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C.M.A. No. 3514 of 2003 and CRP. No. 4880 of 2003. Case: 1.The Superintending Engineer, N.S.R.C. O and M Circle, Lingamguntla Via-Narasaraopet, Guntur District. and The Executive Engineer N.S.R.C. O and M Division Macherla Guntur District, 2.The State of Andhra Pradesh, rep. by the Superintending Engineer, N.S.R.C. O and M Circle, Lingamgutla, Narasaraopet, Narasaraopet M.M.C. and The Executive Engineer, N.S.R.C. O and M Division, Macharla, Macharla M.M.C. Vs 1.D. Ranganayakulu-Contractgor, rep. by Power of Attorney holder, K. Sree Rama Murthy (died), S/o. Subba Rao, Power of Attorney Holder, Sri D.D. Ranganaykulu, Contractor, R/o. Kondapaturu, Kakumani Mandal, Guntur District., died - Makineni Peda Rattaiah, Added as power of attorney agent of D. Ranganayakulu, In the place of deceased K. Sree Rama Murthy, As per orders in I.A. No. 321/2000, Dt. 13/07/2000 and Justice Dr. K. Punnaiah, S/o. Papaiah, R/o. Road No. 3, Banjara Hills, Hyderabad, 2.D. Ranganayakulu-Contractgor, Rep. by Power of Attorney holder, K. Sree Rama Murthy (died), Makineni Peda Rattaiah, .... High Court of Andhra Pradesh (India)

Judgment Cited authorities 3 Cited in Precedent Map Related
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Case NumberC.M.A. No. 3514 of 2003 and CRP. No. 4880 of 2003
CounselFor Appellant: Sri. Y. Chandra Sekhar, Spl. GP for the Advocate General of A.P. and For Respondents: Sri S. Ravi, Sr. Counsel for G. Rama Sarma
JudgesSri G. Bhavani Prasad and Sri K.G. Shankar, JJ.
IssueArbitration Act, 1940; Contracts Act - Section 73; Interest Act, 1978; Banking Regulation Act, 1949; Usurious Loans Act, 1918; Civil Procedure Code (CPC) - Section 34 and 34(1)
Judgement DateApril 21, 2011
CourtHigh Court of Andhra Pradesh (India)

Order:

Sri K.G. Shankar, J., (Hyderabad)

  1. This common order disposes of the appeal as well as the revision. The Superintending Engineer and Executive Engineer of the Nagarjuna Sagar Right Canal are Appellants 1 and 2. In the revision, the State is the first Petitioner represented by the Superintending Engineer of the Nagarjuna Sagar Right Canal. The second Petitioner in the revision is the second Appellant in the appeal. The two Respondents in the appeal and the revision are identical. The second Respondent is the Hon'ble Arbitrator who is merely a proforma party. The parties shall be referred to as the SE, the EE (Superintending Engineer, Executive Engineer), the Contractor and the Hon'ble Arbitrator for convenience.

  2. The SE and the EE challenge the common judgment and decrees in O.S. No. 108 of 1996 and O.S. No. 110 of 1996 on the file of the Additional Senior Civil Judge, Narsaraopet. Through this judgment, the learned Additional Senior Civil Judge, Narsaraopet made the award passed by the Hon'ble Arbitrator on 02.03.1995 under the Arbitration Act, 1940, the Rule of the Court. Aggrieved by the judgment in O.S. No. 110 of 1996, the SE and the EE laid the appeal. Aggrieved by the judgment in O.S. No. 108 of 1996, they laid the revision. However, it is a common judgment with common reasoning by the trial Court.

  3. This appeal and revision were earlier disposed of by a Division Bench through a common order dated 01.11.2004. The claim of the first Respondent before the Hon'ble Arbitrator was Rs. 35,29,535/- Relying upon State of A.P. v. Obulureddy 2001 (10) SCC 30, the Division Bench of this Court held that the dispute was not arbitrable, as the dispute was for over Rs. 50,000/- and accordingly set: aside the judgments in O.S. Nos. 108 of 1996 and 110 of 1996 on the file of the Additional Senior Civil Judge, Narsaraopet.

  4. The first Respondent herein preferred SLP Nos. 5721 of 2005 and 5722 of 2005 from the judgments in the appeal and the revision herein. The Supreme Court granted leave and ultimately allowed the two cases as Civil Appeal Nos. 1087 of 2008 and 1088 of 2008 through a common judgment dated 07.02.2008 holding that the Appellants herein waived their rights to file objection to the award. A clarification thereafter was sought by the first Respondent through I.A. Nos. 1 and 2 of 2009 in the two appeals. The Supreme Court clarified through orders dated 10.08.2009 that the common judgment of the High Court in the appeal and the revision stood set aside through the common judgment of the Supreme Court dated 07.02.2008 and that the appeal and the revision shall be disposed of afresh by

    the High Court expeditiously. Thus, the appeal and the revision came up before us for our consideration.

  5. The facts leading to the filing of the appeal and the revision may briefly be stated at this stage.

    The facts are:

    1. The first Respondent is a contractor. He laid a tender for "lining the bed and sides of Nagarjuna Sagar Right Main Canal from Kilometer 23.13 to Kilometer 23.41". The estimated value of the work was Rs. 12.41 lakhs. The bid of the contractor was accepted. The agreement between the SE and the SE and the contractor concluded on 18.04.1986 for a sum of Rs. 11.22 lakhs. The contract is required to be completed during the periods of the closure of the canal in 1986 and 1987. The contractor, claiming that he executed the works entrusted to him, requested for the settlement of the claims. He also issued a notice on 02.04.1991 to the SE to settle his claim.

    2. Disputes arose between the SE and the EE on the one side and the contractor on the other side regarding the work conducted by the Contractor. The work indeed could not be completed in 1987 as contemplated by the agreement as the canal could be closed by 31.03.1988 only. The contractor claimed that he suffered losses in the execution of the works.

    3. The contractor consequently invoked the arbitration clause and filed O.P. No. 167 of 1991 on the file of the Principal Senior Civil Judge, Narsaraopet. The Court appointed the Hon'ble Arbitrator as the sole arbitrator.

    4. The Hon'ble Arbitrator awarded Rs. 15,21,600/- in favour of the Contractor together with interest at 24% per annum from 05.01.1994 on which date the reference was entered into by the Hon'ble Arbitrator till 02.03.1995 on which date the award was passed. The interest awarded by the Hon'ble Arbitrator worked out to Rs. 4,23,000/-. The Contractor consequently was declared to be entitled to Rs. 19,54,600/- from the SE and the EE.

    5. The Hon'ble Arbitrator also awarded compensation to the first Respondent under items 1 to 13 of the claim of the Contractor at Rs. 16,12,400/- together with simple interest at 24% per annum. The total value of the amount for which the award was passed by the Hon'ble Arbitrator was Rs. 35,72,000/-.

    6. The EE contended that the award was vitiated by misconduct of the Hon'ble Arbitrator and that the Hon'ble Arbitrator ignored Clause (10) of the Schedule-C of the Special Conditions of Agreement. The claim of the Contractor was thus resisted by the Appellants completely.

    7. In their turn, the SE and the EE filed O.S. No. 110 of 1996 to set aside the award of the Hon'ble Arbitrator. The learned trial Judge did not record any evidence. After hearing both sides, the learned trial Judge considered that the award was just and proper. He consequently allowed O.S. No. 108 of 1996 and dismissed O.S. No. 110 of 1996. He made the award the Rule of Court. As already pointed out, impugning the judgment, the Appellants laid the appeal against the judgment in O.S. No. 110 of 1996 and laid the revision against the judgment in O.S. No. 108 of 1996.

  6. The learned Government Pleader for Arbitration advanced his submissions on behalf of the SE and the EE. Sri S. Ravi, learned senior counsel countered the claim of the Appellants while arguing on behalf of the Contractor.

  7. The learned Government Pleader contended that the Supreme Court has already resolved the question relating to interest holding that the contractor would not be entitled to interest on the delayed payments if there was an agreement to that effect. He drew our attention to the award of interest at 24% per annum by the Hon'ble Arbitrator and by referring to Clause 59 of the Preliminary Specifications of the Andhra Pradesh Detailed Standing Specifications ('PS to APDSS' for short), he submitted that the contractor is not entitled to compensation on account of delays or hindrances to the work. He placed reliance upon Clause 69 of PS to APDSS prohibiting payment of interest on money due to the contractor. He further contended that the claim under Clause 12 (A) by the contract towards damages for delay in payment of bills to a tune of Rs. 74,880/- cannot be claimed by the contractor, in view of Clause 59 of PS to APDSS.

  8. The learned Government Pleader pointed out that the contract awarded in favour of the contractor was a lump sum contract as opposed to piecemeal or item wise contract and that notwithstanding various defaults urged by the contractor, the contractor would not be entitled to interest, vide prohibition through Clause 69 of the PS to APDSS. He further urged that as Clause 59 of the APDSS was found to be intra vires, the contractor is not entitled to compensation over by the delayed execution of the works.

  9. On the other hand, Sri S. Ravi, learned senior counsel contended that in respect of the claims under items 1A, 2A, 3A and 11A, Clause 59 of the PS to APDSS would not operate as a defence. He claimed that the contractor would be entitled to interest at least at 15% per annum keeping the interest rates of Reserve Bank of India in view. Award of interest at 9% per annum uniformly by Courts without reference to the rates of interest was considered by the learned Senior Counsel to be unjust and that the rate of interest, therefore, was prayed to be granted at 15% per annum at least.

  10. In the light of the rival contentions, the point for consideration is whether the award passed by the Hon'ble Arbitrator deserves to be confirmed and if so, to what extent.

  11. The exact value of the work entrusted to the first Respondent was Rs. 11,21,682/-. The time stipulated for the completion of the work was three months in 1986 and three months in 1987 during the period of the closure of the canal. When the Contractor sought for the extension of the time, the SE extended the time till 16.06.1989 to complete the works by invoking Clause 59 of the Preliminary Specifications to Andhra Pradesh Detailed Standard Specifications ('PS to APDSS' for short).

  12. However, the work could not be completed even by 16.06.1989. Curiously, the Contractor did not seek for further extension of time, albeit the EE desired that the Contractor should apply for further extension of time. The Contractor, on the other hand, addressed a letter on 13.12.1990 requesting for the settlement of the claim. The Contractor further intimated the SE and the EE that he would apply for the extension of time if the periods of closing and opening of the canal are adhere to a fixed time schedule.

  13. There are as many as 16 claims by the contractor in 29 items. In respect of claims 1 to 13, each of the claims is twofold. The first of these claims is the claim proper. The second of each of these claims is the claim relating to the interest over the main claim. So far as claims 14, 15 and 16 are concerned, there is no added demand for interest over the claim component. The demand for interest component over the main claim is covered by Clause 69 of PS to APDSS. They deserve to be considered while examining the implications of Clause 69 of PS to APDSS. The claims proper, which are the impugned claims, deserve to be examined at the out set.

  14. As already pointed out, the main claims are claim Nos. 1 to 13 numbered as claim 1A, claim 2A, claim 3A so on and so forth till claim 13A. The learned senior counsel representing the contractor contended that claim 1A, 2A and...

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