Holding

A claim or dispute under the contract must be raised in writing to the Superintending Engineer within fifteen days of the cause of action as mandated by Clause 83; failure to do so bars the claim, and the High Court’s setting aside of the award was proper.

Summary

The Supreme Court considered two contracts awarded in 1977 for earthwork and aqueduct construction in Andhra Pradesh. The contractors claimed reimbursement for losses caused by a cyclone in November 1977 and floods in June 1978, but their claim letters did not comply with Clause 83 of the contract, which required any claim or dispute to be submitted in writing to the Superintending Engineer within fifteen days of the cause of action. The High Court had set aside the portion of the arbitral award that granted the contractors Rs 9,66,000 on this basis. The contractors argued that the High Court improperly interpreted Clause 83 and re‑appraised evidence, and that the claims were not time‑barred. The Court held that non‑compliance with the contractual claim‑submission clause barred the claims, and that the High Court was correct in rejecting the award. Consequently, the appeals were dismissed.

Issues considered

Did the contractors comply with Clause 83’s requirement of submitting claims in writing within fifteen days of the cause of action?
Was the High Court authorized to reinterpret Clause 83 and set aside the arbitral award?
Are the claims for losses due to the cyclone and floods time‑barred under the contract?
Does Clause 42 of the contract preclude reimbursement for flood‑related losses, placing the risk on the contractor?

Legislation cited

Arbitration Act, 1940s. 30, s. 33

Subjects

arbitrationcontract clauseclaim submissiontime limitationfloodcycloneconstruction contractSupreme CourtClause 83reimbursement

Judgment

A INTERNATIONAL CONSTRUCTION COMPANY ETC.
v.
STATE OF ANDHRA PRADESH AND ORS.

FEBRUARY I, 2001

B [S. RAJENDRA BABU AND S.N. VARIAVA, JJ.]

Arbitration Act, 1940: Sections 30 and 33-Contract for excavation
work.formation of embankments etc.--C/ause 83 stipulating that claim should
be made in writing to the Superintending Engineer within I 5 days from !he
C date of cause of action in order to enable verification-Also stipulated that
it would be impossible to verijj· the facts of the claims preferred after 15 days
and such claims liable to be rejected-Appellant made claims in respect of -+
losses suffered because of cyclone in November 1977 and floods in 1978,
without giving details in terms of Clause 83-Award made by the Arbitrator
D made rule of the Court-High Court reversed a portion of the said award-
On appeal, Held: No dispute, as contemplated under Clause 83 had been
raised at all-Appellant's letter only mentioned about the severe cyclone and
heavy rains-It also said that the labourers gathered from the different areas
were forced to return-It nowhere gave details as to the number of labourers _f.
from different areas and the arrangements made regarding them and the
E extent of loss suffered by them.

In the year 1977, two contracts were awarded to the appellants for the
purpose of earthwork, excavation and formation of embankments and
construction of aquaducts in the Nagarjuna Sagar Left Canals in District
Khammam in Andhra Pradesh. The total value of the contract was about Rs. I
F 1.57 Crores. A dispute arose out of the said two contracts which was referred
to the Arbitrators. The Arbitrators made an award in favour of the appellants.
The said award was made rule of the Court by the City Civil Court, Hyderabad.
However, on appeal, the High Court set aside a portion of the award made by
the arbitrators on account of claims towards losses suffered by the appellants
G due to severe cyclone in Andhra Pradesh in November, 1977 and on account
of reimbursement of losses due to abnormal rains and unprecedented floods )..._
in 1978. Henc~ these appeals.

' The appellants contended that the High Court had sought to interpret
I
1 the clauses of the agreement which it was not entitled to do so and could not
ff 792
INTERNATIONAL CONSTRUCTION CO. ETC. v. STATE 793
have reappraised the evidence particularly in respect of the taking over.of A
*the site and that there was no heavy rainfall in June~ 978 as per statistics
maintained by the Rainfall Station at Wyra which is near the \vork site. It
was also contended that the High Court erred in holding that new claims had
been raised by the appellants and that certain claims were time-barred.

Dismissing the appeals, the Court B

HELD: I. In order to make a claim and raise a dispute there should
have been compliance with clause 83 of the agreement. The claim should
have been submitted in writing to the Superintending Engineer within 15
days from the date of cause of action so that this aspect would be verified. On C
the interpretation of clause 83, the High Court held that condition therein is
a condition meant for convenience of both the parties and does not lay down a
+ rule of limitation, much less a condition for the arbitrator to entertain a
claim. (795-D-EI

2. From the materials on record, it is clear that there had been floods D
and, therefore, the appellants had been put to loss but a claim or dispute in
terms of clause 83 does not seem to have been addressed at all either in
claim regarding reimbursement of losses sustained by way of advances to
labour on account of severe cyclone in November, 1977 or in the claim
regarding reimbursement of losses sustained due to abnormal rains and E
unprecedented floods in 1978. All that the appellants stated in their letter
dated 26-11-1977 is that there had been severe cyclone and heavy rains as a
result of which communications dislocated and the appellants sent their labour
recruitment personnel to Bilaspur, Orissa, Mehboobnagar and other labour
recruitment areas and some of the labour gathered were on their way to site
when they were held up due to the cyclone and were forced to return back due F
fo complete breakdown of communications after the cyclone, but there are no
details as regards how many labourers have been engaged from different
areas and what arrangements had been made in regard to them and the extent
of loss suffered by them. That is the dispute that is contemplated under
clause 83 and such a dispute had not been raised at all. 1795-E-HI
G
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 3593-3596
of 1996.

From the Judgment and Order dated 30.8.93 of the Andhra Pradesh High
Court in A.A.0. Nos. 1200 and 1201/87 and C.R.P. Nos. 3120 and, 3121
.
of 1987. H
794 SUPREME COURT REPORTS [2001] I S.C.R.

A With
..,.__
Civil Appeal Nos. 3688-3691of1996.

T.L. Vishwanatha Iyer, D. Ram Krishna Reddy, G.R.K. Prasad, D. Bharathi
Reddy, G. Prabhakar, Ms. T. Anamika, P.P. Singh for the appearing parties.
B
The Judgment of the Court was delivered by

RAJENDRA BABU, J. These appeals arise out of orders made by the
Andhra Pradesh High Court in two appeals Nos. 1200 and 1201 of 1987 and
Civil Revision Nos. 3120 and 3121 of 1987. By a common judgment the High
c Court allowed the appeals and civil revision petitions filed by the respondents
and set aside a portion of the award made by the arbitrators for a sum of Rs.
9,66,000 on account of claims towards losses suffered by the contractor on
account of severe cyclone in Andhra Pradesh in November 1977 and on +
account of reimbursement of losses due to abnormal rains and unprecedented
floods in 1978. The dispute arose out of two contracts awarded in the year
D
1977 to the appellants for the purpose of earth work, excavation and formation
of embankments and construction of aquaducts in the Nagarjuna Sugar Left
Canals in District Khammam in Andhra Pradesh The total value of both the
contracts is about Rs. l.57 crores. The arbitrators made an award which was
made the rule of the court by the Additional Judge, City Civil Court, Hyderabad. :f
E The High Court, however, reversed a portion of the award, as stated earlier.
The contention put forth before us is that the High Court has sought to
interpret the clauses of the agreement which it was not entitled to do so and
could not have reappraised the evidence particularly in respect to the taking
over of the site and that there was no heavy rain fall in June 1978 as per
statistics maintained by the Rainfall Station at Wyra which is near the work
F site. It is contended that the High Court also erred in holding that new claims
have been raised by the appellants. The stand of the appellants is that no
new claims had been made and the claims already made were elaborated by
making another siatement. It is further contended that the High Court also
erred in holding that certain claims were time-barred.
G
Clause 83 of the agreement, upon which much argument had been
addressed, is to the following effect :- +---
83. CLAIMS AND DISPUTES

H Any claims or disputes out of the contract should be submitted in
f

INTERNATIONAL CONSTRUCTION CO. ETC. v. STATE [RAJENDRA BABU, J.] 795
writing to the Superintending Engineer within 15 (fifteen) days from A
the date of cause of action, so that the points at issue should be
immediately verified at site by the field officers, facts ascertained and
a prompt decision given. Claims raised subsequently at such a distance
of time as to make it impossible to verify the facts are liable to be
rejected. The tenderer shall carefully note this stipulation.
B
The appellants had made representations to the Government for
reimbursement of losses suffered on account of the cyclone of 1977 and
abnormally heavy rains and floods in June 1978 and the Government had in
September J 979 agreed to advance a loan of Rs. 4.67 lakhs which was
subsequently recovered from the running bills payments. The only two claims C
that survive for our decision are Claim No. I (A) and Claim No. II (A). Claim
No. I (A) is "towards reimbursement of losses sustained by way of advances
+ to labour on account severe cyclone in November 1977 and Claim No. II(A)
is regarding "towards reimbursement of losses sustained due to abiionnal
rains and unprecedented floods in 1978". In order to make a claim and raise
a dispute there should have been comp Iiance with clause 83 of the agreement D
and on this aspect there is no dispute. The claim should have been submitted
in writing to the Superintending Engineer within 15 days from the date of
cause of action so that this aspect would be verified. On the interpretation
of clause 83, the High Court held that condition No. '83 is a condition meant
for convenience of both the parties and does not lay down a rule of limitation, E
much less a condition for the arbitrator to entertain a claim. It is not necessary
for us to examine whether any new claim had been raised by the appellants
or not. All that we need to notice is whether, in fact, any claim had been made
in terms of ~ondition No. 83 at all or not. It is clear from the materials placed
before us that there had been floods and, therefore, the appellants had put
to loss but a claim or a dispute in terms of condition No. 83 does not seen F
to have been addressed at all either in claim No. I (A) or claim No. II (A). All
that the appellants stated in their letter dated 26.11.1977 is that there had been
severe cyclone and heavy rains as a result of which communications dislocated
and the appellants sent their labour recruitment personnel to Bilaspur, Orissa,
Mahboobnagar and other labour recruitment areas and some of the labour G
gathered were on their way to site when they were held up due to the cyclone
and were forced to return back due to complete break down of communications
after the cyclone, but there are no details as regards how many labourers have
been engaged from different areas, as to who they were and what arrangements
had been made in regard to them and the extent of loss suffered by them. That
is the dispute that is contemplated under clause 83 and such a dispute had H
796 SUPREME COURT REPORTS [200 I] I S.C.R.

A not "been raised at all.
The appellants made a claim No. II(A) in the following terms :-
-....- -
"CLAIM NO. II. TOWARDS REIMBURSEMENT OF LOSSES
SUSTAINED DUE TO ABNORMAL RAINS AND UNPRECE-DENTED
B FLOODS IN 1978.

The claimants submit that while the work was in good progress, in
June, 1978, there were heavy unprecedented rains in the catchment of
Pedavagu. These were found to be the heaviest recorded in the
preceding about 20 years, for the month of June as could be verified
c subsequently from the l.M.D. data (enclosed). This resulted in many
floods one following the other breaching all protective works in the
river bed and resulting in heavy siltation of the excavated foundations,
heavy erosion of the banking already formed, and damage to machinery
and loss of stacked materials, in addition to idling of labour and
transport vehicles. These heavy rains had also an adverse effect on
D the cart track used for conveyance of materials from the quarry to the
work-site. The cart track became slushy and loaded lorries could
negotiate the cart track only with reduced loads; it also took extra time
for each trip. This in.creased enormously the cost of transportation.

The rainfall being unusually heavy for the month of June, exceeded
E all expectations of the claimants based on which the protection
arrangements had been formed. The total losses caused by the
extraordinary heavy rains and floods amount to Rs. 12,80,262. As the
claimants incurred these losses due to no fault of theirs, they are
entitled to be reimbursed."
F
Again it is not clear whether the appellants had raised any dispute or a claim.
Moreover, clause 42 of the agreement reads as under :-

"42. FLOODS:

In case of flash and untimely floods during the working season i.e.
G
resulting in over topping of protective work and flooding of the work
area, the contractor shall make his own arrangement at his cost to
shift the machinery equipment, material and labour to a safe place.
The work shall have to be resumed after receding of floods and
necessary strengthening of protective work and dewatering done by
H the contractor at his cost. Suitable extension of time shall however be
INTER NA 1"1.0NAL CONSTRUCTION CO. ETC. v. STA TE [RA.IENDRA BABU, J.] 797
granted on such occasions fo1: the loss of working at lhe request of A
the contractor. The Department is not liable for any loss or damage
to the men, machinery, work or materials on account of these floods
and no compensation whatsoever in this regard shall be paid to the
contract.

1. The silt, debrice, sand and other materials accumulated in the B
working area during flash floods or regular floods in the monsoon
shall be removed by the contractor as required for continuing
the work at his cost, by any chance, if any, excavated portion
that could not be filled with concrete and masonary by the
contractor, get a filled up during the monsoon period with earth
and silt, its removal will not be paid for again. The contractor will c
have to re-excavate at his own cost.
2. It shall be distinctly understood that it is entirely the responsibility
of the contractor to make such arrangements as may be required
from time to time to project the men, machinery, materials and the
work under progress and the work for which the measurements D
were recorded and payment made, against damage either during
working season or during the flood season and department
accepts no liability, whatsoever for any damage or loss of men,
materials, machinery and work or hindrance caused to the
progress of work except as provided in clause under "contractor's E
risk and Insurance" as mentioned herein."

In the event of such situation, as is pointed out, as to what arrangement
the appellants had made and what are the claims in regard to the same and
they had not made such a claim before the department. These two findings
are sufficient for rejecting the claim made by the appellants and the view taken F
by the High Court, therefore, is correct and calls for no interference.

The appeals, therefore, stand dismissed. However, there shall be no
order as to costs.

R.C.K. Appeals dismissed. G