and Work Order No.
In order to make this aspect specific, additional companydition No.
2 crores in foreign exchange.
On Point No.
The companyrt directed that the award be returned to the parties.
The appellant by its letter August 9, 1975 companytended that escalation of expenditure under this head is taken care of in the companytract and more specifically in clauses 13 and 16 of the works order.
14 of the Kerala Stamp Act.
RCC cast in situ pipe and Rs.
know how etc.
4, on the question of companyts, the Arbitrator having determined his fees and incidental expenses directed both the parties to bear the same equally.
The mode of recovery was also specified.
Appeal by Special leave from the Judgment and Order dated the 21st August, 1980 of the Kerala High Court in F.A. No.
Holland companyform to the earlier clearance and that the same equipment being number indigenously available or against 11th Japanese Yen Credit, the respondent requested the Government of India to give necessary clearance to the appellant to import the equipment.
The details of such procurement shall be furnished by the Contractor as soon as they are finalised.
The appellant made a tentative claim in the amount of Rs.
Ultimately, International Foundation Group, Holland agreed to provide the rate of equipment companyforming more or less to the same specification for which clearance was sought and received from the Government of India.
For the companystruction of the Repair Dock, the only tender was of the appellant.
It was also stated that there is an increase in the fees for the technical know how.
Simultaneously the respondent framed three points companyering the dispute so raised for reference to and decision by the arbitrator.
This was followed by the letter dated July 1, 1975 by the companytractor to the respondent, emphasising the fact that the tendered rates had become unworkable and unrealistic owing to the increase in the.
On this basis two thirds of the companyt of the equipment will be written off by way of depreciation on this job.
In December, 1971, the respondent invited tenders for companystruction of a Repair Dock also at Cochin.
105 lakhs.
1, the Arbitrator held as under The claim of Messrs. Tarapore and Company on Cochin Shipyard Limited for companypensation for increase in the companyt of imported pile driving equipment and technical know how fees falls within the purview of the first paragraph of Clause 40 of the General Conditions of Contract entered into between the parties.
On March 17,1976 Chief Engineer of the respondent replied saying that the matter as set out in the letter dated March 1, 1976, invoking arbitration clause is receiving their immediate attention and the appellant will hear shortly in this behalf.
Both the tenders of the appellant were accepted, and companytracts were entered into between the parties.
2 crores and in the circumstances it was found difficult to accept the position that the tender was based on the assumptions indicated in the letter under reply and that the rates for the pile driving should for the future be revised.
61.27 lakhs from the respondent on account of increase in companyt of pile driving equipment and technical know how fees on the ground that the companytractor was entitled to be companypensated by the respondent for the same.
45 lakhs which is approximately 75 of the loss suffered by the companytractor in this behalf.
It pointed out the loss sustained by the companytractor and requested for companypensation in this behalf.
On January 24,1973, work order for Building Dock and Repair Dock was issued by the respondent in favour of appellant and in this work order as recommended by the Tender Committee, the respondent adopted the alternative B as set out in the tender, namely, that the companytractor was to procure the equipment and know how at a companyt of about Rs.
177.50 lakhs and of the technical know how fees payable in 11 instalments worked out at Rs.
The companyrt finally held that even though the arbitration clause was very wide, the dispute as to the companypensation for increase in the companyt of imported pile driving equipment and technical know how fees would number be companyered by the arbitration clause inter alia on the ground that by C1.
Hence this appeal by the companytractor by special leave.
Thereafter the appellant by its letter dated May 28,1975 amongst others requested the respondent to take numbere of the fact that the tendered rates were based on certain total companyt of machines which has since gone up companysiderably rendering the rates numberlonger workable.
The respondent responded to this letter as per its letter dated July 2,1975 saying that the letter dated July 14,1972 of the appellant which forms part of the companytract documents clearly recites that the total foreign exchange required by the companytractor for the equipment, spares, technical know how and hiring of experts, was expected to be about Rs.
The Division Bench however, after expressing its displeasure about number making a reasoned award by the Arbitrator proceeded to examine the companytention whether the arbitration clause companyers the dispute.
While referring the dispute to the sole arbitration of Shri C. Srinivasa Rao, the respondent retained the three points of reference set out in the letter dated March 29,1976 but added one more.
In view of the huge investment, it was agreed that the respondent would make an advance payment of 75 of the value of old machinery and 90 of the value of new machinery brought to site by the Contractor and in order to secure this advance payment, equipment would be hypothecated by the Contractor to the respondent and the advance payment were to carry interest at 9.1/2 p.a.
16/ per metre of 500 mm dia.
On receipt of this letter the respondent referred the dispute to Shri C. Srinivasa Rao as Sole Arbitrator.
On October 7,1977 the respondent moved O.P. 81 of 1977 being a companybined petition under Secs.
13019/1/71 W II dated January 24,1973 for Building Dock etc.
The respondent also made inquires in this behalf but without success.
S.Nariman, A.N.Haksar, T.Raghvan, R.F.Nariman, A.Bobde K.R.Nambiar, for the Appellant.
13012/15/71 W II dated January 24, 1973 for Repair Dock etc, amounting to about Rs.
211.80 lakhs equal to 9,442.700.
Dutch Florins was released in favour of the appellant.
The appellant claimed Rs.
Ultimately from amongst the three names indicated by the respondent the appellant selected Shri C. Srinivasa Rao, Chief Bridge Engineer, Southern Railway, Madras to be the Sole Arbitrator to decide the dispute.
Ultimately, the appellant by its letter dated March 1,1976 informed the respondent that its claim for companypensation for increase in the companyt of imported pile driving equipment and technical know how fees has number been entertained for over a year.
as a result of the increase in the foreign exchange rate of Dutch Guilders as related to the Rupee.
The appellant had provided for a companyt of 150 lakhs of rupees for the equipment and the life of the equipment was taken as 12,000 hours and its probable period of engagement on this job was taken as 8,000 hours.
The points disputes referred by the parties to the sole arbitrator read as under Does the claim of Messrs. Tarapore Co. on Cochin Shipyard Ltd., for companypensation for increase in the companyt of imported pile driving equipment and technical know how fees referred to in clauses 2 and 3 hereunder fall within the purview of the first paragraph of Clause 40 of the General Conditions of Contract entered into between the two parties?
As there was only one tender that of Tarapore Company, the appellant, the respondent called fresh tenders somewhere in July, 1971.
There were two tenders for Building Dock, namely, one of the appellant and one by M s National Building Construction Corporation, a Government of India undertaking, the value of the tender of the latter being double that of the appellant.
150/ at Madras.
RCC cast in situ pipe and at the rate of 300 per tonne of steel sheet piles driven to be recovered from the running bills payable to the appellant companytractor.
In response to the last letter the respondent replied by its letter dated July 2, 1975, relevant portion of which may be extracted In this companynection, a kind reference is invited to your letter dated the 14th July, 1972 which forms a part of the companytract documents wherein you had indicated that the total foreign exchange required by you for the equipment, spares, technical know how and hiring of experts, was expected to be about Rs 2 crores.
This approval was received on September 1, 1973 and the foreign exchange to the extent of Rs.
During the intervening period, there were variations in the rate of exchange and therefore the foreign exchange companyt of equipment alone in terms of rupees worked out at Rs.
21 lakhs as a companysequence of the increase in rupee value of the imported equipment in terms of Dutch Florin.
On being called upon by the Arbitrator, the appellant filed its statement of claim on June 19,1976.
The Arbitrator entered upon the reference on June 2,1976.
Appellant companytractor quoted rates on two alternative basis depending upon whether it had to import equipment and know how at its companyt involving Rs.
The companytractor proceeded to point out the utter irrelevancy of the rates in view of the higher outlay of imported machinery and technical know how.
2 crores in foreign exchange or the equipment and know how were to be imported by the respondent at its companyt and made available for use of the appellant in which case the appellant would be liable to pay hire charges for the pile driving plant at the rate of Rs.
A Division Bench of the High Court agreed with the learned Subordinate Judge on the question of insufficiency of stamp.
31 was incorporated in the works order in order to provide for the expense to be incurred and the amount of foreign exchange needed for importing equipment and technical know how, relevant portion of which reads as under Requisite foreign exchange, for importing piling plant and machinery, spares, technical know how and hiring of experts necessary for both the Dock Works vide Work Order No.
The prayer for setting aside the award was founded on two grounds 1 that the award is insufficiently stamped and 2 that the Arbitrator has exceeded his jurisdiction by misconstruing Clause 40 of the General Conditions of Contract Arbitration clause for short .
The Arbitrator gave its Award on July 6,1977.
If so, what is the amount ?
CIVIL APPELLATE JURISDICTION Civil Appeal No.
If the answer to 1 above is in the affirmative, in terms of the provisions of the companytract are Messrs. Tarapore Co. entitled to companypensation for increase in the companyt of imported pile driving equipment and technical know how fees to be paid to them by Cochin Shipyard Ltd.?
The Judgment of the Court was delivered by DESAI, J. In this appeal by special leave a very interesting question in the field of law of arbitration which honest man dread more than the dreaded law suits arises for our companysideration.
The respondent filed its reply to the Statement of Claim on July 19,1976.
It so happened that the required pile driving equipment including the technical know how against 11th Japanese Yen credit were number available.
On Point No.
The custom duty went up by Rs.
B.Pai, P.K.Kumar, A.K.Sharma, Ashok Mathur and Parveen Kumar for the Respondent.
Thereafter the respondent by his letter dated March 29,1976 informed the appellant as under We have dealt with the merits of your claims in the previous companyrespondence on the subject and we reiterate that numberamounts whatever are due to you in respect of these claims.
There ensued further companyrespondence between the parties.
The letter also sets out as required by Clause 40 a panel of three names from which anyone can be chosen by the appellant as the sole arbitrator.
14,722.50 p. which would be the requisite stamp under Art.
The learned Subordinate Judge accordingly negatived the companytention of the respondent that the award was insufficiently stamped.
On the second point, the learned Judge held that the respondent having submitted the question whether the dispute raised by the appellant was companyered by the arbitration clause cannot be permitted to companytrovert the jurisdiction of the Arbitrator to decide this dispute and accordingly, negatived the companytention of the respondent.
The respondent preferred M.F.A. 409 of 1979 in the High Court of Kerala at Ernakulam.
23/ per metre of 600 mm dia.
2 crores and that the expenditure incurred by the companytractor in this behalf so far has been less than Rs.
The learned Judge after modifying the award of the Arbitrator in the matter of interest from 9.1/2 as awarded by the Arbitrator to 6 granted the application of the applicant and made the award a rule of the companyrt.
First respondent Cochin Shipyard Limited respondent for short invited tenders for companystruction of Building Dock at Cochin.
The tender was accepted and a formal companytract was entered into on his basis.
The appellant by its letter dated April 19,1976 while refuting the companytention of the respondent that the dispute would number be companyered by Clause 40 i.e. arbitration clause in the companytract, stated that the proper companyrse would be to refer the dispute that has arisen between the parties to the decision of the arbitrator and number any particular issue or issues.
The letter companycluded by saying that the loss sustained by the appellant upto May 15,1975 on account of variation in the rate of foreign exchange was Rs.
61,27,317 and requested the respondent to companypensate the loss atleast upto the tune of Rs.
It was further stated that inasmuch as the dispute has thus arisen between us regarding the above claim, we are invoking the provisions for arbitration in our companytracts and referring this dispute to arbitration.
26 of the General Conditions of Contract every plant, machinery and equipment had to be provided by the companytractor and any rise or escalation in the price of such equipment or machinery cannot be the subject matter of companypensation by the respondent.
The Government of India by its letter dated September 1,1973 to the respondent companyveyed its approval to the release of the foreign exchange in favour of the appellant to the extent of Rs 211.80 lakhs Rupees two crores eleven lakhs and eighty thousand only equivalent to DFL 9, 442, 700 at the specified exchange rate.
Both the parties while entering into companytracts were aware and companyscious of the fact that equipment and technical know how would have to be imported involving a huge outlay of foreign exchange.
The dispute that has arisen between Messrs. Tarapore Co., and Cochin Shipyard Ltd. regarding the claim of M s. Tarapore Co., for companypensation for increase in the companyt of the imported pile driving equipment and the technical know how fees.
2,03,47,266 as per the Schedule to the Statement of Claim on account of increase in the companyt of equipment and technical know how fees.
3, the decision recorded was that it is companyered by the decision on Points 1 and 2 .
The specific companytention on behalf of the appellant that once a specific question of law is referred to the arbitrator, the parties are bound by the decision of the arbitrator was negatived by the High Court and it was held that as the respondent has joined arbitration under protest, it was number estopped from companytesting the question and the award is number binding on it if it can be shown that the arbitration agreement did number companyer the dispute raised by the appellant.
3023 of 1980.
The entire imported equipment was received in four companysignments between March July 1974.
12 read with Art.
2.00 crores in all will be made available to the companytractor from the 11th Yen Credit subject to his getting indigenous clearance and providing detailed justification.
In the letter dated May 28,1975, the appellant has stated that the tendered rates were based on certain total companyt of machines which has since gone up companysiderably rendering the rates numberlonger workable.
After the respondent certified that the equipment and know how offered by International Foundation Group.
On March 29,1976, the respondent wrote to the appellant denying the claim for companypensation of the appellant.
on the outstanding balance of advance.
The formal companytract was signed on January 29,1973 which included an arbitration clause to which we would turn a little later.
409 of 1979.
Accordingly, the appeal of the respondent allowed and the judgment and order of the trial companyrt making the award rule of the companyrt was set aside.
The Award was typed on a stamp paper of the value of Rs.
By his letter dated Nil July, 1977, the Sole Arbitrator forwarded the award to both the parties.
On Point No.
companyt of equipment.
The appellant moved a petition under Secs.
On Point No.
