SRI K. MARAPPAN (DEAD) THROUGH SOLE LR. BALASUBRAMANIAN v. THE SUPERINTENDING ENGINEER T.B.P.H.L.C. CIRCLE ANANTAPUR

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73Copy pinpoint73. The second situation is where the materials are drawn in excess of theoretical requirements. The contract contemplates that in such a situation, the excess drawn quantity must be returned to the Department in good condition and otherwise there will be recovery at the issue rate plus 100% surcharge or market rate whichever is higher plus storage and taxes. B

74Copy pinpoint74. The third situation contemplated is that if the materials are short drawn or short used it is specifically provided that in such a situation, the saving due to short drawal/ use should be secured to the Government by recovering the cost thereto at issue rate from the contractor. Thus, in the example, we have taken if 10 metric tonnes is actual quantity as per the specifications which can be drawn but if only 8 metric tonne is drawn by the contractor while he was to use 10 metric tonnes, the saving due to short drawal was secured to the Government by recovering the cost thereto at the issue rate from the contractor. This means that instead of 10 metric tonnes, if 8 metric tonnes is drawn, the contractor would still be liable for recovery from his bill for the entire 10 metric tonnes, though, he has actually drawn only 8 metric tonnes. In respect of short used material, though, properly drawn the recovery would be in addition to the recovery for the cost of materials which is returned as we have noted above. Further, the contract contemplates that if materials are required to be procured by the contractor, he must maintain separate ledger for each of the item which are so required to be procured by the contractor.

75Copy pinpoint75. This would mean that if the appellant had indeed secured cement from outside, the appellant was obliged under the Contract to maintain a separate ledger. Further the Contract contemplates that there could be recovery from the bill of the Contractor for the cost of cement which is actually not supplied to the contractor and it will be based on the theoretical requirement as we have already referred to above. Thus, the mere fact that there has been excess recovery meaning thereby that without issuing the cement to the appellant the amounts have been recovered would not mean that the appellant would be able to substantiate his claim that there was inadequate supply of cement. That is a matter which must be substantiated with reference to other material.

SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN 195 v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]

76Copy pinpoint76. But there are two situations which can arise. Cement may be available with the Department and the Contractor draws only lesser quantity than provided in the specifications which is based on technical requirements. In such a case, undoubtedly the Clauses which we have adverted to would apply. What however would be the position if cement is not available and consequently the Contractor is not supplied and he is not in a position to draw cement. In such a scenario also, will it be a case of drawal of cement by the Contractor which is less than the specified quantum? It would be so, but it may have different implications.

77Copy pinpoint77. At this juncture, we may look at the correspondence which may throw light. In the letter dated 30.06.1979 written by the appellant to the Executive Engineer, we find there is no mention even about the inadequate supply of cement. Next letter is dated 26.07.1980. This is a letter where reference is made to all the three contracts. There is a reference in this letter no doubt about the purchase of cement from other sources. He seeks return of the cement so that extra quantity of cement may be reimbursed. There is no reference to any particular quantity and there is no reference to which the other sources are.

78Copy pinpoint78. The next letter is dated 16.07.1981. Here the reference is made to Agreement No.10/78-79. In this letter there is no complaint about the cement. Finally, there is letter dated 07.10.1982 which is addressed by the appellant to the Superintending Engineer. Here the reference is made to the Agreement No.11/78-79. No doubt in the body of the letter he also adverts to the other contracts. Substantially, the letter is one where he makes various complaints and finally, he makes a claim for enhancement. Here he says in this letter that there is inadequate and irregular supply of cement which affected his steady progress of work during 1979, 1980 and 1981. He says inadequate supply caused him substantial loss to the work done. A look at the correspondence by the departmental officers at this juncture may be not out of place. Letter dated 13.11.1982 written by the Executive Engineer to the Superintending Engineer inter alia reads as follows: “It is a fact that there was difficulty in obtaining and procuring cement for the project. The enclosed table indicates the available cement in the division. The total cement is used on this project

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A alone for the works of Sri K. Marappan. It can also be seen from the statement the maximum percentage of cement available was spared to the works of Sri K. Marappan. Extreme efforts have been made for additional allotment of cement with great difficulty some additional allotment have been obtained as clarified in the statement. On the face of the over all shortage of cement and the possibilities of securing the full requirement of cement being bleak, the contractor could not be forced to increase the rate of progress which he was capable of managing, since most of the work carried out upto March, 81 being at lower levels of the dam. This shortage of cement was felt continuously. Reference is invited to the letter of Superintending Engineer No. 1230 CE dt. 13.6.81 and 831 CE dt. 27.4.79 wherein request for additional quantity of cement was made to Chief Engineer.

79Copy pinpoint79. In letter dated 18.11.1982 written by the Superintending Engineer to the Chief Engineer within 5 days of letter dated 13.11.1982 D Superintending Engineer recommended completion through the same contractor with enhancement. In letter dated 30.11.1982 written by Chief Engineer to the Special Secretary to Government, Irrigation Department, it is inter alia stated: “It is a fact that there was a difficulty in procuring the cement for E this project. Overall shortage of cement and the possibilities of securing the full requirement of cement being bleak, the contractor could not be forced to increase the rate of progress which he was capable of managing. The shortage of cement was felt continuously from the starting of the work till to-day.”

80Copy pinpoint80. From the correspondence, it would appear that the officers proceeded on the basis that there is a shortage of cement. Therefore, this appears to be a case where sufficient cement may not have been supplied to the appellant. However, it is to be remembered under Clause 10 of the agreement no right to compensation lies for short supply of cement. Here the case of the contractor appellant which is accepted by G the arbitrator is that this is not a case where compensation for short supply of cement is made by the appellant. All that the appellant is seeking is to be given, is the quantity of cement, which he brought from other sources or the monetary equivalent.

SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN 197 v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]

81Copy pinpoint81. We proceed on the basis that the claim for return of the cement does not involve infraction of Clause 10 which forbids compensation on account of short supply of cement. The question, however, arises whether the arbitrator has misconducted himself in arriving at the amount of cement supposedly brought from other sources by the appellant to carry out the work. As far as the monetary equivalent is concerned as we have already noted it is at the issue price fixed under the contract itself and it is not an escalated amount so the measure of the amount of reimbursement may not attract Clause 59. The only point, therefore, which remains is whether there was any basis for the arbitrator to have found that the appellant had indeed brought the quantity of cement from other sources and used it for the works in question. C

82Copy pinpoint82. The arbitrator has proceeded on the basis of the admitted correspondence between the officers to find that there is shortage of cement. The sub-court on the other hand finds that none of the correspondence by the officers indicate that the appellant was given permission to buy cement from outside. There is no indication in any of the letters written by the appellant which the other sources were from which he was procuring cement. The most important obstacle for the appellant is the clause in the contract which has been referred to by us and which is referred to by the sub-Court, namely, for procuring cement by the contractor, he must maintain ledger and which may be open to scrutiny by the officer as and when demanded. In this case, the appellant has not produced any ledger showing purchase of cement from other sources. There is no written permission produced to purchase cement from other sources. No voucher has been produced by the appellant to establish purchase of cement from outside.

83Copy pinpoint83. The arbitrator, however, has found that even non-production of vouchers is not material as it is proved that appellant has purchased cement from outside. There are two things which apparently the arbitrator has taken note of. The arbitrator finds that there is no denial about the quantity of the work done by the contractor and also about the quantity of cement used for bringing from other sources. It is stated in the counter affidavit that exact short supply of cement can be shown only after taking over of measurement. It is further found that measurement was already taken. The second aspect is arbitrator finds that as the unstamped receipt and the cement issue register though called for by the appellant

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A was not produced, adverse inference must be drawn. If the matter as alleged is not denied or is admitted then it may not be necessary to adduce evidence to prove the same. This principle is equally applicable before the arbitrator as it is before the court of law. Perhaps it is all the more applicable in the case of proceedings before an arbitrator.

84Copy pinpoint84. We are in one sense handicapped by the fact that the appellant has not produced the counter affidavit filed by the State before the arbitrator. It is true that if the case pleaded by the State amounts to admission that the cement was brought from outside by the appellant and the matter was only regarding the measurement to be carried out that may give the impression that the arbitrator particularly having regard C to the non-production of the unstamped receipt and cement issue register despite being called for had some justification for coming to the conclusion that the appellant had procured cement from outside. Then the further question would be the only quantity of cement which was purported to be bought from outside by the appellant.

85Copy pinpoint85. State definitely has a case, however, that there is no evidence by the appellant having procured cement from outside sources as he has not produced vouchers as that is seen dealt with by the arbitrator. The exact quantity of cement purchased from outside is not pleaded. Instead what the appellant contended for and what was accepted by the arbitrator was that the quantum of cement which was used could be found out from the quantum of work done. This is clear from the statement even on the basis that when a particular quantum of work is done, as per the theoretical requirement for cement involved in such work, the quantity of cement actually used by the appellant has been arrived at and after deducting the quantum of cement which was actually issued, the balance amount of cement which the appellant has used for the work from outside source has been arrived at. We have referred to the contractual provision and it would be hazardous to arrive at the amount of cement, used from other sources based on quantum of work done.

86Copy pinpoint86. But arbitrator overlooks the fact that under the contract the appellant was supposed to make entries in the ledger. A party is supposed to produce the best evidence or rather the evidence which under the contract is contemplated. The failure on the part of the appellant to produce the ledger has fatal consequences. The matter becomes further

SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN 199 v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]

aggravated by the failure on the part of the appellant to even produce vouchers or bills in support of the claim to purchase the cement from outside sources. This is even if we are to ignore the fact that there is no written permission for purchase of cement from outside. We proceed on the basis that a contractor may without written permission but for the purpose of the work purchased cement from outside. But certainly, the fact that there are neither vouchers nor any ledger entries nor bills produced which persuades us to hold that the matter may warrant interference with the award under Section 30. We are not inclined to accept the claim. CLAIM NO.VII C

87Copy pinpoint87. As regards this claim, the claim appears to be that appellant collected materials and it was lying at the site. Admittedly, the appellant has not used this material for the purpose of doing the work. Only the case set up by the appellant is that he was given an assurance that he will be permitted to carry out the work and therefore, since he has spent money for the same, he must get the amount which is claimed for having spent on the material. We are of the view that insofar as the appellant has not used any of the materials to carry out the work and sets up the claim only on the basis of assurance which has not been admitted, the action of the appellant in purchasing the materials cannot result in establishing his claim for compensation. It is to be noticed that the appellant raised a claim for enhanced compensation. He alleged that there was delay on the part of the respondent on various grounds. This is apart from alleging other factors like breakout of malaria, unfavourable weather and delay in taking decision by the departmental officers, which contributed to escalation in cost. Correspondence was exchanged with the Executive Engineer and the Superintending Engineer, the F Superintending Engineer and the Chief Engineer and finally between the Chief Engineer and the Government. It appears that at that stage appellant invoked the arbitration clause and a panel of arbitrators gave their award. In fact, the work itself was stopped. Clause 59 prevents the Court from awarding compensation on account of any factor relating to the delay G which may be due to any cause whatsoever. In such circumstances, we are of the view that the appellant has also not made out any cause for compensation in regard to this claim.

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A CLAIM NO.IX

88Copy pinpoint88. As far as the question relating to interest is concerned, the arbitrator has awarded interest at 12% from the date of the claim but excluded interest from commencement of proceeding till date of award. The question relating to interest is no longer res integra as we find that the issue has been dealt with in a recent judgment of this Court in Assam State Electricity Board & Ors. v. Buildworth (P) Ltd. reported in 2017 (8) SCC 146 to which one of us was a party. As long as the agreement between the parties does not prohibit grant of interest and the matter is referred to the arbitrator, arbitrator would have power to grant interest pendente lite. The Court inter alia held as follows:

“21. The next aspect of the matter relates to the award of interest for the period from 7-3-1986 to 31-12-1997. The arbitrator awarded a lump sum of Rs.20 lakhs for a period of 11 years. The High Court set aside the award of interest on the ground that Section D 29 of the Arbitration Act, 1940 contemplates the award of interest only from the date of the decree. The issue as to whether interest could be awarded for the pre-reference period and pendente lite under the Act of 1940 is not res integra. In Irrigation Deptt., State of Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508, a Constitution E Bench of this Court held that: (SCC pp.533-34, para 44)

“44….. Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount of independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes – or refer the dispute as to interest as such – 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.”

SRI K. MARAPPAN (D) THR.SOLE LR.BALASUBRAMANIAN 201 v. SUPERINTENDING ENGR T.B.P.H.L.C. [K.M. JOSEPH, J.]

89Copy pinpoint89. The sub Court set aside the award of interest for the period from 26.4.1988 till the date of the award namely 19.8.1988 which is the pendente lite interest. This is on the basis that arbitrator has no power to award interest on amounts found due. This is purportedly followed in the judgment of this Court in Smt. Aruna Kumari vs Government Of Andhra Pradesh And Anr. reported in AIR 1988 SC 873. This Court took the view that entering upon reference is to be taken as the date of commencement of arbitration proceedings for calculation of interest. And this Court took the view therein that there is no power to grant interest from the date of commencement of arbitration. However, in view of the decision in Jugal Kishore Prabhatilal Sharma vs. Vijayendra Prabhatilal Sharma 1992 (1) SCC 508 as followed in The C National Highways Authority vs. Afcons-Apil Joint Venture 2017 (8) SCC 146, the sub Court was not justified in setting aside interest and the interest as awarded by the arbitrator is restored.

90Copy pinpoint90. Accordingly, we partly allow the appeals. The award in so far as it relates to Claim No.I, as accepted by the sub-Court is restored D along with interest on the same as awarded by the arbitrator. The amount shall be calculated and paid within two months of production of certified copy of this judgment.

Devika Gujral Appeals partly allowed. E