Case Study Case-Up vs Allied Construction

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State of U.P vs. Allied Constructions, 2003(3) Arb. LR 106 (SC)

The State of U.P and Allied Constructions have entered into contract of construction of bridgecum-fall at Munda Khera Scape at the estimated cost of Rs. 37.2 lakhs. While the work was in progress, the work area was flooded in the night of August 25 and 26, 1991. Contractor herein filed a claim on account of loss sustained by him due to flooding of the work area. The owner refused to pay any compensation on the ground that this case come under the case of force majeure contained in Clause 47 and disentitled the respondent from making any claim which was on account of unprecedented rain(Which comes under force majeure by GCC). Ultimately, the matter was referred to an arbitrator. The arbitrator gave an award for payment of a sum of Rs. 12, 55,365 together with interest at the rate of 18 per cent from 1.11.1991 till the date of the award and 6 per cent thereafter. The owner filed a petition to High Court, on the ground that the arbitrator has misconduct the proceedings, inasmuch as the force majeure contained in Clause 47 disentitled the respondent from making any claim which was on account of unprecedented rain. But court gives the order in favors of contractor. Later the owner goes to Supreme Court and states that the case of unprecedented flood comes under the force majeure i.e. Clause 47 of the agreement runs under: "Neither party shall be liable to the other for any loss or damage occasioned by or arising out of act of God, such as unprecedented flood, volcanic eruption, earthquake or other convulsion of nature and other acts such as but not restricted to general strikes, invasion, the act of foreign countries; hostilities or warlike operations before or after declaration of war; rebellion, military or usurped power which prevent performance of the contract and which could not have been foreseen or avoided by a...
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