Delhi High Court
Netaji Subhash Institute Of Technology vs M/S Surya Engineers & Another on 19 November, 2024
Author: Jasmeet Singh
Bench: Jasmeet Singh
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 18.07.2024
Judgment pronounced on:.19. 11 .2024
+ O.M.P. (COMM) 48/2020 & I.A. 1401/2024
NETAJI SUBHASH INSTITUTE OF TECHNOLOGY .....Petitioner
Through: Ms. Avnish Ahlawat, Standing Counsel with Mr. NK
Singh, Ms. Laavanya Kaushik, Ms. Aliza Alam, Mr
Amitesh Chadha and Mr. Mohnish Sehrawat, Advs.
versus
M/S SURYA ENGINEERS & ANOTHER .....Respondents
Through: Ms Gunjan Sinha Jain and Mr Animesh Tripathi,
Advs.
Mr. Ishaan Mukherjee, Adv.
+ OMP (ENF.) (COMM.) 8/2024
M/S SURYA ENGINEERS .....Decree Holder
Through: Ms Gunjan Sinha Jain and Mr Animesh Tripathi,
Advs.
Mr. Ishaan Mukherjee, Adv.
versus
NETAJI SUBHAS UNIVERSITY OF TECHNOLOGY
.....Judgement Debtor
Through: Ms. Avnish Ahlawat, Standing Counsel with Mr. NK
Singh, Ms. Laavanya Kaushik, Ms. Aliza Alam, Mr
Amitesh Chadha and Mr. Mohnish Sehrawat, Advs.
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
: JASMEET SINGH, (J)
O.M.P.(COMM) 48/2020
1. This is a petition under section 34 of the Arbitration and Conciliation Act,
1996 seeking setting aside of the impugned Arbitral Award dated 04.08.2007
passed by the respondent no. 2, i.e. the learned Arbitrator.
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 1 of 55
By:MAYANK
Signing Date:19.11.2024
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2. The petitioner has impleaded the learned Arbitrator in the present petition.
This is an unusual practice and should be deterred. The Arbitrator is not a party
to the proceedings but sits as an adjudicator over the dispute between the parties.
He is a creature of the agreement to adjudicate the inter-se disputes arisen
between the parties and not personally involved or personally liable in any other
way. Impleadment of Arbitrators, as parties to the proceedings under section 34
of the Arbitration and Conciliation Act, 1996, have the potential to jeopardize
the sanctity of arbitral proceedings, especially since adequate framework for
challenging the decision taken by the Arbitrator is in existence. In this view, the
impleadment of the Arbitrator need not be done. Respondent No. 2 is deleted
from the array of parties.
3. Henceforth, respondent no. 1 is being referred to as „respondent‟.
Facts
4. The brief facts encapsulating the present petition are as under:-
a. The work for “Construction of NSIT Complex (Phase-III) Part II at
Sector 3, Dwarka, New Delhi-110045. SH: Extension of Library Building
& Computer Centre at NSIT, Sector-3, Dwarka” was awarded by the
petitioner to the respondent(which was a partnership firm at the time of
entering in the contract but is now a sole proprietorship firm) vide
Agreement dated 29.08.2003.
b. Since the respondent did not adhere to provisions of the contract
and the work was not completed within time (including the extended
period), the contract was rescinded by the petitioner on 09.05.2005. It is
stated that the work got done at the risk and cost of the respondent from
M/s. Pt Munshiram & Associates (Pvt.) Ltd..
c. The disputes between the parties were referred to arbitration before
learned Sole Arbitrator.
d. The respondent was the claimant before the learned Arbitrator and
raised claims of Rs. 1,99,14,072.8/-under the following heads:
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Claim No. 1 Work done but not paid Rs. 18,34,463.73/-
Claim No. 2 Escalation payments under clause 10C Rs. 49,90,618/-
of the contract for increase in the
prices of the materials
Claim No. 3 Refund of Security Deposit Rs. 5,00,000/-
Claim No. 4 Damages sustained on account of loss Rs. 15, 83,475/-
of material, tools and Plants,
shuttering material etc and for the
advances made to suppliers due to
unjustified rescission of the contract
Claim No. 5 Damages towards idling of manpower, Rs. 77,52,061.67/-
staff and machinery due to various
breachesClaim No. 6 Damages due to loss of expected Rs. 32,53,454.40/-
profits of the work that remained to be
executed due to illegal rescission of the
contract
Claim No. 7 PRE-SUIT, PENDENTE LITE AND - @ 18% PER
FUTURE INTEREST ANNUM
Claim No. 8 Litigation Costs Rs. 80,000/-
e. The petitioner also raised counter claims for Rs. 2,36,27,280/-
under the following heads:
Counter Claim No.1 Compensation under Clause 2 of Rs. 44,83,616/-
the Contract
Counter Claim No.2 Damages compensations for the Rs. 1,82,42,056/-
work remaining
incomplete/unexecuted by the
claimant under clause 3 of the
contract
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 3 of 55
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Signing Date:19.11.2024
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Counter Claim No. 3 Ground Rent for the land made Rs. 1,05,273/
available
Counter Claim No. 4 Salary/wages of the Supervisory Rs. 3,95,335/-
Staff
Counter Claim No. 5 Litigation Expenses Rs. 4,00,000/-
Counter Claim No.6 Interest @ 18%
f. The learned Arbitrator vide Impugned Award dated 04.08.2007
allowed the claims of the respondent and rejected the counter claims of the
petitioner on the ground that the rescission of the contract by the petitioner
was unjust and unwarranted and that the work mainly got delayed on
account of late issue of the structural drawings by the petitioner. The
learned Arbitrator awarded the following amounts in favour of the
respondent vide Award dated 04.08.2007:-
i. Claim No. 1 (Work done but not paid): The learned Arbitrator
awarded an amount of Rs. 11,05,447/- in favour of the
claimant/respondent.
ii. Claim No. 2 (Escalation payments under clause 10(c) of the
contract for increase in the price of the materials): The learned
Arbitrator awarded an amount of Rs. 40,00,000/- in favour of the
claimant/respondent.
iii. Claim No. 3 (Refund of Security Deposit): The learned Arbitrator
awarded an amount of Rs. 5,00,000/- in favour of the
claimant/respondent.
iv. Claim No. 4 (Damages sustained on account of loss of material,
tools and plants, shuttering material etc. and for the advances
made to the suppliers due to unjustified rescission of theDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 4 of 55
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Signing Date:19.11.2024
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contract.): The learned Arbitrator awarded an amount of Rs.
8,04,827/- in favour of the claimant/respondent.
v. Claim No.5 (Damages towards idiling of manpower, staff and
machinery due to the respondents various breaches of the
contract): The learned Arbitrator awarded an amount of Rs.
43,13,645.67/- in favour of the claimant/respondent.
vi. Claim No. 6 (Damages due to loss of expected profits on the
work that remained to be executed due to illegal rescission of
the contract): The learned Arbitrator awarded an amount of Rs.
4,00,000/- in favour of the claimant/respondent.
vii. Claim No. 7 (Interest): The learned Arbitrator awarded (i) Pre-suit
Interest on the amounts awarded in claim no. 1 and 3 from
01.09.2005 to 4.12.2006 @ 12% per annum. (ii) Pendente lite
Interest from 5.12.2006 up to the date of publication of this award
on the amounts awarded against claim nos. 1,2,3,4 and 6 @ 12%
per annum. (iii) No future interest was awarded if the award was
implemented within three months. If the award was not
implemented in this period of 3 months, interest @ 12% per annum
on claim nos. 1,2,3,4,6 and 8 from one day after the date of
publication till the date the award is actually implemented.
viii. Claim No. 8 (Litigation Cost): The learned Arbitrator awarded an
amount of Rs. 80,000/- in favour of the claimant/respondent.
5. It is this Award that is under challenge in the present petition.
Finding of the learned Arbitrator regarding delay attributable to the
petitioner
Submissions by the petitioner
6. It is submitted by Mrs. Ahlawat, learned counsel for the petitioner that the
contract was to be completed within 16 months from the date of the
commencement, i.e. from 24.08.2003 to 23.12.2004. The contract was
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 5 of 55
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Signing Date:19.11.2024
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provisionally extended for another five months, i.e. till 23.05.2005, however
since the respondent no.1 did very little work during the said extension, the
petitioner rightly rescinded the contract on 09.05.2005. The respondent till the
date of rescission had only completed 49% of the work stipulated in the
agreement and therefore, the petitioner was within its right to rescind the
contract.
7. The petitioner submits that the site was handed over on 21.08.2003 and
the demolition for extension of the project site started on 24.08.2003. All the
major drawings for all floors (including doors, windows, sections, plumbing and
structural details) were made available in between 26.08.2003 to 28.08.2003 and
not on 24.11.2003, as held by the learned Arbitrator. In addition, the petitioner
submits that about 46 drawings were issued between 26.08.2003 to 17.11.2003
(i.e. 33 number of drawings on 28.08.2003, 7 number of drawings on
07.10.2003, 05 drawings on 14.11.2003 and 1 number of drawing on
17.11.2003) and any clarification sought, was duly attended to by the Engineer-
in-charge present at the site.
8. The petitioner submits that the learned Arbitrator failed to appreciate that
drawings were made available before laying of RCC slabs, however it was the
respondent who did not execute the work. The minor clarifications were
recorded in the revised drawings, however there was no hindrance in the work
because of non-issue of revised drawings. The petitioner has given details of
revisions in drawings and clarifications for different floors.
9. Further, it submitted by the petitioner that the learned Arbitrator has
wrongly observed that the extension of five months given by the Engineer-in-
charge was not based on any analysis done to ascertain the reasonable time
required but was purely on guess work and Ad-Hoc basis. It is stated that the
contractor/respondent did not seek any extension and the extension granted was
also not disputed. The respondent was supposed to complete RCC work for four
floors within five months, however the contractor took 3 and a half months for
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Signing Date:19.11.2024
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completing RCC work for just one floor showing inadequate manpower
available with the respondent.
10. With respect to the finding by the learned Arbitrator that the delay was
attributable due to non-approval of the source of the machine-moulded bricks,
the petitioner submits that the same is patently incorrect and against the express
provisions contained in Clause 1.2 of the Special Conditions of Contract (SCC),
which reads as under:-
―1.2 The good quality machine moulded bricks are not available in Delhi
and shall have to be arranged from Chandigarh or nearby area. Nothing
extra shall be paid for royalty, carriage, sales tax, octroi etc.‖
11. The petitioner submits in terms of clause 1.6.4.2 of the SCC the RCC
work could have started only after getting M-20 and M-25 approved by an
approved laboratory. It is stated that the respondent delayed the submission of
the sample of concrete mix with the Engineer-in-charge and therefore the delay
is attributable to the respondent. Clause 1.6.4.2 of SCC reads as under:-
―1.6.4.2. The source and quality of all ingredients of a concrete mix
shall be got approved from the Engineer-in-Charge before designing the
mixes and their testing and the same shall be maintained during the
execution of the work as well.‖
12. In view of the above clause, the petitioner submits that no approval or
decision was required to be given by the petitioner and it is the respondent who
has failed to execute the exposed brick work in term of the express provisions of
contract.
Submissions by the respondent
13. The respondent submits that the petitioner is intending to conduct a
fishing and roving enquiry, which does not fall under the purview of „patent
illegality,’ as envisaged under the Arbitration and Conciliation Act, 1996.
14. The respondent submits that the petitioner has failed to show any
illegality in terms of any contravention of any substantial law or terms of the
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contract but the objections raised are primarily on the ground that the learned
Arbitrator failed to consider the factum and evidence on record regarding the
delay attributable to the respondent.
15. The respondent submits that the learned Arbitrator was a technical person,
who was the retired Engineer-in-charge of CPWD. The Arbitrator has gone
through the evidence and the same can also be seen by a perusal of para 2.3 the
Impugned Award. Para 2.3 of the Award reads as under:-
―2.3 I have studied carefully the voluminous documentary evidence filed
by the parties in support of their contentions and have also carefully
considered the pleadings, oral and written, as made by the parties. The
claimants’ main stress for not being able to complete the work in the
stipulated contract period was on the delayed issue of the structural
drawings which were not made available to them in the beginning of the
work itself and it was because of this that the work could not be properly
planned and executed with the required pace. …..‖
16. The respondent submits that the drawing register of the petitioner clearly
shows that multiple revisions of drawings on various crucial aspects were made
from time and time. Additionally, there is nothing on record to show that only
minor clarifications were required and the same were cleared by the Engineer-
in-charge, present on the site, verbally and in real time.
17. Even in terms of the machine moulded bricks, the respondent submits that
the petitioner has only raised factual grounds, predicated upon re-appreciation of
evidence, which is impermissible, in a petition under section 34 of the
Arbitration and Conciliation Act, 1996. The respondent states that the petitioner
never earlier contended in its Statement of Defence that its approval/permission
is not required for procuring the machine-made bricks from areas other than
Chandigarh or nearby areas, rather as per the contract prior permission was
required for even bricks used for construction of hut for labourers (Clause 19H
of GCC). The respondent relies on clause 1.2.12 of SCC to show the
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requirement of prior permission for sample of materials, including bricks, which
reads as under:-
―1.2.12 SAMPLE OF MATERIALS:
The contactor shall submit to the Engineer-in-Charge samples of all
materials/work to be performed for approval before bringing bulk
supplies and before commencing the work. These approved samples
shall be preserved and retained in the custody of the Engineer-in-charge
as standards of materials and workmanship till the completiton of the
work. The cost of such samples shall be borne by the Contractor and
nothing shall be payable on this account. Testing charges, shall be borne
by the Institute.
In case sample of materials fails in the Laboratory, the testing charges
shall be recovered from the contractor’s account.‖
18. The respondent submits that under clause 5 of the contract, the
Superintending Engineer was required to take a decision on extension of time
considering the reasons for delay. A bare perusal of the termination letter shows
that there is a total non-consideration of the reply of the respondent to the show-
cause notice and there is total non-consideration of the petitioner‟s own lapses
which caused delay in completion of the project.
19. Claim No. 1: Work done but not paid:
Submissions by the petitioner
20. The petitioner submits that all the running bills, except the last running
bill for an amount of Rs 3.73 lakhs, were duly paid for, and there was no bill
amounting to Rs. 90 lakhs, therefore the learned Arbitrator should have held that
there is no delay in payment of bills, instead of holding there was no appreciable
delay.
21. The petitioner states that the amount of Rs. 7,29,088/- was awarded on
account of shutter finish of RCC surface against item 3.5 of BOQ (Bill of
Quantity), however since the objective of shutter finish was not achieved, the
extra payment could not have been made. The petitioner relies on the entries in
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the Site Order Book dated 29.10.2004 and 19.01.2005 which clearly shows that
shutter finish was not done.
Submissions by the Respondent
22. The respondent submits that the petitioner has relied on photographs and
entries in the Site Order book to state that RCC work was defective, however the
same was rejected by the learned Arbitrator. The learned Arbitrator observed
that there was no submission that the shutter finish work was not meeting
technical specifications since there was no complaint. Other than a few columns,
the petitioner never asked the respondent to redo any work
23. The respondent further submits that the technical view of the Arbitrator
cannot be substituted/reviewed by the court under the limited jurisdiction under
section 34 of the Arbitration and Conciliation Act, 1996 on the basis of some
photographs and entries in the Site Order book, which too had been duly
considered by the learned Arbitrator.
Claim No. 2: Escalation payments under clause 10(c) of the contract for
increase in the price of the materials:
Submissions by the petitioner
24. The petitioner submits that the claim and awarded amount for escalation
in steel price is contrary to clause 10C of the GCC and the same is only
permissible if the increase is a direct result of any fresh law, statutory rule or
order (but not due to any change in sales tax) and such increase exceeds 10% of
the price and or wage prevalent at the time of last stipulated date of receipt of
tender including the extension. Clause 10C reads as under:-
―CLAUSE 10 C
Payment on Account of Increase in Prices/Wages due to Statutory
Order(s)
If after submission of the tender the price of any material
incorporated in the works (not being a material supplied from the
Engineer-in-Charge’s stores in accordance with Clause 10 thereof)
and/or wages of labour increases as a direct result of the coming intoDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 10 of 55
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force of any fresh law, or statutory rule or order (but not due to any
changes in sales tax) and such increase exceeds ten per cent of the
price and/or wages prevailing at the time of the last stipulated date
for receipt of the tenders including extensions if any for the work, and
the contractor thereupon necessarily and properly pays in respect of
that material (incorporated in the works) such increased price and/or
in respect of labour engaged on the execution of the work such
increased wages, then the amount of the contract shall accordingly be
varied, provided always that any increase so payable is not, in the
opinion of the Superintending Engineer (whose decision shall be final
and binding on the contractor) attributable to any delay in the
execution of the contract within the control of the contractor.
Provided, however, no reimbursement shall be made if the increase is
not more than 10% of the said prices/wages, and if so, the
reimbursement shall be made only on the excess over 10% and
provided further that any such increase shall not be payable if such
increase has become operative after the contract or extended date of
completion of the work in question.
If after submission of the tender, the price of any material
incorporated in the works (not being a material supplied from the
Engineer-in-Charge’s stores in accordance with Clause 10 thereof)
and/or wages of labour is decreased as a direct result of the coming
into force of any fresh law or statutory rules or order (but not due to
any changes in sales tax) and such decrease exceeds ten per cent of
the prices and/or wages prevailing at the time of receipt of the tender
for the work. Government shall in respect of materials incorporated
in the works (not being materials supplied from the Engineer-in-
Charge’s stores in accordance with Clause-10 hereof) and/or labour
engaged on the execution of the work after the date of coming into
force of such law statuary rule or order be entitled to deduct from the
dues of the contractor such amount as shall be equivalent to the
difference between the prices of the materials and/or wages as
prevailed at the time of the last stipulated date for receipt of tenders
including extensions if any for the work minus ten per cent thereof
and the prices of materials and/or wages of labour on the coming into
force of such law, statutory rule or order.
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The contractor shall, for the purpose of this condition, keep such
books of account and other documents as are necessary to show the
amount of any increase claimed or reduction available and shall
allow inspection of the same by a duly authorised representative of
the Government, and further shall, at the request of the Engineer-in-
Charge may require any documents so kept and such other
information as the Engineer- in-Charge may require.
The contractor shall, within a reasonable time of his becoming aware
of any alteration in the price of any such material and/or wages of
labour, give notice thereof to the Engineer- in-Charge stating that the
same is given pursuant to this condition together with all information
relating thereto which he may be in position to supply.‖
25. The petitioner submits that there is no ambiguity in the phrase of
“Statutory Rule or Order” in clause 10Csince the same is made applicable to all
government contracts by all the government agencies. Therefore, giving a
different interpretation and applying the Contra Proferentum Rule by the
learned Arbitrator gave undue benefit to the respondent/contractor, which is
against public policy. It is submitted that a wholesale price index issued by the
Ministry of Commerce is only an indication of the escalation of the price and not
any rule/order contemplated under clause 10 C.
Submissions by the respondent
26. The respondent submits that the petitioner has failed to make out a case of
implausible interpretation. It is submitted that the learned Arbitrator has rightly
interpreted the term „order‟ under the clause 10C. Reliance is placed on the
judgment of the Supreme Court in Consolidated Coffee Limited v Coffee Board
(1980) 3 SCC 358, the operative portion of which reads as under:-
―14. In the first place the concerned phrase speaks of two things in
disjunctive: ―agreement‖ or ―order‖. The word ―order‖ which appears
in a statute dealing with sales tax must be understood in a commercial
sense, that is, in the sense in which traders and commercial men will
understand it. In commercial sense an order means a firm request for
supply of definite goods emanating from a buyer, an indent placed by aDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 12 of 55
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purchaser and, therefore, an order for or in relation to export would
mean an indent from a foreign buyer. It is not possible to accept the
contention urged by counsel for the petitioners that the word ―order‖ in
this phrase can mean or refer to an order, direction, mandate, command
or authorisation to export that may be issued by a statutory body like the
Coffee Board for two reasons; first, occurring in a sales tax statute the
word must be given its commercial meaning and, secondly, while
enacting the provision Parliament could not be said to have only
statutory bodies like Coffee Board or STC in mind. If, therefore an order
for export in the concerned phrase means an indent from a foreign
buyer, the preceding word ―agreement‖ in the phrase would take colour
from the word ―order‖ and would on the principle of noscitur a sociis
mean an agreement with a foreign buyer. In Maxwell on
the Interpretation of Statutes (at p. 289, 12th Edn.) the rule of noscitur a
sociis is explained thus:
―Where two or more words, which are susceptible of analogous
meaning, are coupled together they are understood to be used in
their cognate sense. They take, as it were, their colour from each
other, the meaning of the more general being restricted to a sense
analogous to that of the less general.‖
Applying this rule of construction it becomes clear that ―the agreement‖
occurring in the phrase must mean the agreement with a foreign buyer
and not the agreement with a local party containing a covenant to
export. Secondly, and more importantly, the user of the definite article
―the‖ before the word ―agreement‖ is, in our view, very significant.
Parliament has not said ―an agreement‖ or ―any agreement‖ for or in
relation to such export and in the context the expression ―the
agreement‖ would refer to that agreement which is implicit in the sale
occasioning the export. Between the two sales (the penultimate and the
final) spoken of in the earlier part of the sub-section ordinarily it is the
final sale that would be connected with the export, and, therefore, the
expression ―the agreement‖ for export must refer to that agreement
which is implicit in the sale that occasions the export. The user of the
definite article ―the‖, therefore, clearly suggests that the agreement
spoken of must be the agreement with a foreign buyer. As a matter of
pure construction it appears to us clear, therefore, that by necessary
implication the expression ―the agreement‖ occurring in the relevant
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phrase means or refers to the agreement with a foreign buyer and not an
agreement or any agreement with a local party containing the covenant
to export.‖
27. The respondent submits that interpretation of terms of contract falls within
the domain of the learned Arbitrator and the principle of contra proferentum is
applicable to interpret such term against the drafter of the Agreement, if the
contractual term were ambiguous. Further, the respondent states that Penta Test
for applying the principle of business efficacy would be applicable and the
judgment of Nabha Power Limited v Punjab State Power Corporation Limited
&Anr, (2018) 11 SCC 508) in this regard reads as under:-
―49. We now proceed to apply the aforesaid principles which have
evolved for interpreting the terms of a commercial contract in question.
Parties indulging in commerce act in a commercial sense. It is this
ground rule which is the basis of The Moorcock test of giving ―business
efficacy‖ to the transaction, as must have been intended at all events by
both business parties. The development of law saw the ―five condition
test‖ for an implied condition to be read into the contract including the
―business efficacy‖ test. It also sought to incorporate ―the Officious
Bystander Test‖. This test has been set out in B.P. Refinery (Westernport)
Proprietary Ltd. v. Shire of Hastings requiring the requisite conditions to
be satisfied: (1) reasonable and equitable; (2) necessary to give business
efficacy to the contract; (3) it goes without saying i.e. the Officious
Bystander Test; (4) capable of clear expression; and (5) must not
contradict any express term of the contract. The same penta-principles
find reference also in Investors Compensation Scheme Ltd. v. West
Bromwich Building Society and Attorney General of Belize v. Belize
Telecom Ltd. Needless to say that the application of these principles
would not be to substitute this Court’s own view of the presumed
understanding of commercial terms by the parties if the terms are explicit
in their expression. The explicit terms of a contract are always the final
word with regard to the intention of the parties. The multi-clause contract
inter se the parties has, thus, to be understood and interpreted in a
manner that any view, on a particular clause of the contract, should not
do violence to another part of the contract.‖
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28. Further, the respondent relies on the judgment of this court in Prem
Chand Sharma & Co v DDA & Anr, 2005(85) DRJ 305, to state that clause
10C would cover the increase in prices of steel by the selected vendors and
CPWD price index. The operative portion reads as under:-
―4. Claim no 4 arises from the price escalation clause 10-C. It is not in
dispute that the amount under this clause would be payable on account of
statutory increase if during the progress of the work the price of any
material incorporated in the work and of wages of labour increase more
than ten per cent. The grievance of the respondent is that the arbitrator
has erroneously relied upon the CPWD cost index which does not amount
to a statutory increase. It is thus contended that the cost escalation made
on the basis of the CPWD cost index could not form the basis of awarding
an amount under clause 10-C of the conditions of the contract.
5. A reading of the award shows that these CPWD tabulations were
contested on the ground that they were not binding on the respondent-
authority and further the CPWD rates of escalation do not reveal the
basis on which the escalation has been worked out. The arbitrator found
that the building cost index circulated by the CPWD is rightly recognized
method of working out the cost escalation and the respondent had given
no convincing reason why this methodology should not be adopted for
purposes of objection under clause 10-C. I find no infirmity in the
approach of the arbitrator. The CPWD rates are not private rates but are
rates of escalation of statutory authorities which have been relied upon
for purposes of arriving at the escalation figure. It is not as if the
respondent has produced some other material to come to the conclusion
that a different figure of escalation should have been awarded under
clause 10-C. I thus find no merit in the objections.‖
Claim No. 3: Refund of Security Deposit:
Submissions by the petitioner
29. The petitioner submits that the contract had been rescinded in accordance
with clause 3 of GCC. Clause 3 of GCC reads as under:-
“Clause 3
……
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a) To determine or rescind the contract as aforesaid (of which
termination or rescission notice in writing to the contract under the
hand of the Engineer-in-Charge shall be conclusive evidence). Upon
such determination or recession the full security deposit recoverable
under the contract shall be liable to be forfeited and shall be absolutely
at the disposal of the Government. If any portion of the Security Deposit
has snot been paid or received it would be called for and forfeited.
………
Provided further that if any of the recoveries to be made while taking
action as per (b) and/or (c) above are in excess of the security deposit
forfeited, these shall be limited to the amount by which the excess cost
incurred by the Department exceeds the security deposit so forfeited.‖
30. The respondent had delayed work and only completed 44.36% of the
work till by stipulated date of completion, i.e. 23.12.2004 and could complete
5% of the work during the extended period. Since work came to a standstill, the
petitioner was compelled to rescind the contract as the respondent is not ready
and willing to complete the contract.
Submissions by the respondent
31. The respondent submits that since the contract was unjustly and illegally
terminated, the respondent is liable to refund of its forfeited security amount on
the principle of restitution.
Claim No. 4: Damages sustained on account of loss of material, tools and
plants, shuttering material etc. and for the advances made to the suppliers
due to unjustified rescission of the contract.
Submissions by the petitioner
32. The petitioner submits that the finding of the learned arbitrator that the
rescission was unjust is incorrect. The site was at complete stalemate due to the
inaction and delay of the contractor/respondent and therefore clause 14 of GCC
which permitted petitioner to recover expenditure incurred by the petitioner
from monies due to respondent/contractor was invoked. The Clause 14 of GCC
reads as under:-
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“CLAUSE 14-
Cancellation of contract in full or part
If contractor:
i) at any time makes default in proceeding with the works or any
part of the work with the due diligence and continues to do so after a
notice in writing of 7 days from the Engineer-in-Charge;
ii) or commits default to complying with any of the terms and
conditions of the contract and does not remedy it or take effective steps
to remedy it within 7 days after a notice in writing is given to him in that
behalf by the Engineer-in-Charge; or
iii) fails to complete the works or items of work with individual
dates of completion, on or before the date(s) of completion, and does not
complete them within the period specified in a notice given in writing in
that behalf by the Engineer-in-Charge; or
iv) shall offer or give or agree to give to any person in Government
service or to any other person on his behalf any gift or consideration of
any kind as an inducement or reward for doing or forbearing to do or
for having done or forborne to do any action relation to the obtaining or
execution of this or any other contract for Government; or
v) shall enter into a contract with Government in connection with
which commission has been paid or agreed to be paid by him or to his
knowledge, unless the particulars of any such commission and the terms
of payment thereof have been previously disclosed in writing to the
Accepting Authority/Engineer-in-Charge; or
vi) shall obtain a contract with Government as a result of wrong
tendering or other non-bonafide methods of competitive tendering; or
vii) being an individual, or if a firm, any partner thereof shall at any
time be adjudged insolvent or have a receiving order or order for
administration of his estate made against him or shall take any
proceedings for liquidation or composition (other than a voluntary
liquidation for the purpose of amalgamation or reconstruction) under
any Insolvency Act for the time being in force or make any conveyance
or assignment of his effects or composition or arrangement for the
benefit of his creditors or purport so to do, or if any application be
made under any Insolvency Act for the time being in force for the
sequestration of his estate or if a trust deed be executed by him for
benefit of his creditors; orDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 17 of 55
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viii) being a company, shall pass a resolution or the Court shall make
an order for the winding up of the company, or a receiver or manager
on behalf of the debenture holders or otherwise shall be appointed or
circumstances shall arise which entitle the Court or debenture holders
to appoint a receiver or manager; or
ix) shall suffer an execution being levied on his goods and allow it
to be continued for a period of 21 days; or
x) assigns, transfers, sublets (engagement of labour on a piece-
work basis or of labour with materials not to be incorporated in the
work, shall not be deemed to be subletting) or otherwise parts with or
attempts to assign, transfer sublet or otherwise parts with the entire
works or any portion thereof without the prior written approval of the
Accepting Authority;
The Accepting Authority may, without prejudice to any other right or
remedy which shall have accrued or shall accrue hereafter to
Government, by a notice in writing to cancel the contract as a whole or
only such items of work in default from the Contract.
The Engineer-in-Charge shall on such cancellation by the Accepting
Authority have powers to:
(a) take possession of the site and any materials, constructional plant,
implements, stores, etc., thereon; and/or
(b) carry out the incomplete work by any means at the risk and cost of
the contractor.
On cancellation of the contract in full or in part, the Engineer-in-
Charge shall determine what amount, if any, is recoverable from the
contractor for completion of the works or part of the works or in case
the works or part of the works is not to be completed, the loss of damage
suffered by Government. In determining the amount, credit shall be
given to the contractor for the value of the work executed by him up to
the time of cancellation, the value of contractor’s materials taken over
and incorporated in the work and use of plant and machinery belonging
to the contractor.
Any excess expenditure incurred or to be incurred by Government in
completing the works or part of the works or the excess loss or damages
suffered or may be suffered by Government as aforesaid after allowing
such credit shall without prejudice to any other right or remedy
available to Government in law be recovered from any moneys due to
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the contractor on any account, and if such moneys are not sufficient the
contractor shall be called upon in writing and shall be liable to pay the
same within 30 days.
If the contractor shall fail to pay the required sum within the aforesaid
period of 30 days, the Engineer-in-Charge shall have the right to sell
any or all of the contractors’ unused materials, constructional plant,
implements, temporary buildings, etc. and apply the proceeds of sale
thereof towards the satisfaction of any sums due from the contractor
under the contract and if thereafter there be any balance outstanding
from the contractor, it shall be recovered in accordance with the
provisions of the contract.
Any sums in excess of the amounts due to Government and unsold
materials, constructional plant, etc., shall be returned to the contractor,
provided always that if cost or anticipated cost of completion by
Government of the works or part of the works is less than the amount
which the contractor would have been paid had he completed the works
or part of the works, such benefit shall not accrue to the contractor.‖
33. In terms of clause 14 of GCC, the petitioner submits that a notice of 30
days was served upon the respondent on 12.12.2006 to pay the extra cost
incurred in completing the balance work namely Rs. 1,53,62,653/-. Since the
same remained unpaid, the petitioner issued press notice to sell the material and
tools & plants(T&P) of the respondent/contractor.
34. The petitioner submits that the respondent no.1 had raised the said issue
before the Arbitrator and no order was passed restraining the petitioner from
selling the same. Further, the respondent no.1 itself abstained from participating
in the open auction/sale.
35. It is submitted that the petitioner sold the said materials for a sum of Rs.
1,65,045/-, however the learned Arbitrator without any basis or evidence on the
quality and condition of the said items, awarded a sum of Rs. 8,04,827/- in
favour of the respondent.
Submissions by the respondent
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36. The respondent submits that the present claim has also been awarded on
account of the unjust termination notice and the said finding is based on detailed
pleading and factual details.
37. It is submitted that the learned Arbitrator has awarded the amount after
detailed analysis on the quantification of the amounts, since the unilateral
auction of material could not have been done. In addition, the auction price did
not reflect the actual value of the auctioned goods.
Claim No.5 (Damages towards idling of manpower, staff and machinery
due to the respondents various breaches of the contract):
38. The petitioner has not raised any grounds of challenge under the said
claim.
Claim No. 6: Damages due to loss of expected profits on the work that
remained to be executed due to illegal rescission of the contract
39. The petitioner submits that there is no evidence that the respondents could
have finished/completed the work within reasonable time, therefore there is no
question of payment of loss of expected profits. The contract was rescinded on
account of slow pace of work of the respondent and was done in accordance
with the terms of the contract, hence the Arbitrator erred in not appreciating the
non-fulfilment of obligations by the respondents and therefore an award of 2%
on balance work is patently perverse.
40. The respondent submits that question of loss of expected profits on
balance works is squarely covered by the judgment of the Hon‟ble Supreme
Court in A.T. Brij Paul v State of Gujarat (1984) 4 SCC 59. The operative
portion reads as under:-
―11. Now if it is well-established that the respondent was guilty of
breach of contract inasmuch as the rescission of contract by the
respondent is held to be unjustified, and the plaintiff contractor had
executed a part of the works contract, the contractor would be entitled
to damages by way of loss of profit. Adopting the measure accepted by
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the High Court in the facts and circumstances of the case between the
same parties and for the same type of work at 15 per cent of the value
of the remaining parts of the work contract, the damages for loss of
profit can be measured.
41. In view of the above, the respondent submits that it is entitled to receive
expected profit as a percentage of value of the balance work. Though, a percent
of 15% is propounded as a norm in A.T. Brij Paul (Supra), the learned Arbitrator
has only awarded 2% of the balance value of works on account of loss of profit.
Claim No. 7 (Interest):
42. The petitioner submits that the awarded interest @12% is exorbitant
especially since the commercial rate for long term fixed deposit is between 6%
to 7%.
Claim No. 8: Litigation expense:
43. The petitioner submits that other than payment of Rs. 40,000/- to learned
Arbitrator, nothing is on record to show expenses incurred in litigation.
44. The respondent submits that the amount of Rs. 80,000/- towards litigation
is fair and reasonable, considering the expenses incurred.
Counter Claim No.1: For Compensation under clause 2 GCC
45. The petitioner submits that the respondent is liable for non- completion of
the project within the stipulated time and therefore is bound to pay
compensation of Rs. 44,83,616/- in terms of clause 2 of GCC, which reads as
under:-
―CLAUSE 2
COMPENSATION FOR DELAYIf the contractor fails to maintain the required progress in terms of
clause 5 or to complete the work and clear the site on or before the
contract or extended date of completion, he shall, without prejudice to
any other right or remedy available under the law to the Government on
account of such breach, pay as agreed compensation the amount
calculated at the rates stipulated below or such smaller amount as theDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 21 of 55
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Superintending Engineer (whose decision in writing shall be final and
binding) may decide on the amount of tendered value of the work for
every completed day/week (as applicable) that the progress remains
below that specified in Clause 5 or that the work remains incomplete.
This will also apply to items or group of items for which a separate
period of completion has been specified.
i) Completion period (as originally stipulated)
not exceeding 3 months @ 1% per day.
ii) Completion period (as originally stipulated)
exceeding 3 months @1% per week.
Provided always that the total amount of compensation for delay to be
paid under this Condition shall not exceed 10% of the Tendered Value
of work or of the Tendered Value of the item or group of items of work
for which a separate period of completion is originally given.
The amount of compensation may be adjusted or set- off against any
sum payable to the Contractor under this or any other contract with the
Government.‖
46. The respondent submits that the rejection of counterclaim is due to the
fact that the rescission of contract has been declared illegal and unjust by the
learned Arbitrator and correctly so. Without prejudice, the petitioner has failed
to show any actual loss suffered by it due to the alleged delay in completion of
works.
Counter Claim No.2: Damages/Compensation for the work remaining
incomplete/un-executed by the claimant under clause 3 of the contract
Submissions by the petitioner
47. The petitioner submits that in terms of clause 3 of the GCC, the petitioner
is entitled to receive risk and cost amount for completion of balance work from
the third party. In view of the fact that the contract was rightly rescinded
between the parties, the respondent is liable to pay an amount of Rs.
1,53,31,293/- to the petitioner.
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Submissions by the respondent
48. The respondent submits that the learned Arbitrator has come to the
finding that the contract was rightly rescinded in the Impugned Award after a
detailed analysis based upon the pleadings and evidence on record. In a limited
jurisdiction under section 34 of the Arbitration and Conciliation Act, 1996, the
same does not warrant any interference. This court cannot re-appreciate
evidence as it does not act as an appellate court.
49. Further, the petitioner is also seeking allowing of: (a) Counter Claim No.
4 for an amount of Rs.3,95,335/- on account of Salary/wages paid to the
supervisory staff; (b) Counter Claim No. 5 for an amount of Rs.4,00,000/- as
litigation expenses; (c) Counter Claim No. 6, i.e. Claim of interest: pendente lite
and future interest.
Analysis
50. Before proceeding with the objections raised by the petitioner, it is
pertinent to mention the scope of interference under section 34 of the Arbitration
and Conciliation Act, 1996. The Hon‟ble Supreme Court in State of
Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275has summarized the
position in law. The operative portion of which reads as under:-
―14. The law on interference in matters of awards under the 1996 Act
has been circumscribed with the object of minimising interference by
courts in arbitration matters. One of the grounds on which an award
may be set aside is ―patent illegality‖. What would constitute ―patent
illegality‖ has been elaborated in Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], where
―patent illegality‖ that broadly falls under the head of ―Public Policy‖,
has been divided into three sub-heads in the following words : (SCC p.
81, para 42)
―42. In the 1996 Act, this principle is substituted by the ―patent
illegality‖ principle which, in turn, contains three sub-heads:
42.1. (a) A contravention of the substantive law of India would result
in the death knell of an arbitral award. This must be understood in the
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sense that such illegality must go to the root of the matter and cannot
be of a trivial nature. This again is really a contravention of Section
28(1)(a) of the Act, which reads as under:
‗28. Rules applicable to substance of dispute.–(1) Where the
place of arbitration is situated in India,–
(a) in an arbitration other than an international commercial
arbitration, the Arbitral Tribunal shall decide the dispute
submitted to arbitration in accordance with the substantive law for
the time being in force in India;’
42.2. (b) A contravention of the Arbitration Act itself would be
regarded as a patent illegality — for example if an arbitrator gives no
reasons for an award in contravention of Section 31(3) of the Act,
such award will be liable to be set aside.
42.3. (c) Equally, the third sub-head of patent illegality is really a
contravention of Section 28(3) of the Arbitration Act, which reads as
under:
‗28. Rules applicable to substance of dispute.–(1)-(2) * * *
(3) In all cases, the Arbitral Tribunal shall decide in accordance with
the terms of the contract and shall take into account the usages of the
trade applicable to the transaction.’
This last contravention must be understood with a caveat. An Arbitral
Tribunal must decide in accordance with the terms of the contract, but
if an arbitrator construes a term of the contract in a reasonable
manner, it will not mean that the award can be set aside on this
ground. Construction of the terms of a contract is primarily for an
arbitrator to decide unless the arbitrator construes the contract in
such a way that it could be said to be something that no fair-minded
or reasonable person could do.‖
(emphasis supplied)
15. In SsangyongEngg. & Construction Co. Ltd. v. NHAI, speaking for
the Bench, R.F. Nariman, J. has spelt out the contours of the limited
scope of judicial interference in reviewing the arbitral awards under the
1996 Act and observed thus : (SCC pp. 169-71, paras 34-41)
―34. What is clear, therefore, is that the expression ―public policy of
India‖, whether contained in Section 34 or in Section 48, would now
mean the ―fundamental policy of Indian law‖ as explained in paras
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law would be relegated to ―Renusagar‖ understanding of this
expression. This would necessarily mean that Western
Geco expansion has been done away with. In short, Western Geco , as
explained in paras 28 and 29 of Associate Builders, would no longer
obtain, as under the guise of interfering with an award on the ground
that the arbitrator has not adopted a judicial approach, the Court’s
intervention would be on the merits of the award, which cannot be
permitted post amendment. However, insofar as principles of natural
justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of
the 1996 Act, these continue to be grounds of challenge of an award,
as is contained in para 30 of Associate Builders .
35. It is important to notice that the ground for interference insofar as
it concerns ―interest of India‖ has since been deleted, and therefore,
no longer obtains. Equally, the ground for interference on the basis
that the award is in conflict with justice or morality is now to be
understood as a conflict with the ―most basic notions of morality or
justice‖. This again would be in line with paras 36 to 39 of Associate
Builders, as it is only such arbitral awards that shock the conscience
of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to
mean firstly, that a domestic award is contrary to the fundamental
policy of Indian law, as understood in paras 18 and 27 of Associate
Builders, or secondly, that such award is against basic notions of
justice or morality as understood in paras 36 to 39 of Associate
Builders. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to
Section 48(2)(b)(ii) was added by the Amendment Act only so
that Western Geco, as understood in Associate Builders , and paras
28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an
additional ground is now available under sub-section (2-A), added by
the Amendment Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does not amount
to mere erroneous application of the law. In short, what is not
subsumed within ―the fundamental policy of Indian law‖, namely, the
contravention of a statute not linked to public policy or public interest,
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cannot be brought in by the backdoor when it comes to setting aside
an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence,
which is what an appellate court is permitted to do, cannot be
permitted under the ground of patent illegality appearing on the face
of the award.
39. To elucidate, para 42.1 of Associate Builders, namely, a mere
contravention of the substantive law of India, by itself, is no longer a
ground available to set aside an arbitral award. Para 42.2
of Associate Builders, however, would remain, for if an arbitrator
gives no reasons for an award and contravenes Section 31(3) of the
1996 Act, that would certainly amount to a patent illegality on the
face of the award.
40. The change made in Section 28(3) by the Amendment Act really
follows what is stated in paras 42.3 to 45 in Associate Builders ,
namely, that the construction of the terms of a contract is primarily
for an arbitrator to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or reasonable person would;
in short, that the arbitrator’s view is not even a possible view to take.
Also, if the arbitrator wanders outside the contract and deals with
matters not allotted to him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new ground added under
Section 34(2-A).
41. What is important to note is that a decision which is perverse, as
understood in paras 31 and 32 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while
no longer being a ground for challenge under ―public policy of
India‖, would certainly amount to a patent illegality appearing on the
face of the award. Thus, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision would
be perverse and liable to be set aside on the ground of patent
illegality. Additionally, a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a decision
based on no evidence inasmuch as such decision is not based on
evidence led by the parties, and therefore, would also have to be
characterised as perverse.‖
(emphasis supplied)
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16. In Delhi Airport Metro Express (P) Ltd. [Delhi Airport Metro
Express (P) Ltd. v. DMRC, (2022) 1 SCC 131] referring to the facets of
patent illegality, this Court has held as under : (SCC p. 150, para 29)
―29. Patent illegality should be illegality which goes to the root of the
matter. In other words, every error of law committed by the Arbitral
Tribunal would not fall within the expression ―patent illegality‖.
Likewise, erroneous application of law cannot be categorised as
patent illegality. In addition, contravention of law not linked to public
policy or public interest is beyond the scope of the expression ―patent
illegality‖. What is prohibited is for Courts to reappreciate evidence
to conclude that the award suffers from patent illegality appearing on
the face of the award, as Courts do not sit in appeal against the
arbitral award. The permissible grounds for interference with a
domestic award under Section 34(2-A) on the ground of patent
illegality is when the arbitrator takes a view which is not even a
possible one, or interprets a clause in the contract in such a manner
which no fair-minded or reasonable person would, or if the arbitrator
commits an error of jurisdiction by wandering outside the contract
and dealing with matters not allotted to them. An arbitral award
stating no reasons for its findings would make itself susceptible to
challenge on this account. The conclusions of the arbitrator which are
based on no evidence or have been arrived at by ignoring vital
evidence are perverse and can be set aside on the ground of patent
illegality. Also, consideration of documents which are not supplied to
the other party is a facet of perversity falling within the expression
―patent illegality‖.‖
(Emphasis Supplied)
51. With this being the position in law, I shall now be dealing with the
contentions raised by the parties. The same can be classified under three heads:
a) finding on delay attributable to the petitioner; b) wrongful interpretation of
terms of the contract and c) interest and litigation costs.
Finding on delay attributable to the petitioner
52. In the present case, the fountainhead of all the disputes is whether the
delay in completion of the project was attributable to the acts of the petitioner or
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the respondent. The learned Arbitrator concluded that the delay in the work was
attributable to the petitioner. The operative portion of the Award concluding the
same reads as under:-
―2.9 I am therefore of the opinion that the work mainly got delayed on
account of late issue of the structural drawings and because of the
decision for the use of machine made bricks from Jhajjar coming up at a
very late stage of the extended period. The delays in the issue of
drawings are attributable purely to the respondents while the blame for
late approval of the source of machine made bricks has to be shared by
both the parties. Other reasons cited by the parties for the delay in the
work are not of material nature as they were only minor irritants that did
not contribute appreciably to the extension of the contract period. Apart
from this, the extension of five months given by the engineer in charge of
the respondents in December 2004 for completing the work was not
based on any analysis done to ascertain the reasonable time required
thereafter but was rather on an Ad-Hoc basis as clarified by them in the
oral hearings. Clause 5 of the contract, under which the extension of
time has to be sanctioned, designates the S.E. as the competent authority
to decide how much extension of time is to be granted but the
respondents have not produced any orders from him sanctioning the
extension of time. The extension of time of five months was granted by
the Engineer in Charge and it was he only who thereafter decided that
no further extension was warranted; such a decision should have – been
taken at the S.E.’s level only as per the condition of the contract. I do not
find that the extension of time of five months given on 23.12.2004 to
complete the remaining work was sufficient and reasonable and the
respondents should have given more time for the same either at the time
when they originally extended the stipulated date of completion or
should have granted further extension to the claimants in the month of
May 2005 when the first extension granted by them was on the verge of
expiring. The claimants cannot be blamed for not being able to complete
the work by the stipulated date of completion or by the extended date of
completion. I also observe that there was very slow action on the part of
the respondents in calling the risk and cost tender for the remaining
work once they had rescinded the original contract of the claimant in
May 2005. The tenders for the balance work were invited to be receivedDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 28 of 55
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on 18.9.2006 (nearly 16 months after the rescission) and the work was
awarded only on 1.12.2006. This clearly indicates that there was hardly
any urgency for completing this work. In view of all this, I do not find the
rescission of the contract by the respondents on 9.5.2005 just and
reasonable. In the absence of the orders of the S.E. concerning how
much extension of time was justified, the decision to terminate the
contract is also contractually incorrect.‖
53. The petitioner has challenged the said finding on various grounds,
including a) that the drawings were supplied in time by the petitioner, contrary
to the observation by the learned Arbitrator; b) that the work had stopped in
March, 2005 based on site entries since there was no cement on site and the
machine-moulded bricks were not procured by the respondent; c) there was no
fault in extension of time by the petitioner; and (d) that the respondent failed in
getting approval for M-20 and M-25 concrete from an approved laboratory.
54. Even though the scope under section 34 of the Arbitration and
Conciliation Act, 1996 is limited and the court need not go into evidence, I am
of the view that there was relevant material available before the learned
Arbitrator and the same was duly considered to arrive at his finding that the
delay is attributable to the petitioner. The said conclusion can be arrived in view
of the following:-
55. With regard to non-issue of drawings, the learned Arbitrator in the
Impugned Award has observed as under:-
“2.3 I have studied carefully the voluminous documentary evidence filed
by the parties in support of their contentions and have also carefully
considered the pleadings, oral and written, as made by the parties. The
claimants’ main stress for not being able to complete the work in the
stipulated contract period was on the delayed issue of the structural
drawings which were not made available to them in the beginning of the
work itself and it was because of this that the work could not be properly
planned and executed with the required pace. Non issue of structural
drawings in time and their revisions from time to time also effected the
planning for the execution of the work, rotation of the shuttering and
procurement of reinforcing steel of the required diameters in advance.
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Signing Date:19.11.2024
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The claimants have filed a tabular statement showing the issue of
structural drawings to them from time to time and the revisions that
each drawing had undergone. The respondents have pleaded that the
claimants had been executing the concrete framework in a lethargic
manner without keeping the time frame in mind; they have also filed a
tabular statement showing the dates of issue of drawings viz. a viz. the
actual dates of casting of various members of the RC.C. framework and
have concluded from there that it was the claimants who delayed the
work. It is seen from the details filed by the parties that number of
revisions of the structural drawings issued by the respondents was
taking place even after the good for construction drawings were issued.
It is also a fact that the issue of structural drawings started from the
date 24.11.2003 and continued up to 17.2.2005 when the scheduled date
of completion of the work was 23.12.2004. It is clear from these dates
that it was certainly not possible for the claimants to complete the work
by the initial stipulated date of completion and that it would have been
necessary to give a reasonable time to the claimants for completing the
work after the stipulated date of completion…..‖
56. The petitioner has stated that all the drawings were made available to the
respondent in between 26.08.2003 to 17.11.2003 and minor revisions were made
immediately by the Engineer-in-charge on site. The learned Arbitrator observed
that the issue of structural drawings continued till 17.02.2005, long after the
stipulated date of completion of work, i.e. on 23.12.2004. The same can also be
seen from entries in the Drawing Register before the learned Arbitrator. It is
reproduced as under:-
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By:MAYANK
Signing Date:19.11.2024
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57. The learned Arbitrator has placed reliance on this chart and come to the
conclusion that the petitioner was revising drawings till 17.02.2005. The same is
evident from the last couple of entries in the above said chart. That being so, it
was not possible for the respondent to complete the construction till 23.12.2004,
i.e. the stipulated date of completion.
58. The petitioner has attempted to suggest that the revised drawings were
just minor clarifications and had no effect of delaying the work since the
respondent at no point raised the said issue. The above stand of the petitioner is
belied in view of the letter dated 19.04.2005 issued by the respondent
categorically highlighting the fact that non-issue of structural drawings has
delayed the project. The letter is reproduced as under:-
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By:MAYANK
Signing Date:19.11.2024
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By:MAYANK
Signing Date:19.11.2024
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By:MAYANK
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59. The learned Arbitrator, who is a technical person, held that delay in
finalizing of drawings and the time to time revisions has consequently had a
major impact on the planning for the execution of the work. The learned
Arbitrator perused the material on record and observed that it was the delay in
issuance of drawings that precluded the advance planning for procuring of steel
and thereby leading to delay in execution of the RCC framework of the
structure. Therefore, the objection raised by the petitioner that the non-issue of
drawings did not negatively impact the execution of the project is rejected.
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By:MAYANK
Signing Date:19.11.2024
18:10:35
60. Further, with regard to submission that the work had come to a standstill
in March 2005 since there was no cement on site, the learned Arbitrator has
observed the following:-
―2.3 The respondents had pleaded that the claimants had totally stopped
work in the month of March 2005, which also does not appear to be
correct. The cement register shows that the work was continuing up to
the first week of May 2005 though in a restricted way which according
to the claimants was due to non approval of the source of the machine
made bricks.‖
61. The petitioner has relied upon the entries in the Cement Register to show
that there was no cement stock between 17.03.2005 to 07.04.2005. The learned
Arbitrator considered and rejected the said averment and observed that the
entries in the cement register shows to the contrary and that the work was
continuing in a subdued manner till first week of May. The relevant entries of
the cement register are reproduced as under:-
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By:MAYANK
Signing Date:19.11.2024
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By:MAYANK
Signing Date:19.11.2024
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By:MAYANK
Signing Date:19.11.2024
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62. A perusal of the above shows that though there was a „NIL‟ stock in the
Cement Register in between 17.03.2005 to 07.04.2005, however on 07.04.2005
the daily balance of the cement stock was 200 bags. From thereon, there appears
to have been regular issuance of additional cement bags, though in a limited
quantity. Therefore, there is no infirmity in the observation of the learned
Arbitrator pertaining to the cement register.
63. The learned Arbitrator also came to the conclusion that the work was
continuing in a subdued manner due to the non-approval of the source of
machine made bricks by the petitioner. The petitioner has attempted to suggest
that no approval was required for the purchase of bricks from any sources, as
defined in the contract. The said issue was not raised before the learned
Arbitrator.
64. Besides the above contention, the petitioner has also alleged that false
letters claiming that the bricks were not available were sent by the respondent.
The same was responded to by a survey by the petitioner where it was observed
that there was no shortage of bricks. This dispute on facts between the parties
regarding the availability/non-availability of the machine moulded bricks was
duly considered by the learned Arbitrator. The operative portion of the Award in
this regard reads as under:-
―2.4 There also was some difference of opinion between the
respondents and the claimants regarding the procurement of machine
made bricks. The agreement provides that the machine made bricks
would be arranged from Chandigarh or nearby areas as they were not
available in Delhi. The respondents interpreted this condition to mean
that the bricks would have to be arranged from Chandigarh and/or
areas around Chandigrh while the claimants interpreted it to mean that
the bricks had to be arranged from either Chandigarh or from the areas
neighboring Delhi. The claimants in December 2004 had requested the
respondents to take some alternative decision and thereafter the
respondents engineer- in- charge had visited Chandigarh and
ascertained that the machine made bricks were easily available there.
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By:MAYANK
Signing Date:19.11.2024
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There was however some controversy between the parties regarding the
availability of bricks in Chandigarh. In their letter dated 27.12.2004, the
respondents indicated that the machine moulded bricks from
Chandigarh were also being used by the D.S.I.D.C. in their Bawana
project. The claimants found that the bricks being used in the Bawana
project were not conforming to the specifications and reported this to
the respondents in their letter dated 9.4.2005. The claimants in this very
letter had shown their willingness to get the bricks which were being
used on the Bawana project of D.S.I.D.C but since these bricks were not
conforming to the specifications, they requested the respondents to
allow them to bring the bricks from Jhajjar from MIS Priya Clay
Products which had been approved by the respondents earlier in April
2004. The respondents approved the use of bricks from Jhajjar and
Hissar in their letter dated 13.4.2005 subject to rate adjustment because
of the difference in the transportation charges from these places and
from Chandigarh. The decision regarding the bricks being taken in the
middle of the month of April 2005 certainly did not leave enough time
for the claimants to complete the work by the extended date of
23.5.2005. The condition as stipulated in the contract for the use of
machine made bricks can not be taken to mean that the bricks were to be
got from Chandigarh or around Chandigarh only; they could be
arranged from other nearby areas also and Jhajjar and Hissar can not
be precluded for obtaining such bricks as per the condition of the
contract so long as the bricks from these sources conformed to the
required specifications. The decision to get the machine made bricks
having been taken only in the middle of April 2005, it can not be
conceived rationally that it would have been possible to complete the
work by the end of the extended period. The respondents pleading that
the claimants did not bring any machine made bricks even after the
approval given on 13.4.2005 has to be viewed in the light of a couple of
letters written by them immediately thereafter which conveyed an
impression that the respondents had already reached a conclusion that
they would be rescinding the contract. Another important issue in this
connection is that whether the external cladding work should have been
taken up for execution from bottom to top or from top to bottom of the
building. The claimants have maintained that this work was to be taken
up from top to bottom because the exposed brickwork to be done withDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 41 of 55
By:MAYANK
Signing Date:19.11.2024
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the machine made bricks was a final finishing item of work while the
respondents have pleaded that this work should have been taken up from
bottom to top to save time specially because there are projections in the
building at each floor level. This point however looses much of its
significance in view of the fact that the procurement of the machine
made bricks became possible after middle of April 2005 when the
casting of the R.C.C. framework was already over. At that time the work
could have been proceeded with from top to bottom also without the fear
of mortar spilling on the exposed brickwork below which in all
probability might have been the case if the brickwork had been taken up
from bottom to top. It is also important in this regard that the claimants
in their programme submitted in the beginning of the work had
considered doing the exposed brickwork only after the structure had
been completed and which was the reason given by them for not getting
the machine made bricks earlier to the casting of the terrace slab.‖
65. Based upon the said facts, in para 2.9 of the Award, the learned Arbitrator
came to the conclusion that the blame for late approval for the source of
machine-moulded bricks has to be shared by both the parties. The learned
Arbitrator considered the entire correspondence exchanged between the parties
to arrive at the said finding.
66. Even otherwise, the argument of no shortage of bricks, etc are all
arguments on factual matrix which cannot be entertained at this stage and in
view of the judgment of the Hon‟ble Supreme Court in SAL Udyog (supra)
wherein reliance is placed on Ssangyong Engg. & Construction Co. Ltd. v NHAI
reappreciation of evidence is beyond the scope of enquiry under section 34 of
the Arbitration and Conciliation Act, 1996.
67. Further, with regard to extension of five months, the learned Arbitrator
has observed as under:-
“2.3…….The contract had been provisionally extended by the
respondents up to 23.5.2005 on 23.12.2004 on an ad hoc basis. The time
of a little more than three months available to the claimants for
completing the work remaining to be done after the issue of the lastDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 42 of 55
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Signing Date:19.11.2024
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structural drawings can not be considered reasonable. The structural
drawings of the terrace floor were made available by the respondents in
December 2004 and the laying of the floor at this level could have been
taken up only thereafter and completed much beyond the initial
stipulated date of completion. The respondents did not produce the
justification as to how they had considered five months extension
sufficient for the completion of the work since at the time of granting
extension, complete drawings had not been issued. Apparently, the
respondents had not done any exercise to work out the reasonable time
that would be required to complete the work after the date of issue of the
terrace floor drawings in December 2004 and simply extended the time
period by five months on an Ad-Hoc basis. No revised programme was
insisted upon from the claimants for completing the work prior to giving
the extension in December 2004. The claimants had sought extension
beyond the date of 23.5.2005 in their letter dated 19.4.2005 which was
in reply to the respondents show cause notice under clause 3 of the
contract and this showed that they were interested in carrying out the
remaining work but the respondents did not think it fit to extend the time
any further…‖
68. The petitioner submits that the respondent/contractor took 3 and a half
months to complete RCC just for one floor whereas as per the schedule the RCC
work for all floors should have been completed within the said time frame. The
learned Arbitrator has observed that no revised timeline was insisted upon by the
petitioner from the respondents, therefore there was no intention of completion
of project on the part of the petitioner and not the respondent. The petitioner has
failed to show any non-consideration of facts/evidence, as alleged. Having held
there is no infinity in the finding that the delay was caused due to the acts of the
petitioner, including non-supply of the drawings in time, the argument that RCC
work of only one floor was completed in the extended period merits no
consideration.
69. The learned Arbitrator, after a perusal of the documentary evidence on
record, observed that there was no communication by the petitioner that work
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was delayed on account of M-20 and M-25 design mix not being available. The
operative portion of the Award reads as under:-
―2.8 The respondents have laid emphasis on the delay on the part of
the claimants in getting the mix design done for M-20 and M-25
concrete from an approved laboratory. The claimants have clarified that
immediately after the award of work, quarries were visited and
inspected and approved by the respondents and then only they could
supply – the materials to the respondents for testing. They also explained
that the coarse sand sample was rejected by the C.P.W.D. Lab after
testing but the same sand was later on approved by the respondents for
use in the work. The claimants also stated that the laboratory from
which the mix design was to be done was approved by the respondents
in October 2003 only as per entry in the site order book and it was
thereafter only that the process of R.C.C. mix design could be initiated. I
have carefully gone through the site order book entries relied upon by
the respondents in this regard and find that these entries had been made
more by way of reminding the claimants to get the mix design done
timely rather than by way of pointing out delays in the execution of the
work. There is no mention by the respondents in any of the
communications that the work was held up on account of the design mix
not available. I also find that the quantity of work to be done with M-25
concrete, mix design for which came at a slightly later date than M-20
mix, was small and this could not have contributed to any appreciable
delay in the execution of the work.‖
70. The argument of the petitioner that the entry in site order book dated
07.10.2003 reminded the respondent/contractor that there is delay in submitting
approval of the design of the concrete mix was specifically rejected by the
learned Arbitrator. The learned Arbitrator has duly perused the evidence on
record and arrived at the above finding which, in my view, is neither perverse
nor contradictory to the material on record. The learned Arbitrator categorically
held that the entry of 07.10.2003 in site order book was merely a reminder and
not pointing out delay in execution of work due to the concrete mix not being
approved.
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 44 of 55
By:MAYANK
Signing Date:19.11.2024
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71. In view of the above, the petitioner has failed to show any grounds for
interference in the finding of delay. I shall now proceed to decide other claims
decided on the basis of the finding that delay is attributable to the actions of the
petitioner:
a. Claim 1: Work done but not paid
72. The learned Arbitrator has awarded an amount of Rs. 11,05,447/- in
favour of the respondent on account of work done but not paid for.
73. The petitioner has primarily challenged the Award on claim no. 1 on the
ground that extra payment for shutter finish could not have been given when the
objective, in terms of item no. 3.5 of BOQ, was not achieved. He relies on
photographs and entries in the site-order book to show that no shutter finish
work was done and the work done by the respondent was also not acceptable.
74. A perusal of the Impugned Award shows that the learned Arbitrator duly
perused the same and concluded that this work done by the respondent was
accepted and not rejected by the petitioner, hence the petitioner ought to pay for
the exposed shutter finish. Thereafter, the learned Arbitrator quantified the
amount and deduced a sum of 10% of the value of the work on the ground that
the rubbing finish was not done. The reasoning of the learned Arbitrator is based
on the fact that non-payment for unexecuted work by the petitioner is correct
however payment for partially executed work shall be done.
75. I do not find any reason that calls for interference in the said finding. The
petitioner has once again raised factual grounds. The basis of its arguments stem
from entries in the site-order book and photographs of the shutter finish work.
An adjudication, as sought, on the basis of these entries and photographs will
amount to reappreciation of not only the evidence but also of facts. The same is
impermissible and hence the objection to awarding of claim no. 1 is rejected.
b. Claim 3 : Refund of Security Deposit
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 45 of 55
By:MAYANK
Signing Date:19.11.2024
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76. The learned Arbitrator awarded a refund of Rs. 5,00,000/- in favour of
the respondent.
77. Since the finding of the learned Arbitrator that the rescission of the
contract by the petitioner was unjust and illegal has been upheld, I find no
reason to interfere with the finding that the security/earnest money deposited by
the respondent must be returned.
c. Claim 4: Damages sustained on account of Loss of Material, Tools and
Plants, Shuttering Material Etc, and for the Advances made to the
suppliers due to the unjustified rescission of the contract
78. The learned Arbitrator awarded Rs. 8,04,827/- in favour of the
respondent.
79. The petitioner states that since the rescission of the contract was correctly
done under clause 3 of the GCC, the petitioner was within its right to recover
any excess expenditure incurred by it in terms of clause 14 of GCC, whereby if
the due amounts are not paid back, the petitioner was within its right to proceed
with selling of the unused materials, T&P and equipment at site. Pursuant to the
above said clauses, the petitioner sold the material and T&P of the respondent at
Rs. 1,65,045/-. Further, it is submitted by the petitioner that the learned
Arbitrator has wrongly calculated the Sale Price of the goods.
80. Since the finding of the learned Arbitrator that the rescission of contract
was unjust and illegal has been upheld, the respondent is within its right to
receive damages suffered towards loss of materials, tools and plants, shuttering
material etc as well as for its illegal confiscation. As regards the quantification,
the submission that the learned Arbitrator has awarded amounts without due
considerations is without merit especially since the learned Arbitrator has shown
detailed quantification for the amounts arrived at. The operative portion of the
Award in this regard reads as under:-
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 46 of 55
By:MAYANK
Signing Date:19.11.2024
18:10:35
―7.1 7.1 The claimants brought out that the respondents did not allow
them to shift their T & P and materials and machinery lying at the work
site as also the batching plant and shuttering materials and some other
articles after they had wrongfully rescinded the contract despite requests
made in this connection and that they had suffered huge losses on this
account. They also stated that the measurements of the materials etc. lying
at site were jointly recorded by the parties and that there was no dispute
regarding the quantity. They then referred to their Annexure- III and stated
that the details of the claim were given therein. The respondents denied the
claim and stressed that there was nothing wrong and unjust in their
rescinding the contract and that the claimants T & P, materials and
machinery detained by them was required to be sold off to partially offset
the amount to be recovered from the claimants under various clauses of
the contract and for which they had already made counter claims.
7.2It has already been held earlier that the rescission of the contract by the
respondents was unjust and unwarranted. There was therefore no cause
for the respondents to confiscate the materials and T &P and the
machinery of the claimants. So far as the counter claims of the respondents
are concerned they are being adjudicated in the later part of this award.
Even otherwise, the respondents failed to produce the orders through
which they had confiscated the materials, T & P and the plant etc. No
notice under any clause of the contract was served on the claimants for
taking over the plant and machinery and materials of the claimants and the
claimants were never asked to furnishreasons why such an action should
not be taken against them. The respondents pleading that the action under
clause 14 of the G.C.C. of the contract was to be taken after the contract
was rescinded is not acceptable; however, there is no such action by the
respondents even after the contract was rescinded by them. In the absence
of the show cause notice and in the absence of any orders confiscating the
machinery, the action of the respondents to seize the machinery etc. and
then subsequently dispose it of through public auction was without any
basis and illegal and hence ultra-vires. The respondents were well aware
that the claimants had raised a claim in arbitration for the materials and
machinery and T &P etc. that had not been allowed to be taken away from
the site and that a decision in the matter was pending in the arbitration for
which the proceedings were continuing but even then they auctioned the
articles seized by them and disposed off the same. Auctioning of the
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Signing Date:19.11.2024
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material and machinery etc. which did not belong to the respondents
despite protests from the claimants was illegal. The respondents are
therefore required to pay the depreciated value of the articles seized by
them to the claimants.
7.3 The main item in the category of machinery seized by the respondents
is the concrete batching plant which was purchased new by the claimants
at the time of the start of this work and for which the respondents had paid
an advance against machinery of nearly RS 9 Lacs. The cost of the
batching plant is stated to be a little more than RS 10 Lacs and the
claimants have filed vouchers of purchase in support thereof. The
claimants have claimed RS 10 Lacs less depreciation for this plant. The
respondents have indicated its value as RS. 30,000/= on lump sum basis.
The price indicated by the respondents appears highly disproportionate
with the cost of the plant. The plant had worked at the site for a period of
nearly eighteen months and’ considering the life of the plant to be at least
5 years, it would be appropriate to allow a depreciation of 40% to fix the
residual value of this plant. I allow the claimants a sum of RS 6,00,000/=
for this plant.
7.4 The claimants have claimed the cost for a mini hoist also RS.
1,50,000/= less depreciation. The respondents are allowing a sum of RS.
3,000/= only on lump sum basis for the same. This again appears to be on
the lower side. Neither side has given the specifications of the hoist and it
is also not known whether it was brought to the site new or second hand. I
therefore consider 60% depreciation on this plant and allow only RS.
60,000/= for the mini hoist.
7.5 There are 2 items relating to the ply wood, 8400 sq. ft @ RS 60/= per
sq. ft for the ply side making and 6598.21 sq. ft @ RS 30/= per sq. ft for ply
cut to some size. The total amount claimed by the claimants for these two
items comes to RS. 6,65,367.24 less depreciation; the net value comes to
RS 4,79,064/=. The respondents’ valuation for these two items on lump
sum basis has been given as RS. 13,000/=. The claimants have furnished
analyses for the rates that have been claimed by them for these two items.
Since the respondents have valued the items on lump sum basis, the
valuation seems to have been done in an Ad-hoc manner. The ply had been
used on the work for a period of more than 2 years and its residual value
could not be as high as is being claimed by the – claimants. I am of the
opinion that the depreciated value can not be more than 10% of the –
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 48 of 55
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Signing Date:19.11.2024
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original value of the price indicated by the claimants. I therefore find that
the claimants are entitled to receive a sum ofRS. 66,537/= only for these
two items.
7.6 The claimants have claimed a sum ofRS 1,62,900/= for 1810 no.
ballies stated to be 9 ft. long. The respondents have classified the ballies to
be 6 ft to 9 ft long. The claimants have tried to justify the rate claimed by
them for these ballies from the D.S.R. 2002 wherein the rate of safeda
ballies, 125 dia. is given as RS 20/= per m. The rate claimed by the
claimant is RS 90/= per balli which is high when compared to the D.S.R.
rate as mentioned above. If the ballies are considered to be 6 to 9 ft length,
the rates will be still lower than the rate of RS. 90/=. Moreover, 125 mm
ballies are generally not used and the normal diam. of the ballies is 80mm
to 100mm. Considering all these factors and also considering the fact that
these ballies had been used for quite some time on the work, I am prepared
to accept the depreciated cost of the balli as RS 20/= per balli only and
thus the claimants are entitled to receive a sum ofRS 36,200/= only.
7.7 The claimants have claimed for 25 nos. G. I. Sheets of size 8’x 2.5′ and
70 G.I. Sheets of size l0’x 2.5′. The amount claimed is RS. 53,250, less
depreciation. Though the number of the sheets measured by the
respondents is the same, the size differs in so much as the sheets are stated
to be 12′ and lO’long while the width is stated to be 3′ and the valuation of
these sheets combined together is RS. 7500/= on lump sum basis. Since the
sheets were in use for nearly 2 years and their initial condition not known,
I accept the valuation done by the respondents for these and award a sum
of RS 7,500 to the claimants.
7.8 The claimants have further claimed RS. 29,400/= for 35 nos. M. S.
Challies and 280m of 40 mm diameter M.S.Pipe. The quantity has been
accepted by the respondents but their valuation for these articles again on
lump sum basis is RS. 1500/= only. I am inclined to accept the respondents
valuation as the challies had been used for quiet some time and were in
damaged condition and award a sum of RS 1500/= to the claimants.
7.9 The claimants have further claimed a total sum of RS 33,250/= less
depreciation towards a number of small items like cup locks for M.S. Pipe,
office doors and windows and chairs and tables, hand pump, tasla,
baskets, empty drums etc. The respondents have valued these items at
approximately RS. 4,000/=. Since the items are too small to have any
appreciable value, I am inclined to accept the valuation done by the
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Signing Date:19.11.2024
18:10:35
respondents for these articles and consider the claimants entitled to
receive only RS 4,000/= for these.‖
81. In view of the above, the learned Arbitrator has given detailed reasonings
to arrive at the figures awarded and hence requires no interference by this court
under the limited jurisdiction under section 34 of the Arbitration and
Conciliation Act, 1996. Therefore, the objections raised against the abovesaid
claim are dismissed.
d. Claim 6: Loss of Expected Profits
82. The learned Arbitrator has awarded an amount of Rs. 4,00,000/- , being
2% of the value of work that remained to be done, in favour of the respondent.
The operative portion of the Award reads as under:-
―9.2…….The claimants have claimed 15% profit on the value of work
that was remaining to be done. I have serious doubts about the
claimants earning this much of profit. Normal profit in the execution of
such works is to be considered as 7.5% but in this case, since there had
been a fair rise in the prices of the materials since the time the claimants
had quoted their rates in the year 2002, even this much profit would not
have been possible. Since it is not possible to compute the loss of profit
with mathematical precision, I assess that the claimants’ loss of profit
would have been not more than 2% of the value of work remaining to be
done and hence award a sum of RS. 4.00 Lacs only to the claimants
against this claim.‖
83. Since I am in agreement with the finding of the learned Arbitrator that the
rescission of the contract by the petitioner was unjust, in view of the judgment
of A.T. Brij Paul v State of Gujarat (supra), no fault can be found with the
grant of 2% for the purpose of expected profits. The learned Arbitrator duly
considered the stage of completion of the project that the respondent was at and
did not grant the claim of 15% of expected profits. The learned Arbitrator was of
the view that loss of profits would not be more than 2% of the work that
remained to be done.
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 50 of 55
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84. Therefore, in view of the fact that the learned Arbitrator duly considered
the material on record and passed a reasoned award, the objections raised
against the said claim are rejected.
Wrongful Interpretation of terms of the contract between the parties:
Claim 2: Escalation Payments under clause 10C of the contract for increase in
the prices of the materials
85. The learned Arbitrator awarded an amount of Rs. 43,09,854/- in favour of
the respondent. The operative portion of the Award reads as under:-
―5.3 The controversy between the parties has arisen on the phrase ‘ —-
increases as a direct result of coming into force any fresh law, or
statutory rule or order—–‘ as appearing in italics in para 5.2 above
(bold). There is no difference of opinion concerning the words coming
into force any fresh law; the controversy is in regard to the words
‘statutory rule or order’. The respondents are stressing that the word
‘order’ in the phrase has to be read along with the word statutory, which
is applicable to both ‘rule’ and ‘order’. The claimants hold a different
view as according to them the word ‘statutory’ is connected to the word
‘rule’ only and does not define the word ‘order’; they had argued that if
the respondents intended to mean the word ‘order’ also to be a statutory
order, they should have drafted the phrase in dispute as ‘statutory rule
or statutory order’. I find that there is ambiguity in the phrasing of this
portion of clause 10(c). The word ‘order’ in the phrase ‘statutory rule or
order’ can be interpreted to mean both, statutory order or any other
order, which is not statutory in nature. Since the contract conditions had
been drafted by the respondents, following the Contra Proferentum
Rule, the meaning which is beneficial to the claimants has to be adopted
to decide the issue. The word ‘order’ has therefore to be taken to mean
any order issued by the agencies mentioned in the contract for the
supply/ purchase of steel etc. The claimants have produced some orders
related to the price of steel issued by the SAIL/RINL in the period the
steel was purchased by them and have also submitted vouchers relating
to the steel purchased from time to time. The claimants have also filed
the monthly whole sale price indices, which are brought out by the
Ministry of Commerce and Industry, Govt. of India. These indicesDigitally Signed O.M.P. (COMM) 48/2020& connected. Page 51 of 55
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clearly indicate that there was an acute increase in the steel prices
during the currency of the contract. The claimants also produced a
decision of the Govt. of Tripura where in similar circumstances, the
claim of the enhancement in the prices of steel was accepted and
reimbursement was allowed. There is clear evidence to show that there
was substantial increase in the price of steel from time to time during
the currency of the contract and from the vouchers submitted by the
claimants it is clear that the claimants had actually paid such increase.
This fact was even accepted by the respondents. I, therefore find that the
claimants are entitled to receive reimbursement of the increase in the
prices of steel from time to time over and above the price prevailing at
the time of submission of the tenders plus ten percent which the
claimants are to absorb as per the provisions of clause 10(c) of the
contract. The claimants are not found entitled to receive any price rise
for the materials like aggregate and sand etc. as the same is beyond the
purview of clause 10(c).
86. The petitioner has challenged the findings on this claim on account of
alleged wrongful/erroneous interpretation of terms of the contract between the
parties, being clause 10 C.
87. The law with regard to interpretation is no longer res-integra. It is settled
law that where the arbitrator has taken a possible/plausible view, the court
would refrain from interfering with the Award under section 34 of the
Arbitration and Conciliation Act, 1996. The same can also be seen in view of the
judgment of the Hon‟ble Supreme Court in NTPC Ltd. v. Deconar Services (P)
Ltd., (2021) 19 SCC 694. The operative portion of the judgment reads as under:-
―12. Further, it is also a settled proposition that where the arbitrator
has taken a possible view, although a different view may be possible
on the same evidence, the court would not interfere with the award.
This Court in Arosan Enterprises Ltd. v. Union of India [Arosan
Enterprises Ltd. v. Union of India, (1999) 9 SCC 449] , held as
follows : (SCC p. 475, paras 36-37)
―36. Be it noted that by reason of a long catena of cases, it is now a
well-settled principle of law that reappraisal of evidence by the
court is not permissible and as a matter of fact exercise of power by
the court to reappraise the evidence is unknown to proceedings
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under Section 30 of the Arbitration Act. In the event of there being
no reasons in the award, question of interference of the court would
not arise at all. In the event, however, there are reasons, the
interference would still be not available within the jurisdiction of
the court unless of course, there exist a total perversity in the award
or the judgment is based on a wrong proposition of law. In the
event however two views are possible on a question of law as well,
the court would not be justified in interfering with the award.
37. The common phraseology ―error apparent on the face of the
record‖ does not itself, however, mean and imply closer scrutiny of
the merits of documents and materials on record. The court as a
matter of fact, cannot substitute its evaluation and come to the
conclusion that the arbitrator had acted contrary to the bargain
between the parties. If the view of the arbitrator is a possible view
the award or the reasoning contained therein cannot be examined.‖
13. From the above pronouncements, and from a catena of other
judgments of this Court, it is clear that for the objector/appellant in
order to succeed in their challenge against an arbitral award, they
must show that the award of the arbitrator suffered from perversity or
an error of law or that the arbitrator has otherwise misconducted
himself. Merely showing that there is another reasonable
interpretation or possible view on the basis of the material on the
record is insufficient to allow for the interference by the court [see
State of U.P. v. Allied Constructions [State of U.P. v. Allied
Constructions, (2003) 7 SCC 396] ; Ravindra Kumar Gupta & Co. v.
Union of India [Ravindra Kumar Gupta & Co. v. Union of India,
(2010) 1 SCC 409 : (2010) 1 SCC (Civ) 130] and Oswal Woollen
Mills Limited v. Oswal Agro Mills Ltd. [Oswal Woollen Mills Limited
v. Oswal Agro Mills Ltd., (2018) 16 SCC 219 : (2019) 1 SCC (Civ)
426] ].‖
88. Even otherwise, this court in Prem Chand Sharma v. DDA(supra) has
held that CPWD rates are not private rates but statutory rates of escalation and
therefore the same can be allowed. The learned Arbitrator, in similar terms,
relied upon (i) SAIL/RINL price of steel, (ii) Vouchers of steel purchased and
most importantly (iii) Monthly wholesale price indices issued by the Ministry
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of Commerce and Industry, Govt. of India (which is similar to CPWD cost
index) to award escalation in steel prices.
89. To my mind, if the interpretation is fair and reasonable, this court under
the limited jurisdiction of section 34 of the Arbitration and Conciliation Act,
1996 cannot interfere in the same. The learned Arbitrator has passed a well-
reasoned Award and hence the same merits no interference.
Interest and Cost
Claim No. 7: Interest
90. The petitioner has challenged the interest awarded on account of the same
being exorbitant. It is no longer res integra that the Arbitrator has the discretion
to grant interest and the same cannot be modified/reduced by this court under
the limited jurisdiction of section 34 of Arbitration and Conciliation Act, 1996. I
have already taken this view in Star Shares & Stock Brokers Ltd. v. Praveen
Gupta, 2024 SCC OnLine Del 6942. The operative portion reads as under:-
―28. The Hon’ble Divison Bench of this court in Anil Kumar Gupta v.
MCD, 2023 SCC OnLine Del 7524 has held reduction of interest by the
court under section 34 of the Arbitration and Conciliation Act, 1996
amounts to modification of the Award and in view of judgment of
Hon’ble Supreme Court in NHAI v. M. Hakeem, (2021) 9 SCC 1 the
same is impermissible. The operative portion of the judgment of the
Hon’ble Divison Bench of this court in Anil Kumar Gupta v. MCD reads
as under:–
XXX
29. From a combined reading of the above judgments, it can be seen that
(a) the arbitral tribunal has the discretion to grant pre-award interest
and/or post-award interest, on either whole or part of the principal
amount; (b) in proceedings under section 34 of Arbitration and
Conciliation Act, 1996, it is impermissible to reduce interest awarded
since the same amounts to modification of the Award.‖
91. In view of the above, the challenge/objections to the interest awarded is
dismissed.
Claim No. 8 Litigation Costs
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92. The learned Arbitrator has awarded a sum of Rs. 80,000/- towards
litigations costs to the respondent.
93. I do not find any reason to interefere in the same. The respondent has
succeeded in claims raised by it before the learned Arbitrator and is therefore
entitled to recover litigation costs incurred by it.
Counter-Claims
94. The petitioner raised counter-claims for an amount of Rs. 2,36,27,280/-
under various heads premised on the ground that the rescission of the contract
was legal and valid, thereby entitling the petitioner to recover amounts,
including compensation, damages for incomplete work, salary of the supervisory
staff and litigation expenses.
95. I have already upheld the finding of the learned Arbitrator that the
rescission of the contract by the petitioner was illegal and unjust. In this view of
the matter, the petitioner is not liable to receive amounts, as claimed, since delay
is attributable to the acts of the petitioner.
Conclusion
96. For the above said reasons, the petition, alongwith pending applications,
are without merit and is hereby dismissed.
O.M.P.(ENF.)(COMM.) 8/2024
97. In view of the judgment passed in OMP (COMM) 48/2020, the captioned
execution petition is allowed. The judgment-debtor shall pay the entire awarded
amount alongwith up to date interest within 8 weeks from today to the decree-
holder.
98. List for compliance before the Roster Bench on 12.02.2025.
99. Pending applications, if any, are disposed of.
JASMEET SINGH, J
NOVEMBER 19th, 2024
Digitally Signed O.M.P. (COMM) 48/2020& connected. Page 55 of 55
By:MAYANK
Signing Date:19.11.2024
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