State Oe Orissa & Another v. Kalinga Construction Co. (P) Ltd

Grover, J. This is an appeal by certificate from a judgment of the Orissa High Court relating to an award given by Shri A. V. Viswanatha Sastri an Ex-Judge of the Madras High Court in a dispute which arose between the respondent and the Union of India in respect of a claim made by the former for a sum of Rs. 35,45,080.91 which was stated to be due for earthwork done en-the right dyke of the Hirakud Dam.

The Chief Engineer, Hirakud Dam, invited tenders on be-half of the Union of India for execution of work specifying certain details as to how tenders were to be submitted. It .appears that before the tenders were invited certain estimates were prepared in the office of the Chief Engineer. The intending contractors were to submit tenders stating the rate for depositing earth on the Right Dyke site including all lifts and leads. The respondent company submitted a tender which, according to the Chief Engi-neer, was not in the form invited by him as certain extraneous L235Sup.CI-13 matter,S1 w~re stated t..> have been introduced. The Chief Engineer and the representatives of the respondent company held a confe-rence at which certain agreements were arrived at. The tender of the contractor was provisionally accepted on December 28, 1951; the formal contract was executed much later on March 21, 1953. The work., started ,in February 1952 and took four years for completion. The earthwork was done by the company by ll nianual labour for a year in the beginning and thereafter it was done io a large extent by machinery The earth required to erect .the dyke was dug up from certain areas demarcated by the Engi-neering Department near the site of the dyke. The places from which the earth had to be taken were called "borrow pits'' or ''borrow areas". The company dug up earth from the "borrow pits" and dumped it on the site of the dyke upto the required speci· fications. This involved movement of the loose earth both verti· ~ally and horizontally from the borrow pit to the dyke. The verti· cal movement was styled us "lift" and the horizontal movement us "lead". When the company started employing the heavy machi· nery from the beginninii of 19~3 onwards a number of ramps had to be constructed to enable the machinery td 110 up from the bMrow pits to the dyke.

It has not been d.isputed that for the earth\vork <lone by the company it ·received payment from the Government of an amount aggregating Rs. 1,08, 19,543.00. This amount was paid in accordance with the rate in item J -A of the contract (Ext. P-69). According to that rate Rs. 45!- were to be paid for 100 ~ubic feet of earthwork of all kinds of soil laid in 6" layers with rough dress-ing including all lifts and average lead not exceeding. 10". Ac-cording to the company an additional sum of Rs. 26,20,798.75 was due in addition to the amount already paid iri respect of extra leads including lifts. An amount of Rs. 2 lakhs was claimed on account of the construction of ramps .. The company further claimed a sum of Rs. 5.34,282.16 on account of interest on the aforesaid two amounts. This claim was disputed by the Union of India and it was maintained on its behalf that the company had been fully paid for the earthwork done by it according to the terms of the contract and that the company was not entitled to payment for lifts nor was there any occasion for leads in excess of an average of 10 and further that the ramps in so far as they were outside the dyke were not to be paid for while those which had been incor-porated in the dyke had already been paid for as a part of the dyke.

The agreement by which reference was made to the arbitrator was as follows :- ·

"The disputes and difference between the parties re-lating to payment of lift equivalent and leads for machine rcute are referred to the arbitration of Shri A. V. Viswanatha Sastri, retired High Court Judge, Madras and his award shall be final and binding on the parties."

On November 16, 1958 the following issues were framed b) the Arbitrator by the consent of both the partie's :-

"(i) ls the claimant entitled to any payment for lifts

under the terms of the contract between the parties? · NOTE : Both sides agree that 1 foot of lifts is equal

to 12 t feet of !~ad.

(ii) Whether the claimant is entitled to payment for

machine leads where machines have been used for earthwork and if so, on what basis and at what rates?

(iii) Whether in the case of machine leads, lifts are

not taken into account as pleaded by the Union of India?

(iv) Whether the claimant is entitled to the cost in-

curred in putting up the ramps '?

(v) ls the Union of India estopped from denying

liability· for payment of lifts and machine leads for the reasons stated in paragraphs 11 to 14 of the Statement Claim of Kalinga Construction Co. (P) Ltd.?

(vi) Is the claimant entitled to interest for the period

during which the amounts payable to the claim-ant remained unpaid by the Government, if so. at what rate ?

(vii) What is the amount due to the claimant from the

Union of India?"

A good deal of oral and documentary evidenctt.,was led by both the parties before the arbitrator. After discussi!lg the same he crune to the following conclusion~ :-

¶1The tender must be taken to have been made and accepted on the basis that the whole work was to be done by manual labour.

¶2According to the terms of the contract if tl'•e average lead of 10 had to be exceeded the orders of the Chief Engineer in writ-ing had to be obtained by the contractor and then the extra lead

was to be paid for at the rate of Rs. 1.12 As. per 1000 cubic feet. The company did raise the question of payment for lifts as early as December 30, 1952 and sought the orders of the Chief Engineer in writing for the ~xtra lead rnsulting from the conversion of lifts into leads but the Chief Engineer never made any order in writing. The arbitrator believed the evidence of the Chief Engi-neer Shri Kanwar Sain that he passed no'"Orders allowing the com-pany an extension of lead beyond the average 10. As the obtain-ing of the written order of the Chief Engineer was an essential condition which had to be complied with before a claim for extra lead could be made the coJllpany was not entitled to payment for the extra leads beyond the average 10.

(3) The letter Ext. P-6 dated March 30, 1953 which was sign-ed by the Superintending Engineer forthe Chief Engineer had not been proved to have been written· either under the instructions of . the. Chief Engineer or approved by him. In this letter it wa!

stated, inter a/ia, that the word~ "average I 0 leads mentioned in the special conditions of the agreement include the initial lead and lift and all ether lifts between fae borrow area and the Dyke". The Chief Engi12eer's evidence relating to Ext. P-6 was believed.

The final conclusion of the arbitrator on issue No. l was that under the terms of the contract between. the panies the rate of Rs. 45/- per 1000 cubic feet covered all lifts and that lifts had' not to be separately paid for. On issue No. 2 the company's claim I!: for extra payment for machine leads was held to be untenable. The finding on issue No. 3 was that in case of machine leads lifts were not to be taken into account. On issue No. 4 the arbitrator held that the company was not entitled to recover the costs in-curred in putting up the ramps. On issue No. 5 it was decided that the Government was not estopped from denying liability for payment for lifts and machine leads. On issues 6 and 7 the arbi-trator found that no amount was payable by the Union of India to the company rior was the Union liable to pay any interest.

The respondent company fil~d what was called a plaint under ss. 30 and 33 of the Indian Arbitration Act 1940 in the court of the Subordinate Judge, Sambalpur, challenging the award on various grounds and prayed that it be set aside. It was further prayed that another arbitrator be appointed to make a fresh award regarding the disputes between the parties. The Subordinate Judge set aside the award by his order dated March 17, 1962. The Urion of India preferred an appeal to the High Court which was heard by Barman and Das, JJ. Learned judges gave dissenting judgments, Burman J., was of the view that the award could not be sustained whereas Das J ., was of the opinion that the award was not !iab1e to be set aside. The appeal was then heard by a third Judge G. K. Misra J. On issues l and 2 Misra J. agreed with the judg)llent of Barman J., but on issues 3 and 4 he concurred with the decision of Das J. According to his judgment the award could not be set aside on issues 3 and 4 whereas it was liable to be set aside on issues l and 2. As the issues were severable he set aside the award only on issues l and 2.

A bare perusal of the judgment of Misra J. would show that he decided the matter as if he was entertaining an appeal against the award itself. He re-examined and re-appraised the evidence which had been considered oy the arbitrator and held that the arbitrator was wrong in coming to the conclusion that the work was contemplated by the coniract to be done by manual labour alone. According to him under the agreement payment for machine leads was contemplated from the very beginning or at any rate was not excluded. He examined a large volume of evidence including Ext. P-6 as also the oral evidence of the Chief Engineer Shri Kanwar Sain and. held that from the course of correspon-dence it was clear that in dealin~ with the contractor or the Execu-tive Engineer almost all the letters on behalf of the <;:hief Engi-neer were being dealt with by the Superintending:E~J:r. Once Ext. P-6 was admitted to be genuine and was bsu!lif{}y1he Super-intending Engineer in the ordinary course of correspondence it was for the appellant to establish by production! elf the relevant records that that letter had been issued withol!t':lttd\hority of the Chief Engineer. Misra J., had no hesitation in holding that Ext. P-6 was written under the authority of the Chief Engineer and was binding between the parties. Here again what Misra J., did was to appreciate the evidence which had been considered by the arbi-trator, in particular, the testimony of the Chief Engineer. The arbitrator had believed the statement of the Chief Engineer that Ex. P:6 had neither been.issued under his authority nor with his approval. Once this part of his statement was believed by the arbitrator it was not open to Misra J., to sit in appeal over the conclusion of the arbitrator in proceedings for setting aside the award.

The other serious error into which Misra J., fell was to record a finding on the p«yment for extra leads beyond I 0 in reversal of the conclusion of the arbitrator. This is what the learned judge proceeded to say :

"The next point for consideration is whether the payment for extra leads beyond I 0 are to be rejected because the Chief Engineer's order in writing had not been obtained before the work involving additional leads was executed. Both under Ex. P. 2 and Ext. P. 69 this term had been incorporated. In the peculiar circum-stances of this case, however, it must be taken that the

condition had been fulfilled eveJL though there was no order in writing. It was for the Executive Engineer and the Superintending Engineer, who were getting the work done by the Company, to obtain the order in writ-ing or not to allow the Company, to work beyond 10 leads including lifts without obtaining the order of the Chief Engineer in writing."

Once it was found that under the terms of the contract the order of. the Chief Engineer in writing had to be obtained befor(l the work involving additional leads was executed arid in the absence of any such written order it was not ope.n to the court to hold that the appellant-Union of Jndia-was liable for payment of extra leads beyond 10 by applying some principle or rule analogous to estoppel. It is no doubt true that the company had Ileen writing to the Engineering Department in the matter and that the latter did not, for a considerable time, send any reply but the company was debarred from asking for any additional payment Jn the absence of the Chief Engineer's order in writing. If the arbitrator came to that conclusion it could not said that there was any error appa· rent in his award 'which would justify setting it aside.

For the reasons given above the appeal is allowed and the order of the High Court setting aside the award dated July 19, 1959 in part as indicated in the judgment of Misra J., is hereby reversed. The proceedings instituted by the respondent under ss. 30 and 33 of the Indian Arbitration Act, 1940, shall stand dismissed. In view of the entire circumstances the parties are left to bear their own costs in this Court.