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ARBITRATION CASE.

Work: Provision of Accommodation for the laboratory, officers rooms and class rooms at IRISET Secunderabad. Value : Date of Commencement : Date of Completion : Completion period : Work Completed : Rs. 4,39,638 28-1-1981. 27.10.1981. 9 months 31-8-1983

DEVELOPMENTS DURING CONTRACT Four extensions have been given up to 31.8.1983 at the request of the contractor. Certain disputes arose during the execution of the contract and Contractor framed 5 claims on 12/10/1984. As per GCC, GM appointed Railway Joint Arbitrators (2) on 2-6-1986 to adjudicate the disputes on the following claims CLAIMS AND AMOUNT AWARDED (1st Arbitration) Claim No. 1st Claim 2nd Claim 3rd Claim 4th Claim 5th Claim Details of Claim Expenditure incurred for delay caused by Railways Rock excavation done by hand chiseling instead of blasting Extra cost due to excessive use of steel. Reduction of quantity of Snowcem item Compound interest Total value Claim Amount (Rs) 2,35,000 6157 1,87,729 40,568 @24% 4,69,454 Award Amount (Rs) 54288 2657 1,29,000 Nil S.I.@ 10% from 31.3.1984 185945+ Interest as above.

DEVELOPMENT AFTER AWARD Joint arbitrators passed the award on 28.3.1990 awarding Rs.1,85,945 with simple interest @10% from 31.3.1984 till date of payment. Award amount of Rs. 1,85,945 was satisfied in the month of February 1991. But interest portion (Claim No.5) challenged in the City civil court. a) Joint arbitration filed the award to make the award as a decree of the Court. b) The Contractor also challenged the entire award. The lower court set aside the award on 13.6.94 holding that the joint arbitrators has not given the reasons. Further directed that the fresh arbitrator may be appointed to adjudicate the disputes. Railway requested Contractor to repay the award amount; Contractor did not. As a result of the court directions, fresh Joint Arbitrators have been appointed on 31/8/2005. The Contractor framed two more claims as additional claims in addition to the already referred claim of 5 claims on 7-12-1994.
Additional claims of 6 and 7 was referred to Arbitrator on 8/11/95 and another claim of 1.3 cores rejected by department. It was specifically advised to the Joint Arbitrators that the award may be passed giving reasons and decide the excepted matters. The claims referred and the award pronounced on 5/10/96 as under.

CLAIMS AND AMOUNT AWARDED (2nd Arbitration)

Claim No. 1st Claim 2nd Claim 3rd Claim 4th Claim

Details of Claim
Extra expenditure due to delay caused by Railway administration. Extra cost due to excess use of steel Reduction of quantity of snowcem Compound interest @ 24% p.a.

Claim Amount (Rs) 2,39,000


1,87,725 40568

Award Amount (Rs) 2,35,000


1,65,829 40,200 18% simple interest

5th Claim 6th Claim


7th Claim a) b) c) d) e) Total

Additional Claims:
Legal charges from 31.3.1984 10% of the award amount. 20% of the amount i.e. Rs. 9,78,454 29,000 72,160 34,528 24,600 11,41,940 10% of the award amount. 15% on the award amount i.e. Rs6,69,504 Nil 18% simple interest. Nil Nil Total

Overhead and profit and loss due to delay in finalizing the Claims for 31.3.84 to 30.11.1994. Final bill amount of Rs.29,000-- 20% compensation for 5 years. Interest 24% compound interest on Rs.29000/1984 to 1990 Profit and loss of interest on Rs.29,000 from 1984 to 1990. Idle establishment of 6 months 16,11,738

Railways Counter Claims


1. Amount paid under earlier award .18% simple interest.

DEVELOPEMENTS AFTER THE 2nd AWARD


Award amount other than the award amount on counter claims was contested by Railways. Arbitrators filed to make it as decree of the court. Lower Court rejected Claim Nos. 1and 7 for an amount of Rs.9,30,604 and allowed award on other claims and counter claims. Railway paid the due amount. Contractor challenged the rejection of award on Claim No. 1& 7. The High court on appeal allowed Claim No.1 and rejected Claim No.7. Railway challenged High court order (claim no.1) in the Supreme Court in 2001and Contractor also challenged high court order on award on Claim No.7in the Supreme Court Contractor filed EP in High court and obtained amount under Claim No.1. The appeals are tagged together and pending since 2001.

In the mean while the Contractor filed another case before the city civil court No. OPNo./02 for appointment Arbitrator to settle the dispute which are emanated after the high court case for a value of Rs.1.5 cores on 5 claims. The rejected claim 1.3 cores also figure out . Lower court appointed Sri J.Venugopala Rao retired Dist.Judge to adjudicate the dispute by order dated 13.10.2004. Decided not to appeal against the appointment as Arbitrator is empowered to have is on jurisdiction.

Claim No. 1st Claim 2nd Claim 3rd Claim 4th Claim 5th Claim

Details of Claim
Loss of turn over and direct damages to the profession estimated at 1.3 crores from 1983 to 1994 Loss of profit and over head for the period of 31.10.87 to 31.12.83 Business damage up to 1.6.98 Expenditure on Arbitration proceeding Compound interest on the above claim i.e 24% PA

Claim Amount (Rs) 1.30 crore

Rs 1,69,559 Rs 16,00,000. Rs 2,25,000

Award Amount (Rs) 61,35,017 (72.76 lakhs 11.4 lakhs awarded on earlier award) Withdrawn.
Withdrawn 1,49,350 @ 18% simple interest from 18.6.99 till date of realisation on Rs.61,35,017.

POINTS MADE BEFORE ARBITRATOR RAILWAYS ARGUMENTS


It was strongly contended by the Railways that the claims are barred by limitation. Not maintainable under sections 55 and 73 of the Indian Contract Act 1872. Opposed to public policy. Relied upon number of judgments. It was contended by the Railways against above offer that, the jurisdiction of the arbitrator only to settle the dispute in accordance with the terms of reference, but not as a conciliator Arbitrator has no jurisdiction to deduct the earlier amount and pass the award as requested by the claimant. Arbitrator has no jurisdiction to allow the contractor to withdraw the case which

is pending before the Supreme Court. The claimant has not submitted any evidence as to how he is entitled the loss of turn over and its authenticity. The proposition of the contractor is against to the public policy. The contractor was paid by the Railways so far, the value of the contract plus Rs.17 lakh as a compensation i.e. total Rs.21 lakh paid for a value of Rs.4 lakh contract. The contractor was sufficiently compensated. There is no law that a arbitrator can act without looking into the merits of the case CONTRACTORS ARGUMENTS: On the other hand, the Contractor supported his claims stating the amount which was paid by order of the court, if paid on day of the completion of the date on which the work is completed i.e. on 31.8.1983, he could have earned 10% turnover and this loss of turnover is about Rs.2 crores , but he restricted to Rs. 1.3 crores. The Contractor submitted before the sole arbitrator that if he awards the amount what he is claiming, will refund the amount paid earlier and also withdraw the case filed by him before the Supreme Court. But the sole arbitrator turned down all the pleadings of the Railways and awarded above claims by award dated 9-8-2005. CONTESTED AWARD IN CITY CIVIL COURT The award is contested in City Cvil Court in 2005 Contractor offered to withdraw the case from Supreme Court provided the award is paid Contractor requested for acceptance of award wwith a offer of reduction in Interest rate Contractor requested for out of court settlement which is turned down by RailwaY.

RECENT DEVELOPMENT IN SUPREME COURT Supreme Court decided Claim No.1 of award in Railways favour in 2008 Issued notice to contractor to return the Money PRESENT POSITION Chhallenge of 3rd arbitration award is in advanced stage of hearing in City Civil Court