IN THE HIGH COURT OF DELHI AT NEW DELHI
O.M.P. 482/2009
Reserved on: December 14, 2011
Decision on: February 16, 2012
M/S NATIONAL HIGHWAYS
AUTHORITY OF INDIA ..... Petitioner
Through: Mr. Yaman Kumar, Advocate.
versus
M/S TANTIA-TBL (JV) ..... Respondent
Through: Mr. George Thomas with
Mr. Amit George, Advocates.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
16.02.2012
1. The Petitioner, National Highways Authority of India ('NHAI'), in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 ('Act'), challenges an Award dated 5th May 2009 passed by the Arbitral Tribunal ('Tribunal') arising out of the disputes between the Petitioner and the Respondent M/s. Tantia-TBL (JV) pertaining to the contract for the work of four laning of km 332.600 to km 316.00 (Aluva-Angamaly section) of NH-47 in the State of Kerala (Contract Package No. NS-28/KL). The contract dated 14th June 2001 was entered into between the NHAI and the Respondent for the contract price of Rs. 66,45,73,827/-. The date of commencement was 31st August 2001 and the intended date of completion was 30th August 2003. The first extension of intended completion date OMP No. 482 of 2009 Page 1 of 11 granted by the NHAI was up to 30th April 2004 and the second extension was granted up to 31st May 2004 which is the actual date of completion. The NHAI took over the project on 7th August 2004. The defect liability completion certificate was issued on 7th February 2006. The contract price was increased to Rs. 71,40,52,826/- (by 7.45%). M/s. Sai Consulting Engineers Private Limited [formerly known as Sheladia Associates & Consultants (India) Private Limited] was appointed by the NHAI as the "Engineer" for the project in terms of the contract.
2. In terms of Clause 24.1 of the contract if the contractor believes that a decision taken by the Engineer was either outside the authority or was wrongly taken, the decision will be, at the first instance, referred to a Dispute Review Expert ('DRE'). The decision of the DRE is final and binding if neither party referred the dispute for arbitration under Clause 25.2.
3. The disputes between the parties were referred by the contractor to the DRE by its letter dated 9th November 2005. However, the DRE by its letter dated 24th November 2005 communicated its inability to adjudicate the matter as the tenure of the DRE had come to an end and the NHAI had not extended it. The Respondent contractor then referred the disputes to the Tribunal in terms of Clause 25.
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4. A preliminary objection raised before the Tribunal by the NHAI was that the Respondent ought to have approached the Indian Road Congress ('IRC') under Clause 26.1 for designating another DRE. The Tribunal observed that contingencies envisaged under Clause 26.1 of the contract, i.e., resignation/death of the DRE or failure to fulfill its functions, were not attracted. The DRE was willing to continue however the NHAI did not extend its tenure.
5. Mr. Yaman Kumar, learned counsel appearing for the NHAI reiterated the same objection that the Respondent was under obligation in terms of Clause 26.1 to approach the IRC. He further submitted that merely because the NHAI at that stage did not object to the appointment of the Tribunal it could not be held to have waived its objection.
6. This Court is unable to appreciate the above submission. Clause 26.1 was clearly not attracted in the instant case. The DRE did not show its unwillingness to act. The DRE in fact, by its letter dated 24th November 2005, pointed out that it was unable to continue due to expiry of its term as DRE. The NHAI was expected to extend its tenure, which it failed to do. In the circumstances, the Respondent was justified in approaching the Tribunal. The objection as regards the jurisdiction raised by the NHAI has been correctly rejected by the Tribunal.
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7. There were 15 items of claims filed by the Respondent before the Tribunal. During the course of oral submissions before the Tribunal, the Respondent withdrew four claims, i.e., Claim Nos. 7, 8, 12 and 14, thus leaving 11 claims for adjudication by the Tribunal. Out of these 11 claims, Claim Nos. 1, 2, 4, 6, 9, 10 and 15 were allowed in favour of the Respondent whereas Claim Nos. 3, 5, 11 and 13 were rejected. To the extent that seven of the claims made by the Respondent were allowed by the impugned Award dated 5th May 2009 of the Tribunal, the present petition has been filed by the NHAI.
8. Claim No. 1 is for loss suffered due to idling and under utilization of machinery and equipments on account of compensation events. The claim is for a sum of Rs. 5,24,12,282/- where the Tribunal awarded Rs. 2,62,01,141/-. Although the claim as regards idling of machinery of the Respondent was for a period of fifteen months, the Tribunal allowed it for eight months.
9. The case of the Petitioner is that the Respondent was also responsible for the delay in completion of the contract and it had not carried out the work in terms of the Work Programme as envisaged in Clause 27 of the contract. It is submitted that Clause 44.1 (g) should not be read to include ordering of variations as a compensation event. Secondly, the Tribunal had accepted OMP No. 482 of 2009 Page 4 of 11 the basis of computation as given by the Respondent without going into the veracity of the details mentioned in the cross reference of the said document. Thirdly, there was no finding with regard to the documents produced by the Respondent. Reliance is placed on the decision of this Court in Delhi Development Authority v. Sunder Lal Khatri & Sons (2009)1 Arb LR 240 (Del) (DB).
10. Countering the above submissions, Mr. George Thomas, learned counsel for the Respondent pointed out that the monthly progress report of the NHAI itself acknowledged the equipments deployed at the site and the cost of machinery deployed. There was no objection raised as regards the quantification placed on the value of the machinery by the Respondent before the Tribunal. Apart from filing its evidence by way of affidavit, the Respondent also demonstrated that the compensation was worked out not on the basis of owning cost method but by adopting the formula fixed by the Ministry of Surface Transport ('MOST'), Government of India. Reliance is placed on the decision in Anant Raj Agencies v. Delhi Development Authority 91 (2001) DLT 273.
11. It is seen that the Respondent had before the Tribunal limited the number of months of extended deployment to the extent of documentary proof available in the exhibits. The Respondent also restricted the number OMP No. 482 of 2009 Page 5 of 11 of months of extended deployment for the Bituminous Concrete Equipments. The Respondent placed before the Tribunal copies of progress reports and invoices showing the total investments on all the machines. The Tribunal has, in paras 21 to 39, analysed the relevant provisions of the contract in this regard. It was noticed that Clause 44 of the Contract stipulated that certain events were 'compensation events' unless they were caused by the contractor. The Engineer was empowered under the said provision to assess 'compensation events'. Clause 44.1 (g) qualified variation as a 'compensation event'. Clause 40.4 of the GCC also permitted variation to be treated as a 'compensation event'. The Engineer has, in the present case, certified 365 days of compensation events. The documents on record before the Tribunal showed that 'early warning' notices had been issued by the Respondent to the NHAI and while seeking extension of time the Respondent had notified such 'compensation events'. In the circumstances, the Tribunal held that the Respondent herein has not committed a breach of contract and the certificate issued by the Engineer regarding compensation events was after being satisfied that there was no breach of contract on the part of the Respondent. Further, the 'compensation events' were not considered in the price adjustment payment or Clause 47 debarring the contractor from claiming additional cost for 'compensation events'.
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12. The criticism of learned counsel for the NHAI to the impugned Award as regards Claim No. 1 is not justified. The Tribunal analysed the documents and the evidence placed on record and concluded that the delay was attributable to NHAI. It was not reasonable to contend that since some stretches were handed over, the Respondent ought to have completed the work on those stretches. In para 37 of the Award the Tribunal held as under:
"37. From the facts which have come on record, it is clear that claimant was asked to stop work on the above stretches by the Respondent on 17th November 2001 (Ex. C-5) and again vide letter dated 29th November 2001 (Ex. C-6). Claimant was asked to start the work on the same stretches. Once again vide letter dated 17th January 2002 (Ex.C-9) claimant was asked to stop work from 316.000 km to 319.000 km. Respondent was contemplating to provide elevated highway for Angamali Town portion. Matter did not end here. Respondent again vide letter dated 22nd March 2002 (Ex.C-10) asked the claimant to proceed with work on this stretch. Therefore, it is apparent that work of the complainant got prolonged because of indecisiveness on the part of the Respondent. It would be wrong on the part of the Respondent to contend that this indecisiveness of such stoppage of work did not actually cause any loss or damage to the claimant. The Engineer has admitted that the claimant brought machinery and equipments at site as per the programme and if that machinery could not be utilized because of indecisiveness of the Respondent claimant had obviously suffered loss."
13. This Court is unable to be persuaded to interfere with the finding of the OMP No. 482 of 2009 Page 7 of 11 learned Tribunal as regards Claim No. 1.
14. Claim No. 2 was for infrastructure overhead expenses suffered on account of compensation events which resulted in prolongation of the contract. As against the claim of Rs. 1,83,93,690/- the Tribunal awarded to the Respondent a sum of Rs. 1,38,86,131/-. The Respondent claimed expenses for 9 months but the Tribunal reduced it to 8 months.
15. The criticism of learned counsel for the NHAI that the Respondent did not substantiate it claim by producing the accounts book does not appear to be justified. Since the delay was held to be on the part of NHAI, it was held that the Respondent was not entitled to infrastructure overhead expenses on the staff and infrastructure at site as well as at the Head Office. The said decision of the Tribunal cannot be said to be contrary to law or to the contractual provisions.
16. Claim No. 4 pertained to the loss suffered on account of financial charges and insurance in the prolonged period of execution of completion of work. As against the claim of Rs. 37,06,084/- the Tribunal awarded Rs. 32,11,242/-. The Tribunal noted that the Respondent admittedly extended the bank guarantee for the additional period of execution and completion of the work. Since the Respondent was required to keep the bank guarantee OMP No. 482 of 2009 Page 8 of 11 alive till the end of the defect liability period, it would be entitled to extra costs incurred on that score. The Respondent had set out the details of expenses incurred in Annexure CA-4. However, the Tribunal, in the absence of documentary evidence, disallowed the claim for financial charges and reduced the amount. Its findings were based on an appreciation of evidence.
17. Claim No. 6 was for losses incurred on account of variation and change in specification of DBM (BOQ Item No. 4.04). The objection of learned counsel for the Petitioner is that the said claim was barred by limitation and also barred by the principle of constructive res judicata. A similar plea was rejected by the Tribunal. The present claim was not covered by the earlier arbitral Award dated 27th December 2004. It was for a subsequent period. It is seen from the record that the Respondent submitted its rate to the NHAI on 26th April 2003 in terms of Clause 38 of the contract. However, the NHAI failed to submit any counter rate analysis. The NHAI also did not challenge the rate analysis submitted by the Respondent. It is not in dispute that reduction of work was more than 25% and more than 1% of BOQ rates. Since the claim of the Respondent was to be paid unit rate wise units got reduced as a result thereof. Further, no decision had been taken by the Engineer. Therefore, Clause 40.2 was not attracted. The Engineer did not find the quotation submitted by the Respondent to be unreasonable or excessive. In the circumstances, no fault can be found with the impugned OMP No. 482 of 2009 Page 9 of 11 Award as regards Claim No. 6.
18. Claim No. 9 pertained to compensation due to reduction in length of the road and deletion of bridge from the original scope of work. Against the claim of Rs. 2,80,33,280/- the Tribunal awarded in favour of the Respondent a sum of Rs. 88,06,715/-. There was adequate evidence produced by the Respondent which has been analysed by the Tribunal which found that out of the total length the work reduced, 15% work was over. The work of the bridge was also reduced from both sides. Since the deletion of work was not covered under Clause 40 of the contract, the Respondent was entitled to damages under Section 73 of the Contract Act. The Tribunal held that the Respondent was entitled only to BOQ rates and not damages. The decision as regards Claim No. 9 was based on appreciation of evidence and cannot be held to be contrary to law.
19. Claim No. 10 was for compensation for loss suffered due to changes in design of Mangalapuzha bridge. A perusal of the impugned Award shows that due to the order of the High Court, the elevated portion on the Trichur side had to be retained. Consequently, the Engineer decided to increase the proposed road level by three meters. This change led to change of methodology for the construction of Mangalapuzha bridge. The Respondent had to procure steel, fabricate and erect the spans for supporting girder OMP No. 482 of 2009 Page 10 of 11 leading to additional expenditure. The Respondent was compelled to do the construction of girders in all the three spans as cast-in-cast type of construction. The Tribunal held that the NHAI was held to be responsible for change in the design that resulted in additional costs. It also held that the NHAI had not denied the additional cost incurred by the Respondent. Again the decision is based on an appreciation of evidence and cannot be said to be perverse or illegal.
20. As regards Claim No. 15, the award of interest @ 12% per annum cannot be held to be unreasonable or arbitrary. The law in this regard has been explained by the Supreme Court in State of Rajasthan v. M/s. Ferro Concrete Construction 2009 (3) Arb LR 140 SC.
21. No grounds have been made out for interference with the impugned Award dated 5th May 2009 of the Tribunal. The petition is dismissed with costs of Rs. 10,000/- which will be paid by the Petitioner to the Respondent within a period of four weeks.
FEBRUARY 16, 2012 S. MURALIDHAR, J.
RK
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