Case Note & Summary
The Union of India, represented by the Executive Engineer of the Central Public Works Department, filed an Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award passed in favor of the respondent contractor, A. K. Construction Co. The challenge was limited to Claim Nos. 4, 6, and 9 of the award. The contract was for civil construction work, and during its execution, there were deviations and extra items directed by the Department. The time for completion was extended by about four years without any restrictive conditions. The Arbitrator awarded Claim No. 4 for balance payment of substituted and extra items at the rate of Rs. 980 per square meter, noting that the Department had paid the same rate to a similarly placed contractor for adjacent building work during the same period. Claim No. 6 was for extra work done, which was not denied by the Department. Claim No. 9 was for prolongation costs, including overheads, tools, plants, and direct labour, amounting to over Rs. 38 lakhs, due to the extended period of the contract. The Petitioner argued that Clause 12 of the Central Conditions of Contract for Central P.W.D. Works, 2008, required pricing of deviations to be decided by the Engineer, and that the Arbitrator had no jurisdiction to award extra items. The court, per Justice Anoop V. Mohta, held that Clause 12 does not bar claims for extra items; it only provides for pricing by the Engineer. Since the work was done as directed and the Department had accepted similar rates elsewhere, the Arbitrator's award was reasonable and based on material on record. The court also upheld Claim No. 9 for prolongation costs, noting that the prolonged period was due to the Department's own actions and the contractor had suffered losses. The court found no ground to interfere under Section 34, as the award was not patently illegal or contrary to public policy. The petition was dismissed with no order as to costs.
Headnote
A) Arbitration - Section 34 Challenge - Scope of Interference - The court considered the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, and held that the Arbitrator's findings on facts and law, being plausible and based on material on record, do not warrant interference unless perverse or contrary to fundamental policy of Indian law. (Paras 1-6) B) Contract - Extra Items - Clause 12 of Central Conditions of Contract - The court interpreted Clause 12 of the Central Conditions of Contract for Central P.W.D. Works, 2008, and held that it does not bar the contractor from claiming extra items; it only provides for pricing by the Engineer. Since the work was done as directed and time extended without restriction, the Arbitrator's award of Rs. 980 per sq. meter for substituted items, based on payment made to similarly placed contractor, was justified. (Paras 2-4) C) Contract - Prolongation Costs - Claim No. 9 - The court upheld the Arbitrator's award of prolongation costs, noting that the contract was prolonged by about 4 years due to deviations and extra work directed by the Department, and the contractor suffered losses. The Arbitrator's reasoning was based on admitted facts and material on record. (Paras 5-6)
Issue of Consideration
Whether the Arbitrator's award on Claim Nos. 4, 6, and 9 under Section 34 of the Arbitration and Conciliation Act, 1996 is liable to be set aside for being in conflict with Clause 12 of the Central Conditions of Contract for Central P.W.D. Works, 2008 or for being patently illegal.
Final Decision
The court dismissed the Arbitration Petition, upholding the arbitral award in respect of Claim Nos. 4, 6, and 9. No order as to costs.
Law Points
- Section 34 of Arbitration and Conciliation Act
- 1996
- Clause 12 of Central Conditions of Contract for Central P.W.D. Works
- 2008
- Arbitrator's power to award extra items
- Prolongation costs
- Rate fixation based on comparable contracts
