Holding

The arbitrator acted within his jurisdiction to award escalation costs and other compensation arising from the State's breach, and the High Court's setting aside of the award was erroneous.

Summary

The appellant, K.N. Sathyapalan (deceased) by legal representatives, entered into a construction contract with the State of Kerala. The work could not be completed within the stipulated eleven months due to law‑and‑order disturbances, lack of a suitable quarry and dumping yard, and the State’s failure to remove anti‑social elements. The parties executed a supplemental agreement that barred any escalation of rates for work done during the extended period, yet the arbitrator awarded the appellant Rs. 42.21 lakh with interest for interruption losses, price escalation, extra transportation and dumping costs. The State challenged the award under Sections 17 and 30 of the Arbitration Act, 1940 and the High Court set aside the award on the ground that the arbitrator exceeded his jurisdiction by granting claims contrary to the supplemental agreement. The Supreme Court held that where the State’s breach caused the delay, the arbitrator was empowered to award compensation for escalation costs despite the absence of an escalation clause, and therefore restored the award, allowing the appeal.

Issues considered

The arbitrator exceeded his jurisdiction by awarding escalation costs despite the supplemental agreement prohibiting such claims.
Whether the State's failure to maintain law and order and to provide quarry and dumping facilities constitutes a breach justifying compensation.
Whether the award under Section 17 of the Arbitration Act, 1940 can be enforced despite the arbitrator's suspension and retirement.
Whether the High Court could set aside the arbitrator's award on a strict contractual interpretation.

Legislation cited

Arbitration Act, 1940s. 17, s. 30

Subjects

ArbitrationEscalation clauseContract breachExtension of timeLaw and order disturbanceSupplemental agreementJurisdictionSection 17 Arbitration Act

Judgment

A K.N. SATHYAPALAN (DEAD) BY LRS.
v.
STATE OF KERALA AND ANR.

NOVEMBER 30, 2006

B [DR. AR. LAKSHMANAN AND ALTAMAS KABIR, JJ.]

Arbitration Act, 1940-s.17-Non-completion of work within stipulated
time-Ex_tension of time on co_ndition that contractor not eligible to escalation
C costs for work done during extended period-Arbitrator allowing the claims
on account of escalation costs-High Court setting aside the same holding
that arbitrator had exceeded its jurisdiction in granting award-Justification
of-Held, not justified as delay had occurred due to law and order problem
at the work site which should have been avoided by the State Government.

D The appellant entered into an agreement with the Respondent-State
whereby it undertook the construction work. The whole work could not
be completed on the scheduled dates and under clause 50 of the General
Conditions of Contract extension of time was sought by the appellant. The
respondents_ extended the time of completion but while doing so made it
conditional that such extension of time would be subject to execution of a
E Supplemental Agreement to the effect that the contractor would not be
eligible for any enhanced rate for the work done during the extended
period. The dispute arose and the matter was referred to the sole
arbitrator.

F Appellant raised claims under various heads. Arbitrator allowed
some of the claims and awarded a sum of Rs. 42 lacs with 12% interest
per annum on account of losses suffered by appellant due to interruption
of work by anti social elements and failure of State in removing such
miscreants from the sites causing heavy financial losses by way of idle men
and machinery; price escalation of material that had taken place during
G extended period of completion; failure of State to handover a suitable
quarry which resulted in bringing rubble and metal from far off places
involving additional transportation costs; and non-availability of a suitable
dumping yard for dumping excess earth.

H 864
K.N. SATHYAPALAN (DEAD) BY LRS. i·. STATE OF KERALA 865
Appellant filed O.P. under S.17 of Arbitration Act for passing a decree A
in terms of the award. The Respondent-State filed petition under S.30 which
was dismisse~ On appeal, High Court set aside the award holding that the
Arbitrator had exceeded its jurisdiction in granting the award. Hence the
present appeal.

Allowing the appeal, the Court B

HELD: 1.1. Admittedly, the original Agreement did not contain a clause
for escalation of rates. On the other hand, the Supplemental Agreement
contained a specific provision that the contractor would not claim any enhanced
rate for such item of work on account of the extension of time either due to C
the increase in the rate of labour or materials or on any other ground
whatsoever. Ordinarily, the parties would be bound by the terms agreed upon
in the contract, but in the event one of the parties to the contract is unable to
fulfil its obligations under the contract which has a direct bearing on the
work to be executed by the other party, the Arbitrator is vested with the
authority to compensate the second party for the extra costs incurred by him D
as a result of the failure of the first party to live up to its obligations.
(870-G, H; 874-E-F)
P.M Paul v. Union of India, (19891 Supp. 1 SCC 368; T.P. George v.
State of Kera/a and Anr., [20.!H I 2. S~C 758; Mis. Alopi Parshad & Sons
Limited v. The Union of India, [1960) 2 SCR 793 and State of U.P. v. Patel E
Engg. Co. ltd. and Ors., (2004) 10 SCC 566, referred to.

1.2. The appellant was prevented by unforeseen circumstances from
completing the work within the stipulated period of eleven months. Such
delay could have been prevented had the State Government stepped in F
to maintain the law and order problem which had been created at the
work site. It is also clear that the rubble and metal, which should have
been available at the departmental quarry had to be obtained from
·quarries which were situated at double the distance, and even more,
. resulting in doubling of the transportation charges. Even the space for
dumping of excess earth was not provided by the respondents which G
compelled the appellant t-0 dump the excess earth at a place which was
far away from the work site entailing extra costs for the same. (875-B-C)

2. In the aforesaid circumstances, the Arbitrator appears to have
acted within his jurisdiction in allowing some of the claims on account of
H
866 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A escalation of costs which was referable to the execution of the \\'.Ork during
the extended period. The view taken by the High Court was on a rigid
interpretation of the terms of contract and the Supplemeritat Agreement
executed between the parties, which was not warranted by the turn of
events. [875-D)

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4806 of2000.

From the Judgment and Order dated 31-7-1998 of the High Court of
Kerala at Ernakulam in M.F.A. No. 980/1990 C.

Dushyant Dave, M.K. Chandra Mohan Das, M.N. Nandarajan, Ramesh
C Singh and Syed Shahid Hussain Rizvi for the Appellants.

Jayanth Muth Raj and P.V. Dinesh for the Respondents.

The Judgment of the Court was delivered by •'
D ALT AMAS KABIR, J. The appellant entered into an agreement with
the State of Kerala on I 0th October, 1985 whereunder he was entrusted with
the construction work of the Chavara Distributory from Ch.7440M to 944(.)M
and 10475M to 14767M. Disputes having arisen between the parties, the
matter was referred to arbitration. The Superintending Engineer, Siruvani
Project, Palghat, the designated Arbitrator in terms of the contract, was
E appointed as the sole Arbitrator. By his award, which was published on 2nd
September, 1989, the Arbitrator awarded a total sum of Rs. 42,21,000/- with
12% interest per annum from the date of the award. Upon the passing .of the
award the appellant herein filed O.P. (Arb.) 40189 in the court below under
Section 17 of the Arbitration Act for passing a decree in terms·ofthe award.
F The State of Kerala filed a petition under Section 30 of the Act challenging
the award and for setting aside the same.

The application filed by the State was dismissed and aggrieved thereby
the State of Kerala preferred an appeal in the High Court of Kerala at
Ernakulam, being MF A No. 980 of 1990 C.
G
The appellant herein raised claims under 12 different heads but the
Arbitrator allowed only Claims (a), (e), (g), (i) and (k). Although, in the
memorandum of appeal, the entire award in favour of the appellant had been
challenged, but the arguments were addressed only with regard to claims
under heads (a), (g), (i) and (k). A preliminary objection was raised in the
H
K.N. SATHYAPALAN (DEAD) BY LRS. v.. STATE OF KERALA [ALTAMAS KABIR, J.] 867

appeal that the Superintending Engineer, who had been appointed as the A
Arbitrator and had entered on the reference, had been suspended from service
for gross mal-practice, and the Government had informed all concerned that
the Arbitrator was not to continue with the reference. The Arbitrator retired
on superannuation while he was under suspension and the award was made
after his retirement. According to the State of Kerala, in the circumstances, B
the award passed by the Arbitrator was without jurisdiction.

The aforesaid objection being preliminary in nature, the same was taken
up first for consideration and it was held by the High Court that such an
objection was without any merit. The Arbitrator, who was working as
Superintending Engineer was placed under suspension on 31st May, 1989. As C
per an agreement between the parties on 14th February, 1989, the time for
making and publishing the award was extended upto 14th June, 1989. Even
after the Arbitrator was suspended from service, both sides had agreed on
14th June, 1989 to extend the time further for making and publishing the
award upto 14th October, 1989. The Arbitrator retired from service while under
suspension on 30th June, 1989. In the light of the said facts, the High Court D
agreed that the comt below could not revoke the authority of the Arbitrator,
which could only be done under Section 5 of the Arbitration Act, with the
leave of the Court. Accordingly, the preliminary objection raised on behalf of
the State of Kerala that the Arbitrator had no authority to continue with the
arbitration after his suspension or retirement, was rejected by the High Court. E
Claim (a) of the appellant herein involved the claimant's entitlement to
get compensation for interruption of work by anti-social elements and failure
of the Department in removing such miscreants from the sites which caused
the claimant heavy financial losses by way of idle men and machinery, plant
and equipment. The claim made under the aforesaid head was for a sum of p
Rs.11,40,000/-. The Arbitrator was satisfied that there was interruption of work
by anti-social elements and that the State had failed to remove such
obstruction from the site. Accordingly, the Arbitrator awarded a sum of Rs.
7,30,000/- under this claim.

Claim (g) was confined to the question as to whether the claimant was G
entitled to compensation for the losses suffered by him on account of price
escalation of materials that had taken place during the extended period of
completion when such extension of time was necessitated by departmental
failure, although there was no provision for escalation of costs in the contract.
Under the said clause the appellant claimed an amount of Rs.39,90, 198/- but G
868 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A was awarded a sum of Rs. l l, 70,000/- over and above the amount as per the
rates in the agreement for the work done after the original period of contract
till 9th February, 1987.
-.:
Claim (i) was confined to the question regarding the claimant's
entitlement for compensation for the losses purported to have been suffered
B by him because the Department was unable to hand over a suitable quarry
which resulted in the claimant having to bring rubble and metal from far off
places involving additional transportation costs. The Arbitrator came to a
positive finding that the claimant had procured rubble from quarries situated
at different places. According to the initial estimate, the quarry ought to have
C been within 25 Kms. from the place of work, but from the evidence it would
be clear that the nearest quarry from which the claimant had to procure rubble
would be about 4 7 Km. away from the site of the work. The other quarries
were even further away from the work site. It was the definite finding of the
Arbitrator that the average extra lead involved would be not less than 22 Kms.
and accordingly while the claimant had claimed a sum of Rs.24,86,574/-, the
D Arbitrator awarded a sum of Rs.13,35,000/- under this head for the. work
executed up to 9th February, 1987.

The other claim which was pressed by the appellant was claim (k)
relating to losses suffered by him on account of non-availability of a suitable
dumping yard for dumping excess earth. While a claim for a sum of Rs.13, 72,554/
E - was made in this regard, the Arbitrator awarded a sum of Rs.6,62,000/- under
this head.

The agreement relating to the handing over of the site to the claimant
was executed on I 0th October, 1985 and on 25th October, 1985, the
F respondents instructed the claimant to start the work and to complete the
same within the agreement period of eleven months. However, while the
period of completion of eleven months for the whole work was to expire on
24th September, 1986, the same could not be completed on the scheduled
dates and under' clause 50 of the General Conditions of Contract extension
of time was sought by the appellant for completing the work. Clause 50 of
G the General Conditions of Contract provides that if failure to complete the
work was the result of delays on the part of Government in supplying materials
or equipment it had undertaken to supply under the contract or from delays
in handing over sites or from increase in the quantity of the work to be done
under the contract or force majeure, an appropriate extension of time would
H be given. Finding that the said clause was operative, the respondents extended
K.N. SATHYAPALAN (DEAD) BY LRS. v:STATE OF KERALA [ALTAMAS KABIR, J.] 869

the time of completion but while doing so made it conditional that such A
extension of time would be subject to execution of a Supplemental Agreement
to the effect that the contractor would not be eligible for any enhanced rate
>.
for the work done during the extended period. According to the appellant, he
had no option but to sign the agreement, though under protest, since he had
undertaken to complete the work.
B
The appellant appears to have moved to the site and commenced the
work on 1st November, 1985 but he was not allowed to proceed with the work
because of external interference involving law and order problems created by
local miscreants and anti-social elements under cover of union activities.
Although, initially such a claim was denied on behalf of the respondents and
the law and order situation was said to be only a labour dispute between the
c
claimant and his workers, ultimately from the evidence the Arbitrator came to
the finding that the issue was one of law and order which could only have
been controlled by the Governmental agencies.

The Arbitrator also came to a finding that in order to maintain peace D
at the work site, the claimant had to keep the entire local work force in the
muster rolls and to pay wages when the actual work was done with bull
dozers. The Arbitrator was satisfied that although the claimant had aimed to
complete the work within the original period, he was faced with adverse site
conditions which are not usually met with at construction sites.
E
The Arbitrator was also satisfied with the claimant's contention that
adequate space had not been provided for dumping the excess earth which
had to be conveyed to distant places for dumping. On assessment of the
evidence and the ground realities under which the claimant was constrained
to execute the Supplemental Agreement, the Arbitrator was convinced that
F
the claim made by the claimant under the different heads could not be brushed
aside.

Apart from the preliminary objection taken with regard to the competence
of the Arbitrator to complete the arbitration proceedings and to publish his
award, it was also contended before the Arbitrator that the State had no G
responsibility in settling the disputes between the claimant and his employees
and it was really due to the non-cooperation of the claimant that a settlement
could not be arrived at with the workers. It was contended that under such
circumstances claim (a) could not be granted.

It was also contended that there was no provision in the Agreement by H
~
870 SUPREME COURT REPORTS (2006) SUPP. 9 S.C.R.

A which the Department could be made liable to compensate any loss sustained
by the contractor because of intervention of third parties. It was contended
that it is one thing to say that the State is responsible for maintaining ·Jaw
and order and on the other hand to make the State liable under the terms of
the Agreement to compensate the contractor .for losses allegedly suffered
B during the period of disturbance.

On consideration of the case made out on behalf of the respective
parties, the Arbitrator made his award in respect of each of the several heads
of claims on the losses actually suffered by the appellant while trying to carry
out and complete the tender work. The Arbitrator filed his award before the
C Subordinate Judge, Kottarakkara, on which a decree was passed in terms of
the award but modifying the appellant's claim for interest. The respondents
preferred an appeal to the High Court of Kerala at Emakulam.

The stand taken before the Arbitrator was reiterated by the parties ·-''
before the High Court of Kerala at Ernakulam in the said appeat In addition,
D arguments were addressed on the scope of interference by the High Court in
an award passed by the Arbitrator, which award was a speaking award. On
looking into the Agreement, the High Court was of the view that the Arbitrator
had exceeded his jurisdiction in granting claim (a). The High Court felt that
the Arbitrator. had travelled outside the Agreement and had acted without
jurisdiction in granting such claim.
E
Even in respect of claim (g), the High Court took note of the fact that
by virtue of the Supplemental Agreement which had to be executed for
extension of the original period of completion of the work, the appellant herein
was not entitled to enhanced rates during the extended period. In respect of
F claim (g) also, the High Court found that the Arbitrator had travelled outside
the terms of the contract and had mis-conducted himself.

Admittedly, the original Agreement did not contain a clause for
escalation of rates. On the other hand, the Supplemental Agreement contained
a specific provision that the contractor would carry out all further works
G within the extended period at the rates and in the manner agreed to in the
Agreement and would not claim any enhanced rate for such item of work on
account of the extension of time either due to the increase in the rate of labour
or materials or on any other ground whatsoever. The High Court took the
view that although the Arbitrator had come to a finding that the appellant had
to execute. the Supplemental Agreement under the force of circumstances,
H
.•
K.N. SATHYAPALAN (DEAD) BY LRS. v. STATE OF KERALA [AL TAMAS KABIR, J.] 871

there was no material before the Arbitrator in support of such contention. On A
such finding also, the High Court held that the Arbitrator had acted beyond
his jurisdiction in allowing claim (g).

The award of the Arbitrator against claim (i) also met the same fate and
the High Court held that the Arbitrator had travelled outside the contract in
granting such claim and thus mis-conducted himself. B
The only claim which was allowed by the High Court was claim (k).

The High Court accordingly set aside the judgment and decree of the
court below to the extent it affirmed the award as far as claims (a), (g) and
(i) are concerned. c
The said order of the High Court is the subject-matter of the present
appeal.

Appearing for the appellant, Mr. Dushyant Dave, learned senior advocate,
urged that the High Court while reversing the award under claims (a), (g) and D
(i) had failed to take into consideration the finding of the Arbitrator that the
appellant had suffered heavy losses on account of the law and order problem
which had been created at the work site and that he had been compelled to
complete the work under duress. Reference was made to the letter dated 7th
September, 1985 addressed by the appellant to the Superintending Engineer,
E
K.I.P.(RB) Circle, Kottarakkara, regarding extension of time to complete the
work under tender with the hope that the Department would reciprocate his
gesture and consider the special circumstances under which he had given his
consent for extension of the period for completion of the work.

Reference was also made to another letter dated 24th September, 1986 F
written by the appellant to the said Superintending Engineer informing him
of the problems that were being faced for completion of the work and requesting
that his accounts be settled and that he be freed from the entanglements.

The last letter referred to by Mr. Dave was written by the appellant to
the said Superintending Engineer on 30th September, 1986 indicating that he G
was carrying out the work despite all the difficulties although the same was
not a solution to the genuine problems being faced by him as indicated in
the earlier letters.

It was urged that having regard to the ground realities, it was within the
H
.
872 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A powers of the Court to grant relief on account of escalation of costs in
interrupted projects, although there may not be any specific provision for
such escalation in the contract itself.

In support of his submissions, Mr. Dave firstly referred to the decision
of this Court in P.M Paul v. Union ofIndia, (1989] Supp. I SCC 368, wherein
B a dispute arose regarding payment of escalated costs. By an order of this
Court, the dispute between the parties was referred to a retired Judge of this
Court to ascertain who was responsible for the delay in completion of the
building, what was the repercussions of the delay and how the consequences
were to be apportioned. It had been contended therein that in the absence
C of any escalation clause it was not permissible for the Arbitrator to grant any
escalation price sought by the contractor. The Arbitrator, however, noted that
the claim related to the losses caused due to increase in prices of materials
and costs of labour and transport during the extended period of the contract
and accordingly allowed 20 per cent of the compensation sought. The question
before this Court was whether the Arbitrator had travelled beyond his
D jurisdiction in awarding escalation costs and charges. This Court came to a
finding that the Arbitrator had not mis-conducted himself in awarding the
amount as he had done. Once it was found that there was delay in execution
of the contract due to the conduct of the respondent, respondent was liable
for the consequences of the delay, namely, increase in prices. It was held that
E the claim was not outside the purview of the contract and arose as an
incidence of the contract and the Arbitrator had jurisdiction to make such
award.

Reference was then made to the decision of this Court in T.P. George
v. State ofKera/a And Anr., [2001] 2 SCC 758, where a similar situation arose
F and the contractor was compelled to execute a Supplemental Agreement.
Although, a question was raised as to whether the Supplemental Agreement
debarred the contractor from pursuing his claims, the Arbitrator allowed the
claims which were however set aside by the High Court. This Court in appeal
held that the High Court had erred in setting aside the award regarding those
claims notwithstanding the fact that the Supplemental Agreement had been
G executed between the appellant and the State Government. The grant of
interest by the Arbitrator, which had been disallowed by the High Court, was
also allowed by this Court.

Mr. Dave contended that even in the absence of any escalation clause,
H if it is found that the escafation of costs had been occasioned by circumstances
K.N. SATHYAPALAN (DEAD) BY LRS. v. STATE OF KERALA [AL TAMAS KABIR, .J.] 873

which were not anticipated at the initial stage and was attributable to the A
respondents, there was no reason why the Arbitrator could not take notice
of the ground reality and to award escalation costs. It was urged that had the
respondents provided for the rubble to be obtained for the work from the
quarry at Mannady, the appellant would not have had to bear the extra
transportation charges for bringing such rubble from far away quarries. The B
same applied to providing a suitable place for dumping of excess earth arid
the failure of the respondents to maintain the law and order problem that had
been created at the site.

The submissions advanced on behalf of the appellant were strongly
opposed on behalf of the State Government with particular reference to the C
award in respect of claims (a) and (g) since the Original Agreement did not
provide for such escalation and the Supplemental Agreement which had been
executed clearly stipulated that no extra rates would be allowed. It was
contended that the Department had never failed to perform its contractual
obligations, and, in any event, the delay in completing the work was not on
account of any neglect on the part of the State but on account of labour 'D
trouble involving the appellant and his workmen at the site.

Mr. Jayant Muth Raj, who appeared for the State, contended that as had
been observed by this Court as far back as in 1960 in Mis. Alopi Parshad &
Sons Limitedv. The Union of India, reported in [1960] 2 SCR 793, provision
for payment of charges at rates specified had been made in the contract and E
the arbitrators could not ignore the express covenants between the parties
and award amounts not agreed to be paid. It was observed further that a
contract is not frustrated merely because the circumstances in 'Yhich it is
made is altered and that the Courts have no general power to absolve a party
from the performance of his part of the contract merely because its performance F
has become onerous on account of an unforeseen turn of events. According
to Mr. Muth Raj the award made in the instant case could not also be justified
on the basis of quantum meruit since such a concept would be applicable
when services are rendered but the price thereof is not fixed by a contract.

Mr. Muth Raj also referred to various other decisions of this Court, G
including the decision in State of UP. v. Patel Engg. Co. Ltd. And Ors.,
reported in [2004] 10 SCC 566, where a question arose as to whether on the
basis of a modified contract which specifically excluded payment of freight
charges, claims for variation in payment of such charges could be awarded
by the arbitrator. It was held that the arbitrators had exceeded their jurisdiction H
874 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.
..
A in awarding freight ch~rges in respect of steel and handling transportation
charges and that the District Judge had rightly held that the same was not
sustainable inasmuch as the clai.mant was not entitled to such freight charges.
It was urged that when no provision had been made in •the contract for
escalation of costs and the Supplement!ll Agreement entered into between the
parties specifically provided that the contractor would not claim any enhanced
B rate for the work performed during the extended period of the contract, the
Arbitrator had wrongly allowed some of the claims made by the appellant on
account of escalation of costs and the High Court had rightly disallowed the
same.

c is whether
The question which we are called upon to answer in the instant appeal
in the absence of any price escalation clause in the Original
Agreement and a specific prohibition to the contrary in the Supplemental
Agreement, the appellant could have made any claim on account of escalation
of costs and whether the Arbitrator exceeded his jurisdiction in allowing such
claims as had been found by the High Court.
D
Ordinarily, the parties would be bound by the terms agreed upon in the
contract, but in the event one of the parties to the contract is unable to fulfil
its obligations under the contract which has a direct bearing on the work to
be executed by the other party, the Arbitrator is vested with the authority to
compensate the second party for the extra costs incurred by him as a result
E of the failure of the first party to live up to its obligations. That is the
distinguishing feature of cases of this nature and Mis. Alopi Parshad's case
(supra) and also Patel Engg. 's case (supra). As was pointed out by Mr. Dave,
the said principle was recognized by this Court in P.M Paul's (supra), where
a reference was made to a retired Judge of this Court to. fix responsibility for
F the delay in construction of the building and the repercussions of such delay.
Based on the findings of the learned Judge, this Court gave its approval to
the excess amount awarded by the arbitrator on account of increase in price
of materials and costs of labour and transport during the extended period of
the contract, even in the absence of any escalation clause.

G The said principle was reiterated by this Court in T P. George's case
(supra).

We have intentionally set out the background in which the Arbitrator
made his award in order to examine the genuineness and/or validity of the
appellant's claim under those heads which had been allowed by the Arbitrator.
H ,,,

,, I
K.N. SATHYAPALAN (DEAD) BY LRS. v. STATE OF KERALA [ALTAMAS KABIR, J.] 875

It is quite apparent that the appellant was prevented by unforeseen A
circumstances from completing the work within the stipulated period of eleven
months and that such delay could have been prevented had the State
Government stepped in to maintain the law and order problem which had been
created at the work site. It is also clear that the rubble aqd metal, which should
have been available at the departmental quarry at Mannady, had to be obtained B
from quarries which were situated at double the distance, and even more,
resulting in doubling of the transportation charges: Even the space for dumping
of excess earth was not provided by the respondents which compelled the
appellant to dump the excess earth at a place which was far away from the
work site entailing extra costs for the same.

In the aforesaid circumstances, the Arbitrator appears to have acted
c
within his jurisdiction in allowing some of the claims on account of escalation
of costs which was referable to the execution of the work during the extended
period. In our judgment, the. view taken by the High Court was on a rigid
interpretation of the terms of contract ap.d 3he Supplemental Agreement executed
between the parties, which was not warranted by the tum of events. D
We accordingly allow the appeal and set aside the order passed by the
High Court and restore the award ma~e by the Arbitrator.

There will, however, be no order as to costs.
E
D.G. Appeal allowed.