pendente Site. Thawardas, : [1955]2SCR48 , has not been followed in the later decision of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena's case, : [1988]1SCR253 , almost all the Courts in the Country had upheld the power of the arbitrator to award interest pendents lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendents lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice, between the parties, such power has always been inferred.
I laving regard to the above considerations, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a parly claims interest and dispute (along with the claim for principal amount or independently) is referred to the Arbitrator, he shall have the power to award interest. This does not mean that in every case the Arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.'
45. The Supreme Court in the case of Jugal Kishore v. Vijayendra, : AIR1993SC864 , while referring to the case of G.C. Roy, held as follows :
'Where the reference to arbitration is not only of all the disputes in the suits pending between the partners but also of all the disputes arising out of the deed of dissolution and the deed of dissolution envisages the payment of interest and also specifies the point of time from which interest is payable, the Arbitrator is competent to grant interest on the amount becoming payable under the award. The disputes between the parties pending adjudication in a suit have been referred for Arbitrator in the instant case and therefore the arbitrator had all the powers which the Court itself would have in deciding the issues in the suit. The Claims in the suit and the claims under the deed of dissolution in the instant case were comprehensive enough to include the claim of interest and its reference to the Arbitrator. The arbitrator was, therefore, within his rights in granting interest pendente Hte,''
46. Similar is the view taken by the Supreme Court in the case of State of Orissa v. B.N. Agarwala, : AIR1993SC2521 , and Hindustan Construction Co. Ltd v. State of J & K, : AIR1992SC2192 .
47. In the case of P.L. Raj it & Company v. The Slats of A.P., 1996 (2) APLJ 374 (HC), the Division Bench of this Court held as follows :
'It is to be noted that the reference in this case was made after the commencement of the Interest Act, 1978 under which the definition of 'Court' includes an arbitrator and hence he is invested with the same power as the Court to award pendente lite interest, unless he is prohibited from doing so under the terms of the contract.'
48. In the case of State of U.P. v. Harish Chandra, (supra), the Supreme Court while dealing with point No. 1 namely whether the award of interest prior to thedate of the reference was within the power and jurisdiction of the arbitrator, held as follows :
'So far as this point is concerned, we may note a decision of three Judge Bench of this Court in State of Orissa v. B.N. Aganvala, : [1997]1SCR704 , which has clearly ruled in the light of the earlier Constitution Bench Judgment of (his Court in Secretary, Irrigation Department, Government of Orissa v. G. C. Roy, : [1991]3SCR417 , that the claim for interest even for the pre-refercnce period was also within the power and authority of the arbitrator after the Interest Act, 1978. It is also not in dispute between the parties that in the present cases, the cause of action for reference arose after the coming into force of the Interest Act, 1978. Consequently, it cannot be effectively urged by the learned senior Counsel for the appellant-State that the arbitrator had no power to grant such pre-reference period interest. The first point is, therefore, answered in the affirmative.'
49. Whereas the law laid down in the case of Durga Ram Prasad v. Government of A.P., : (1995)1SCC418 , on facts has no application to the case on hand as that was a case where the Court disallowed the interest as the agreement itself had prohibited payment of interest.
50. However, interest from the date of Award till its payment is concerned, by exercising our discretion it is modified from 18% p.a. from the date of award till the dale of payment.
51. Perusal of the entire award showed that the Arbitrator never misconducted himself in passing the award. Nothing in the Award to show that the Arbitrator stated an erroneous proposition of law or such an erroneous proposition of law became a basis for this award. The award of the Arbitrator does not suffer from arbitrariness. Arbitrator did not actirrationally or capriciously. His findings are plausible, reasonable and does not suffer from any perversity.
52. The Court below considered very seriously and dispassionately the entire award consisting of findings and reasons. It also considered all the contentions raised by both sides and settled legal position, applied its mind and then upheld the award passed by the Arbitrator by making the award as a rule of the Court. Thus, the Award and the Order are the result of proper evaluation of evidence. We see no reason to take a view other than the view taken by the Arbitrator and the Court. The Award and the Order are just reasonable and lawful and as such no interference is warranted except as to modification of the interest from 18% p,a. to 15% p.a.
53. Accordingly with the above modification both the appeals are dismissed. There shall be no order as to costs.