Summary
The Supreme Court set aside further payment directions against the Kerala State Electricity Board in a dam-construction dispute. The contractor could not change the principal-first appropriation adopted in the claim statement incorporated in the earlier judgment, or obtain subsequent interest not awarded there. Uniform escalation percentages for additional work were also unsustainable. With no arbitration agreement, counsel’s oral consent without written party authority could not support the reference; the resulting award was set aside. Payments already made were adjusted in full settlement of the additional-work claims.
Issues
- Whether the contractor could change the earlier method of payment appropriation and claim additional principal and subsequent interest.
- Whether uniform labour and material escalation percentages were justified.
- Whether counsel’s oral consent could support an arbitration reference without an arbitration agreement or written party consent.
Provisions considered
- Section 34(2), Code of Civil Procedure, 1908Silence in the underlying judgments as to further interest amounted to refusal; subsequent interest on the claims could not be added. (¶¶ 24, 25, 33, 47)
Held
- Payments must be appropriated according to the decree. The earlier judgment directed payment under Ex.P20, in which the contractor himself had credited advances to principal and calculated interest separately. He could not later reappropriate payments first to interest to assert an unpaid principal balance. The general interest-first rule did not displace those directions. (¶¶ 15, 17, 18, 19, 20, 21, 47(i))
- The underlying judgments contained no direction for subsequent interest. Section 34(2) therefore precluded the additional future-interest claims. The High Court’s further principal and interest directions under Ex.P20, and future interest under Ex.P59, were set aside. (¶¶ 22, 23, 24, 25, 26, 33, 47(ii), 47(iii))
- Additional-work claims were disputed. Applying single uniform labour and material escalation percentages of 173.60% and 98% disregarded the contractor’s monthly calculation method. The admitted work amount required escalation calculated monthly; the High Court’s uniform calculation could not stand. (¶¶ 29, 30, 31, 32, 47(iii))
- Without a pre-existing arbitration agreement, reference under section 89 CPC required written agreement of the parties, such as a joint memo, application, affidavit or signed record. Counsel’s oral consent without written instructions was insufficient here, particularly for a statutory body. Arbitration’s procedural and substantive consequences required actual consent; the impugned reference and resulting award were set aside. (¶¶ 34, 35, 36, 37, 38, 39, 40, 41, 42, 47(iv))
- Article 136 ordinarily does not entail factual reappreciation, but permits intervention where perverse findings or serious irregularities produce manifest injustice or excessive hardship. The errors here threatened substantial loss to the Board and ultimately consumers, justifying interference. (¶¶ 43, 44, 45)
- The Rs.1,74,75,247 excess paid under Ex.P20 and the further Rs.5 crore interim payment were together treated as full settlement under Ex.P59, including tender excess and labour and material escalation. The Court did not direct a fresh calculation or further arbitration of those settled claims. (¶¶ 46, 47(v))
Result
Appeals allowed; impugned High Court judgment and arbitral award set aside. Board’s pending arbitration appeal allowed. Rs.6,74,75,247 already paid treated as full settlement of Ex.P59 claims. Parties to bear their own costs.