The HC judge on February 8, 2013, held that the " it is clear that the arbitration application filed by the owner—Konkan Railway-- has been rejected by the district judge in 2004 only by observing that each and every claim has been decided by the arbitral tribunal separately and on the basis of evidence adduced and submissions made and the tribunal had not exceeded its limit in any way. In my view, the order passed by the learned District Judge is also totally contrary to the provisions of the Contract and the law laid down by the Supreme Court holding that arbitral tribunal has to decide in accordance with the terms of the contract and not de hors it. In my view the order passed by the learned District Judge also thus deserves to be set aside. "The Konkan Railway had moved the HC against Oriental Construction Company in an arbitration petition to challenge the 2004 order of the district court.
The HC set aside the award dated 19th December, 2000 made by the arbitral tribunal in favour of Oriental. The HC also held that the tribunal could not have granted payment of interest which was prohibited in the contract itself. "By allowing prohibited claim, the arbitral tribunal has exceeded its jurisdiction and has decided contrary to the terms of the contract and thus even that part of the award is also conflict with the public policy and deserves to be set aside."
The case revolved over a June, 1991 tender floated by Konkan Railway for work of construction of major bridge on River Vashshiti at Chiplun. Oriental Construction which has its officer in Bandra, in Mumbai, submitted a tender and it was accepted in August 1991 for a cost of Rs 1.59 crore with a completion date se t for October 28, 1992. Both the parties thereafter executed formal contract agreement. Konkan Railway granted an extension of time till June 30, 1993 in writing. The work was not completed even by June 30, and the contractor continued the work and completed by March 18, 1995. The dispute then arose between the parties. The contractor submitted their claim to the Konkan Railway in January 1996 which Konkan Railway rejected and Oreintal Construction, the contractor invoked the arbitration clause and the tribunal granted its claims. But the HC held that when the main contract provided that money could not be claimed for work beyond the deadline, a general clause under the Contract Act cannot be used to come to the rescue of the contractor.
The HC judge held, "I am not inclined to accept the submission of the learned counsel appearing for the contractor—Oreintal Construction-- that the work carried out during the extended period would attract section 55 of the Contract Act even though the contract agreement entered into between the parties, records prohibition of any payment of compensation." The HC order said, "Once an agreement is entered into with specific clauses prohibiting payment of compensation, a party cannot resort to section 55 of the Contract Act."
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