Holding

The limitation period starts only upon proper notice of filing of the award; since no such notice was given, the application was not barred, and the award is upheld except for the sales‑tax refund and loss‑of‑profit claims which are set aside.

Summary

The dispute arose from contracts for work where the parties had agreed to refer disagreements to arbitration. After a fresh award was made by a newly appointed arbitrator, the appellant sought to set aside the award, challenging several items including sales‑tax refund and loss‑of‑profit claims, and also argued that the application to set aside was barred by the 30‑day limitation under Article 119(b) of the Limitation Act, 1963. The Supreme Court held that the limitation period begins only when a proper notice of filing of the award is given to the parties, which did not occur; therefore the application was not time‑barred. The Court also clarified that courts may interfere with an arbitral award only when the arbitrator exceeds his jurisdiction or the award is manifestly erroneous, and upheld most of the award except for the sales‑tax refund and loss‑of‑profit components, which were set aside. The award was consequently modified and the appeals were disposed of.

Issues considered

The commencement of the 30‑day limitation period for filing an application under Article 119(b) of the Limitation Act, 1963 in arbitration matters.
The scope of judicial interference with an arbitral award under the Arbitration Act, 1940.
Whether the arbitrator exceeded his jurisdiction in awarding sales‑tax refund and loss‑of‑profit compensation.
Whether the appellant's application to set aside the award was barred by limitation.

Legislation cited

Arbitration Act, 1940s. 15, s. 17, s. 30, s. 39(2), s. 5
Limitation Act, 1963s. Article 119(b)

Subjects

ArbitrationLimitation ActArbitral award modificationJudicial interferenceSales taxLoss of profitContract work disputes

Judgment

BHARAT COKING COAL LTD. A
V.

L.K. AHUJA .

APRIL 12, 2004

[S. RAJENDRA BABU AND ASHOK BHAN, JJ.] B

Arbitration Act, 1940-Sections 15 rlw 30 and 39(2):

Dispute-Award of Arbitrator-Grant of claims-Application for setting
aside and improving the award-Held: In view of the facts of the case award C
modified

Award of Arbitrator-Interference with- Scope of-Held: When award
is passed in view of pleadings, the evidence and terms of contract, there is no
scope for interference-Even if two views are possible view of Arbitrator D
would prevail-However, the same can be interfered with when Arbitrator
exceeds the terms of agreement and award is passed in absence of evidence
apparent on the face of the award.

Limitation Act, 1963-Artic/e 1J9(b)-Application for setting aside
award-Limitation Period-Commencement of-Held: It commences from the E
date of notice of the same by the Court and not from the date offiling as mere
knowledge of passing an award is not sufficient.

Disputes in respect of contract of work were referred for arbiLation.
After a round of litigation, Supreme Court remanded the matter back to
Arbitrator for fresh consideration, appointing a new Arbitrator. There F
was large difference in the original and subsequent claim. The Arbitrator,
regarding claim of final bill, found that the same had not been paid fully
and allowed the claim regarding the balance amount. In the final bill,
claim was also made with regard to extra work and the same was rejected
on the ground that there was no order in writing by the Engineer-in-Chief G
and that even if it had been executed, it had been paid for. Claim for
labour escalation was awarded around 50% of the claim because for
prolongation of the work as contractor as well as appellant, both were
responsible for the de!ay. Claim for refund of Sales Tax was allowed by
Arbitrator holding that Sales Tax was leviable. Claim for additional
1105 H
1106 SUPREME COURT REPORTS [2004) 3 S.C.R.

A payment consisted of four items i.e. extra work, watch and ward expenses
for the staff of 18 members, rolling margin and refund of security deposit.
Claim for extra work was rejected as the same was already considered in
final bill. The claim for watch and ward expenses was awarded only to
the extent of Rs. 1,40,000 as against Rs. 7,09,000 for a reduced period of
14 months holding that 3 members of staff would have been sufficient.
B The other two claims were also rejected. Regarding material escalation
only half of the claim was allowed on the ground that though the material
was used, but in view of having secured a sum by way of advance, the
escalation would get off-set and further running account payments would
have taken into consideration the price rise. Claim for loss arising out of
C turnover due to prolongation of work was allowed to the extent of 15%
of the profit, holding that there was no justification for asking for the
compensation under the head, as compensation was obtained on account
of escalation in wage and material price. Interest was also paid on the
amount. The award was submitted in this Court on 18.2.2002, copies of
which were also served upon the parties. On 11.3.2002 when the matter
D was listed before the Court, parties took notice of the same. On I 1.4.2002
appellant filed application raising objection to the passing of decree in
terms of the award.

Respondents contended that the limitation period for filing
E application for setting aside an award in terms of Article I 19(b) of
Limitation Act, 1963 is 30 days from the date of filing of the award in the
Court and hence objections filed were barred by limitation as the counting
of 30 days commenced on 18.2.2002.

Disposing of the appeals, the Court
F
HELD: I.I. Article 119(b) of the Limitation Act, 1963 prescribes
a period of limitation of 30 days for making an application after the
required notice regarding filing of the award in the Court is given to the
parties. If there is no material to show that a notice of filing of the award
has ever been given to the parties, any period of limitation as prescribed
G in Article II 9(b) loses its significance. Mere knowledge of passing of an
award is not enough. The period of limitation will commence as provided
in Article 119(b) only upon notice as to filing of the award in the Court
has been given to the parties concerned. 11111-A-BI

1.2. Though on 18.2.2002 the Registry notified the submission of the
H award in the Court by way of an office report, but the same cannot be
BHARAT COKING COAL LTD. v. L.K. AHUJA 1107
,.,;.,
treated to be in the nature of a notice. The noting made by the Registry A
in the office report merely brought to the notice of the Court as to what
had transpired and as the matter was being listed before the Court, a copy
was served upon the parties concerned. It is only thereafter it can be said
that the Court directed issue of notice to the parties regarding filing of
the award which has been sent by the Registry. The Registry on its own
could not have issued a notice without a direction from the Court in this
B
regard. In that view of the matter there is no notice <Jf filing of the award
in the Court to the parties as contemplated in Article l l9(b). Further on
11.03.2002 when the matter was listed before th.~ Court, the parties
concerned took notice of the same and thereafter, objections have been
filed by the parties. c
Dewan singh v. Champa! Singh and Ors., AIR (1970) SC 967, relied
on.

Indian Rayon Corporation Ltd. v. Raunaq and Company Pvt. Ltd., (1988)
4 SCC 31; Food Corporation of India and Ors. v. E. Kuttappan, (1993] 3 D
) SCC 445 and State of Bihar v. Hanuman Mal Jain, (1997) 11 SCC 40,
distinguished. [l ll l-C-F)

2.1. When the Arbitrator has applied his mind to the pleadings, the
evidence adduced before him and the terms of the contract, there is no
scope for the court to reappraise the matter as if this were an appeal and E
even if two views are possible, the view taken by the Arbitrator would
prevail. So long as an award made by an Arbitrator can be said to be
one by a reasonable person no interference is called for. However, in cases
where an Arbitrator exceeds the terms of the agreement or passes an
award in the absence of any evidence which is apparent on the face of the F
award, the same could be set aside. (ll 13-A-B)

2.2. It cannot be said that there is absolutely no material to make a
claim by the contractor with regard to extra items because these extra
items have been mentioned in the measurement book and which clearly
indicated that the work had been executed and he treated that the entry . G
in the measurement book will itself amount to order in writing in terms
of clause 11 of the agreement and, therefore, allowed the claim. In these
circumstances, it cannot be said that the item claimed for extra works
referred to in the final bill is the same as the claim for extra works
wherever such a situation has arisen, the Arbitrator has examined the
same. If appropriate pleadings had been raised, the Arbitrator would have H
1108 SUPREME COURT REPORTS 12004] 3 S.C.R.

A certainly considered this aspect and in the absence of the same, the view
taken by the Arbitrator in this regard cannot be interfered. Only two
items which had bee'! allowed by the Arbitrator, which have beer. adverted
to by this Court as a sum of Rs. 49,513.02 which was still to be paid and
a sum of Rs. 91,013.72 as extra items of works which was disclosed in the
B measurement book. Therefore, there is no infirmity on this aspect of the
claim. 11114-F; 1115-B)

2.3. When on the basis of the pleadings and overall view of the
situation arising as to the rise in the cost of wages, having awarded a
lumpsum amount under the head Labour Escalation, it is not necessary
C to interfere with the award on this aspect of the matter. 11115-DI ,

2.4. There is a clear error apparent on the face of the award in
having allowed the claim for refund of Sales Tax by the Arbitrator. The
award was based on a Government Notification which laid down that if
the works had been handed over prior to 1.4.1984 Sales Tax was not
D leviable. But the works having been executed on 31.5.1984 it cannot be
said that terms of the Notification had been complied with and therefore
no claim could have been made by the claimant. 11115-E-Fl

2.5. In assessing the situation regarding watch and ward staff, the
Arbitrator has exceeded his jurisdiction or that there was no material at
E all before him in assessing the situation that there was some delay in
handing over the flats and watch and ward had to be maintained, he has
awarded for a reduced period of 14 months @ Rs. 10,000 per month.
Therefore, it cannot be held that this conclusion suffers from an error
apparent on the face of the award. 11116-F-G)

F 2.6. Regarding claim for material escalation, when there was no
dispute as to the fact that materials had been used for the purpose of the
project and the value thereof, the claim made by the appellant having been
duly examined by the Arbitrator and after giving due allowance to the
advances that have been made, the award made by the Arbitrator cannot
G be stated to be as one suffering from any error apparent on the face of
the award. Therefore, this conclusion also cannot be interfered with.
11117-C-DI

2. 7. When claim for escalation of wages bills and price for materials
compensation has been paid and compensation for delay in the payment
H of the amount payable under the contract or for other extra works is to
BHARAT COKING COAL LTD. v. L.K. AHUJA [RAJENDRA BABU • .I.] 1109
be paid with interest. thereon, it cannot be accepted that in addition 15% A
of the total profit should be computed under the heading 'Loss of Profit'.
It is not unusual for the contractors to claim loss of profit arising out of
diminution in turnover on account of delay in the matter of completion
of the work. What he should establish in such a situation is that had he
received the amount due under the contract, he could have utilized the B
same for some other business in which he could have earned profit. Unless
such a plea is raised and established, claim for loss 'If profits could not
have been granted. In this case, no such material is available on record.
In the absence of any evidence, the Arbitrator could not have awarded
the same. (1117-G-H; 1118-A]

Sunleyn (8) and Co. Ltd. v. Cunard White Star Ltd., (1940) 1 K.B. 740,
c
referred to.

2.8. So far as interest that is payable is concerned, the Arbitrator
has appropriately considered the same and no real objection can be raised
in this regard. As regards arbitration costs also there cannot be any D
}
serious dispute. Therefore, except for the sums coming under Refund of
Sales Tax and claim for payment of losses arising out of turnover due to
prolongation of work, other part of the award having been upheld, the
award made by the Arbitrator shall stand modified accordingly.
[1118-C-D] E
State of Bihar and Ors. v. Hanuman Mal Jain, [1997] 11 SCC 40,
referred to. (ll 18-C-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5489-5490
of 1995.
From the Judgment and Order dated '!8.9.94 of the Patna High Court F
in Appeal from Original Order Nos. 68 and 69 of 1993 (R).

Mukul Rohtagi, Additional Solicitor General and Ajit Kumar Sinha, for
the Appellant.

V.A. Mohta and S.B. Upadhyay for the Respondent.
G
The Judgment of the Court was delivered by

RAJENDRA BABU, J. In respect of certain contracts of work assigned
by the appellant certain disputes having been arisen, the matter was referred
to arbitration. Two awards were made and the same were filed in the court
of the Civil Judge in two Title (Arbitration) Suits Nos. 37/86 and 40/86. By H
1110 SUPREME COURT REPORTS [2004] 3 S.C.R.

A a common order, the trial court made the awards Rule of the Court in entirety
and decrees were drawn in terms thereof. An appeal was filed against the said
common order before the High Court. The High Court having dismisseJ the
said appeal, the matter was carried to this Court.

On February 21, 2001 by an order made by this Court, the a\l/ards were
B set aside after quashing the orders made by the High Court and the trial court
and the matter was remanded to arbitration for a fresh consideration of all
points by appointing a new arbitrator Shri Justice Uday Sinha, former Judge,
High Court of Patna. He made an award and on 25.0 I .2002 sent the copies
of the award and on 12.02.2002 minutes of the proceedings before him to
C the Court. Report in this regard was placed before this Court on I 8.02.2002,
copies of which were served upon the concerned advocates. Objections to the
award and application to set aside the award hav~ been filed on 11.04.2002.
Now, an objection is raised on behalf of the respondents that the application
filed for setting aside the award in terms of Article I I9(b) of the Limitation
Act should have been filed within a period of 30 days from the date of filing
D of the award in the Court; that inasmuch as the office report had been served
upon all the parties, it must be deemed that the said office report gives
sufficient notice of filing of the award in the Court; that the period oflimitation
of counting 30 days commenced on I 8.02.2002; that, therefore, the objections
filed on I 1.04.2002 are hopelessly barred by limitation. It is further submitted
E that the Court itself may order a notice of filing of the award or even the
Registry can take steps to issue such a notice and reliance is placed on certain
decisions of this Court as to how in situations of this nature 30 days limitation
period is to be computed in Indian Rayon Corporation Ltd v. Raunaq and
Company Pvt. Ltd, [I 988] 4 SCC 31; Food Corporation of India and Ors.
v. E. Kuttappan, [1993] 3 SCC 445, and State of Bihar v. Hanuman Mal
F Jain, [I 997] I I SCC 40. In our view, none of these decisions can have any ••
application to the situation arising in the present case.

The office report was prepared on 18.02.2002 and the matter was listed
before this Court on I 1.03.2002 when this Court ordered that "call after four
weeks". On 02.04.2002 the learned counsel for the respondents filed a separate
G application in both the appeals under Section 17 of the Arbitration Act, while
on 11.04.2002 the appellant filed an application under Section I 5 read with
Section 30 of the Arbitration Act raising objections to the passing of decree
in terms of the award.

Article I 19(b) of the Limitation Act has been enacted to fix a definite
H
BHARAT COKING COAL LTD. v. L.K. AHUJA (RAJ END RA BABU, J.] 1111

time limit within which the validity of the award can be challenged after the A
award is filed in the court. The said provision prescribes a period of limitation
of 30 days for making an application after the required notice regarding filing
of the award in the court is given to the parties. If there is no material to
show that a notice of filing of the award has ever been given to the parties,
any period of limitation as prescribed in Article l l 9(b) loses its significance. B
The law is clearly to the effect that mere knowledge of passing of an award
is not enough. The period of limitation will commence as provided in Article
l 19(b) of the Limitation Act only upon notice as to filing of the award in the
court has been given to the parties concerned.

In the present case, the situation has arisen in very special features. C
This Court made an order appointing a new arbitrator who was directed to
file an award in the Court and hP- submitted the award in the Court after
publishing the same to the parties. Though on 18.02.2002 the Registry notified
the submission of the award in the Court by way of an office report, but the
same cannot be treated to be in the nature of a notice. The noting made by
the Registry in the office report merely brought to the notice of the Court as D
to what had transpired· and as the matter was being listed before the Court,
a copy was served upon the parties concerned. It is only thereafter it can be
said that the Court directed issue of notice to the parties regarding filing of
the award which has been sent by the Registry. The Registry on its own
could not have issued a notice without a direction from the Court in this E
regard. In that view of the matter, we do not think, there is any notice of
filing of the award in the Court to the parties as contemplated in Article
I 19(b) of the Limitation Act. Further, on 11.03.2002 when the matter was
listed before the Court, the parties concerned took notice of the same and
thereafter, objections have been filed by the parties. In these circumstances,
we thirik that the first contention urged on behalf of the respondents that the F
objections raised by the appellant are barred by limitation is incorrect and the
same stands rejected.

In the view we have taken, it is unnecessary to refer to the various
decisions relied upon by the learned counsel for the respondent.
G
Further, it may be useful to refer to one decision of this Court, which
was not cited by either party, in which the effect of non-service of notice was
considered by this Court. In Dewan Singh v. Champat Singh and Ors., AIR
( 1970) SC 967, it is observed by this Court "that if a party files an objection
before the service of notice, the question of limitation does not arise at all. H
~-

1112 SUPREME COURT REPORTS [2004] 3 S.C.R.

A But also in the absence of clear proof to the effect that notice of the filing
of the award had ever been given to the applicant, application filed by him
cannot be rejected on the ground of limitation."

Originally, though the respondent had made large claims totalling to a
sum of Rs. 78,41,350.00, the same got slashed to Rs. 32,03,755.!0p. Now,
B the subsisting claims are :-

"Claim No. Rs.
~
I. Payment of final bill 2,18,862.42

c 2. Payment of P.O.L. escalation 18,417.31

3. Compensation for making late
Payment of running account bill 3,75,500.00

4. Payment of labour escalation 2,66,321.55
D
5. Refund of sales tax 35.050.95

6. Payment of extra items 8,77,115.82

7. Payment of material escalation 4,12,487.46
E 8. Keep back account NIL

9. Payment of compensation to loss arising out of
tum over due to prolongation of work I0,00,000.00

Total 32,03, 755.10
F (
The arbitrator took notice of the fact that the difference in the original
claim and the subsequent claim is to the order of Rs. 45,62,376 which casts
serious doubt as to the nature of the claim and the veracity of quan-tum of the
claim.
G Out of the claims mentioned above, Shri Mukul Rohtagi, learned
Additional Solicitor General who appears for the appellant, did not contest
the award made by the arbitrator in respect of claim Nos. 2 and 3. However,
serious contest has been raised in regard to interest awarded by the arbitrator.

H There are limitations upon the scope of interference in awards passed
BHARAT COKING COAL LTD. v. L.K. AHUJA [RAJENDRA BABU. J.] 1113

by an arbitrator. When the arbitrator has applied his mind to the pleadings, A
the evidence adduced before him and the terms of the contract, there is no
scope for the court to reappraise the matter as if this were an appeal and even
if two views are possible, the view taken by the arbitrator would prevail. So
long as an award made by an arbitrator can be said to be one by a reasonable
person no interference is called for. However, in cases where an arbitrator B
exceeds the terms of the agreement or passes an award in the absence of any
evidence, which is apparent on the face of the award, the same could be set
aside.

The learned Additional Solicitor General submitted that in the present
case the arbitrator found that there was delay in execution of the contract of C
work for which both the parties were liable and apportioned the same between
them without clearly examining whether there was any material for that claim
at all. His contention is that there is absolutely no evidence to sustain any of
the claims and i.n the absence of the same, it is not permi;;sible for the
arbitrator to have made the award.
D
Shri V .A. Mohta, learned Senior Advocate appearing for the respondent,
submitted that the material on record clearly indicated that there were certain
joint statements before the arbitrator and they were all based on the
measurement books or other material and if that piece of material is treated
as evidence, there cannot be serious doubt that the view taken by the arbitrator
is justified and no interference would be called for. E
On the first claim regarding non-payment of the final bill, reliance was
placed by the parties before the arbitrator on a joint statement and the entries
made in the measurement book. On the question whether reliance could be
placed on the joint statement, the arbitrator held that he cannot attach any F
) conclusiveness to the joint statement. However, he would examine the claims
on their intrinsic merit. One of the contentions raised was that the final bill
had been fully paid inasmuch as 13th and 14th running account bills having
been passed, the arbitrator relied upon a letter sent on 14.3.1986 by Sri
Srinathan, Deputy Chief Engineer [Civil] that the final bill had not been paid
and that clinched the matter in favour of the claimant. Thereafter having held G
that the final bill is yet to be paid, he proceeded to examine the quantum of
the same. The final bill disclosed that as per the agreement, the value of the
~- work is Rs. 86,43,730 as against this amount, the actual cost of the work was
Rs. 90,46,842.14, out of which a sum of Rs. 89,97,311.12 had been paid.
Thus a balance of Rs. 49,531 had not been paid. Therefore, he held that this H
1114 SUPREME COURT REPORTS [2004] 3 S. C.R .

. A part of the claim is allowed.
In addition to this, he also stated that certain work had been done by
him by way of extra works and made a claim of Rs. 91,013.72. There is a
separate claim made by the claimant under claim No.6 as claim for extra
work done. Claim made therein is to the extent of Rs. 1,02,350. On this
B aspect of the matter, the contention advanced on behalf of the appellant is
that separate claim for extra works of items under claim No. 6 includes the
claim of Rs. 91,013.72 and the claim for extra items of work can be made
only on the written order of the Engineer-in-Charge in terms of clause 11 of
the agreement and, therefore, the contractor will not be entitled to make any
C claim unless he has received such an order for substituted or altered work in
terms of clause 11 of the agreement. On this aspect while dealing with the
claim for extra works under claim No. 6, the arbitrator adverted to the decision
of this Court in State of Bihar and Ors. v. Hanuman Mal Jain, [I 997] 11
SCC 40, wherein this Court interpreted a similar clause as laying down the
procedure as to how a claim could be lodged and not to oust the jurisdiction
D of the arbitrator in deciding the dispute on merits. It is not clear from the
pleadings raised on behalf of the appellant before the arbitrator whether the
claim covered by the final bill as extra items to the tune of Rs. 91,013.72 is
included in the extra item of works which had been rejected by the arbitrator.
The arbitrator adverted to this aspect of the matter while deciding claim No.
E 6 and held that out of the claim of Rs. 1,02,517, Rs. 11,503 had been paid
leaving a balance of claim of Rs. 91,013 which has been clearly allowed by
him while consider claim No. I regarding non-payment of final bill and having
claimed Rs.91,013.72 which had been allowed by him the contractor could
not once again claim the same amount under another head and the arbitrator
rejected this claim on two grounds, namely, that there is no order in writing
F by the Engineer-in-Chief and secondly, even if it had been executed, it had
been paid for. The contention put forth on behalf of the appellant that there
is absolutely no material to make a claim by the contractor in this regard
cannot be accepted because these extra items have been mentioned in the
measurement book and which clearly indicated that the work had been
G executed and he treated that the entry in the measurement book will itself
amount to order in writing in terms of clause 11 of the agreement and,
therefore, allowed the claim. In these circumstances, it cannot be said that the
item claimed for extra works referred to in the final bill is the same as the
claim under claim No.6 for extra works wherever such a situation has arisen
the arbitrator has examined the same, say for example, in regard to petrol, oil
H and lubricant, he has separately, treated the same. If appropriate pleadings
BHARAT COKING COAL LTD. v. L.K. AHUJA [RAJ END RA BABU, l.] 1115

had been raised, the arbitrator would have certainly considered this aspect A
and in the absence of the same we think that the view taken by the arbitrator
in this regard cannot be interfered. Only two items which had been allowed
°"' by the arbitrator which have been adverted to by us as a sum ofRs.49,513.02
which was still to be paid and a sum of Rs.91,013.72 as extra items of works
which was disclosed in the measurement book. Therefore, we find no infirmity B
on this aspect of the claim.

Claim Nos. 2 and 3 not having been disputed before us, we now proceed
to consider claim No. 4. The arbitrator considered various aspects made
under this head for claim for payment of labour escalation. The arbitrator
took the view that the appellant alone was not responsible for prolongation C
of the works and there were lapses on the part of the contractor as well and
both were responsible for the delay. The arbitrator, after taking into
consideration that there was definitely a escalation between April 1983 and
April 1984 in regard to wage bill of the claimant, took the view that as
against a claim of Rs. 2,66,343 awarded a.sum of Rs. 1,30,000. \\!hen on the
basis of the pleadings and overall view of the situation arising as to the rise D
in the cost of wages, having awarded a lumpsum amount under this head, we
do not think it is necessary to interfere with the award on this aspect of the
matter.

The claim for refund of sales tax in a sum of Rs. 35,050 has been
upheld by the arbitrator on the b~sis that in terms of a notification issued by E
the Government which lays down that if the works had been handed over
prior to 1.4.1984, sales tax was not leviable but the works having been
executed on 31.5.1984, it cannot be said that the terms of the notification had
been complied with and, therefore, no claim could have been made by the

)
claimant and, therefore, an award of Rs. 35,050 based on the notification F
dated 19.2.1985 would not be correct and, thus, this amount of award in a
sum of Rs. 35,050 stands allowed. There is a clear error apparent on the face
of the award in having allowed this claim by the arbitrator.

Claim No. 6 consists of four. items. So far as the first item regarding
extra work is concerned, the claim has been rejected by the arbitrator which G
we have adverted to while considering claim no. I under final bill. The
second item under this claim relates to watch and ward expenses. The
arbitrator, after examining various aspects of the matter, took the view that
the expenditure over watch and ward staff could not be more than Rs. I 0,000
per month for 14 months and the bill on that account would come down to H
1116 SUPREME COURT REPORTS (2004) 3 S.C.R.

A Rs. 1,40,000. However, taking all the factors in respect of this claim, the
expenditure under this head would not come to more than Rs. 84,000 for the
whole period and taking a lenient view of the matter, the arbitrator awarded
a sum of Rs. 1,25,000 under this head.

The arbitrator considered the fact that the appellant took possession of
B the quarters for two days on 30.4.1984 and 1.5.1984 to accommodate
delegation for the All-India Labour Union Congress but it was not in dispute
that the same was handed over after a couple of days. Thereafter the quarters
were allotted to employees in stages and actual delivery of possession was
made on 10.3.1986. While the arbitrator considered that the claim on account ...
C of watch and ward to the tune of Rs. 7,09,000 is fantastically high and in the
written submissions it had been claimed that th.e building had to be maintained
at a cost of Rs. 5,500 per month, he doubts as to whether the claimant had
retained any watch and ward staff to the extent of 18 members, he held that
three watch and ward staff would have been enough and the period for which
the same had been maintained comes down to 18 months and with reference
D to the pleadings raised in this Court on earlier occasion took note of the fact
that possession had not been given since April 1984 .. Therefore, he reduced
the period to 14 months. He rejected the claim that for the whole period from
April 1986 it had retained the services of plumber, electrician, carpenters,
supervisory, etc. and watch and ward staff and he held that the flats were not
E in such a condition that the appelfant could have taken possession and,
therefore, the entire claim cannot be justified. Having taken into consideration
the fact that the watch and ward staff could be three, he awarded a sum @
Rs. 10,000 per month for 14 months.

The learned Additional Solicitor General submitted that there is
p absolutely no basis for awarding this item as no material had been placed
before the arbitrator. We cannot say that in assessing such a situation, the
arbitrator has exceeded his jurisdiction or that there was no material at all
before him in assessing the situation that there was some delay in handing
over the flats and watch and ward had to be maintained, he has awarded for
a reduced period of 14 months @ Rs. I 0,000 per month. Therefore, we
G cannot hold this conclusion as suffering from an error apparent on the face
of the award.

Next two items regarding rolling margin and refund of security deposit
had been rejected by the arbitrator and, therefore, do not require any
H consideration.
BHARAT COKING COAL LTD. v. L.K. AHUJA [RAJENDRA BABU, J.] 1117
I
' On the question of material escalation, the arbitrator considered the A
claim made in a su!:" of Rs. 4, 12,487.46 under this head. The arbitrator took
note of the situation that it was not the contention of the appellant that the
material referred under this head had not been used for the completion of the
project but having secured a sum of Rs. 17, 70,085 by way of advance, the
escalation would get off-set by the advance paid and further running accounts
payments had been made from month to month which must have taken into B
consideration the rise in prices. He held that there was no evidence on record
as to the nature of the purchases made by the claimant during the extended
)'
period although some purchases had been made attracting escalation in the
prices. Secured advance was only made to the extent of 60 to 75%. Therefore,
he held that 25% of the escalation has to be compensated on that basis and c
allowed half of the claim of the contractor. When there was no dispute as to
the fact that materials had been used for the purpose of the project and the
value thereof, the claim made by the appellant having been duly examined
by the arbitrator and after giving due allowance to the advances that have
been made the award made by the arbitrator cannot be stated to be as one
suffering from any error apparent on the face of the award. Therefore, this D
conclusion also cannot be interfered with.

Claim No. 8 has been rejected by the arbitrator. Now, we proceed to ..
consider claim No. 9 for loss arising out ·of turnover due to prolongation of
work. The claim made under this head is in a sum of Rs. 10 lakhs. The
arbitrator rightly held that on account of escalation in wage and prices of
E
materials compensation was obtained and, therefore, there is not much
justification in asking compensation for loss of profits on account ·of
prolongation of works. However, he came to the conclusion that a sum of Rs.
6,00,000 would be appropriate compensation in a matter of this nature being
)
15% of the total profit over the amount that has been agreed to be paid. F
While a sum of Rs. 12,00,000 would be the appropriate entitlement, he held
that a sum of Rs. 6,00,000 would be appropriate. He also awarded interest on
the amounts payable at 15% per annum.

Here, when claim for escalation of wages bills and price for materials
compensation has been paid and compensation for delay in. the payment of G
the amount payable under the contract or for other extra works is to be paid
with interest thereon, it is rather difficult for us to accept the proposition that
in addition 15% of the total profit should be computed under the heading
'Loss of Profit'. It is not unusual for the contractors to claim loss of profit
arising out of diminution in tum over on account of delay in the matter of H
1118 SUPREME COURT REPORTS [2004] 3 S.C.R.

A completion of the work. What he should establish in such a situation is that
had he received the amount due under the contract, he could have utilised the
same for some other business in which he could have earned profit. Unless
such a plea is raised and established, claim for loss of profits could not have
been granted. In this case, no such material is available on record. In the
absence of any evidence, the arbitrator could not have awarded the same.
B This aspect was very well settled in Sunleyn (B) & Co. ltd v. Cunard White
Star Ltd., (1940] I K.B. 740, by the Court of Appeal in England. Therefore,
we have no hesitation in deleting a sum of Rs. 6,00,000 awarded to the
claimant.

C So far as interest that is payable is concerned, the arbitrator has
appropriately considered the same and no real objection can be raised in this
regard. As regards arbitration costs also there cannot be any serious dispute.
Therefore, except for the sums coming under the heading No. 5, that is,
Refund of Sales Tax and claim for payment of losses arising out of tum over
due to prolongation of work, other part of the award having been upheld by
D us, the award made by the arbitrator shall stand modified accordingly.

In similar terms in respect of second contract, for the very reasons f
stated in this part of the order, we disallow the claim for refund of sales tax
and compensation for losses arising out of on account of prolongation of
work. In other respects, we maintain the award made by the arbitrator.
E
The civil appeals stand disposed of in the aforesaid terms.

K.K.T. Appeals disposed of.