IN THE HIGH COURT OF DELHI AT NEW DELHI
(Not reportable)
CS(OS) 1421A/2006
Reserved on: February 29, 2012
Decision on: March 28, 2012
SADHU SINGH & COMPANY ..... Petitioner
Through: Mr. Girish Aggarwal with
Mr. Abhishek Aggarwal, Advocates
versus
NATIONAL PROJECTS CONSTRUCTION
CORP. ..... Respondent
Through: Mr. K.L. Budhiraja with
Mr. Neeraj Gupta and
Ms. Pruti Sharma, Advocates.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
28.03.2012
1. These are objections by the National Projects Construction Corporation Limited (NPCC) under Section 30 and 33 of the Arbitration Act, 1940 ('Act') to an Award dated 5th June 2006.
2. Earlier an Award originally passed by the learned Arbitrator on 25th April 1996 was questioned in CS (OS) No.1465A of 1996. By an order dated 20th December 2005 while setting aside the said Award, as it was a lump sum non-speaking award, the High Court remitted the case to the Arbitrator for passing a fresh Award giving reasons for each of the claims after giving an opportunity of hearing to both parties. Thereafter, the impugned Award dated 5th June 2006 has been passed by the learned sole CS (OS) 1421A of 2006 Page 1 of 17 Arbitrator giving detailed reasons in regard to each of the claims and counter claims.
3. NPCC has challenged the award in respect of Claim Nos.1, 3 to 6, 17, 28, 36, 42, 44, 52 to 55, interest and Counter Claim Nos.1 to 4. As regards 33 claims, the learned Arbitrator has awarded 'Nil' amount.
4. The work in question related to construction of South side portion of the road over bridge at Seva Nagar. It was awarded by NPCC to M/s. Sadhu Singh & Company ('Claimant') by Work Order No.186/402 dated 14th November 1981. The work was completed on 12th August 1982.
5. Claim No.1 was for a sum of Rs.10,42,426 plus interest on account of increased cost due to increased input incurred by the Claimant due to reduction in the available time for execution of certain elements of the work necessitated by the delays.
6. The work was to be completed within 12 months from 8th April 1981 i.e. by 7th April 1982. The work was of national importance connected with Asiad 1982. There were inevitable delays on account of non- availability of site, delay in issue of materials by NPCC, delay in providing designs and drawings, increase in the scope of work and collapse of Span 4-B. The work was completed with a delay of about CS (OS) 1421A of 2006 Page 2 of 17 seven months. Inter alia, the learned Arbitrator noticed that NPCC had in its letter (Annexure 1/36) admitted that some portion of the site had been handed over as late as February 1982. Further, some drawings were given as late as on 1st April 1982. Documents placed on record by the Claimant showed that a work order was placed on it by NPCC after the collapse of Span 4-B for the erection and dismantling of centering of Span 1A due to change of drawings. The learned Arbitrator, after noting that the concrete along with reinforcement and erection of centering and shuttering materials consequent upon collapse of Span 4-B would take some time, held that the delay of two months claimed by the Claimant in its correspondence with NPCC was not unreasonable. It was found that the scope of work did increase by way of letter dated 7th August 1981 issued by NPCC. Further, if delays were occasioned by the Claimant, NPCC ought to have taken action against it. The learned Arbitrator held that the delay in execution of the work was on account of aforementioned hindrances created by the NPCC.
7. The finding of the learned Arbitrator appears to be based on a careful analysis of the evidence on record. It cannot be held to be perverse or said to be suffering from an error apparent on the face of the record.
8. As was urged before the learned Arbitrator, it has been urged on behalf of NPCC in this Court that no amount should have been awarded CS (OS) 1421A of 2006 Page 3 of 17 under Claim No.1 on account of Clauses 18 and 20 of the Special Conditions of Contract ('SCC'). It is also submitted that there could be no claim entertained for extra wages in view of Clause 20 of the SCC. Further, Section 73 of the Contract Act had no relevance as the claim did not pertain to compensation for breach of contract.
9. The reasoning of the learned Arbitrator while awarding Rs.3,29,660 in respect of Claim No.1, as contained in para 5.8.2 of the impugned Award reads as under:
"5.8.2. The Claimant had done a total work of Rs.34,94,753 after 9-12-81 and Rs.16,83,247/- from 12-4-1981 to 9-12-81 and has claimed Rs.10,48,426/- plus interest on account of increased inputs after 9-12-81. Clause 18 and 20 of contract referred to by the respondent have been misinterpreted by the respondent and do not bar compensation due to the claimant on account of increased cost imposed on him due to respondent's failures and as such are not relevant to this claim. After going through the records made available I accept the claim of the claimant only to the extent of additional costs incurred by him due to increased inputs necessitated to speed up the work to make up for the lost time on the basis of certified details by the Chartered Accountant as given under:-
Incentives and overtime paid during the period claimed to speed up the work as per the Chartered Accountant's certificate Rs.2,99,691/-
Labour Agent's commission
CS (OS) 1421A of 2006 Page 4 of 17
limited to 10% of the above Rs. 29,969/-
------------------
Rs.3,29,660/-"
10. Once it was found that the delay caused was on account of actions of the NPCC, then Clauses 18 and 20 of SCC would have to be interpreted accordingly. While in terms of the original time schedule for completion of the work no escalation was permitted under Clause 18 SCC, that obviously cannot be the position where the delay was occasioned by the NPCC. The Claimant had to engage additional labour to complete the project as quickly as possible. Clearly therefore the claim for compensation under Section 73 of the Contract Act was maintainable.
The learned Arbitrator has found that the Claimant did a substantial amount of work after 9th December 1981 and based on payments made by NPCC after 24th December 1981, the Claimant claimed 30% of the said amount. The reliance on the certificate of the Chartered Accountant was only to prove exact details concerning the overtime paid to the workmen for speeding up the work.
11. This Court is unable to find any illegality having been committed by the learned Arbitrator in deciding Claim No.1 in the above manner. The objection in this regard is hereby rejected.
12. The next objection is to Claim No.3 which was for a sum of Rs.2,19,694 plus interest. This was a claim basically for idle labour. CS (OS) 1421A of 2006 Page 5 of 17
13. The Claimant was able to demonstrate that after the collapse of Span 4-B, the work was stopped by NPCC as drawings and designs had to be revised as per the Inquiry Committee Report. This in turn compelled the Claimant to keep the labour and supervisory staff idle during the period from 10th December 1981 to 28th January 1982. The total expenditure incurred worked out to Rs.1,91,325. The balance amount claimed under this head was for the stoppage of work for short periods between 16th April 1981 and 26th November 1981.
14. The learned Arbitrator discussed the entire evidence in detail. NPCC objected to the above claim on the basis of Clause 29 of the Contract which stated that the work allotted was of a total nature and the contractor should make his own arrangements for haul roads, godowns and such like requirements for execution at his own cost. The interpretation placed by NPCC on Clause 29 was not accepted by the learned Arbitrator. He reasoned as under:
"Clause 29 is not correctly interpreted by the Respondent. Since the Contract is based on Work Order with Schedule of quantities mentioning the items of work briefly, it is the intention of the Contract Clause 29 to make it clear that the rates quoted by the Claimant would include arrangements for haul roads, godowns and such like requirements needed to execute the work and nothing extra would be payable on this account. Such requirements would be done by the Claimant at its own cost. This has no relevance to the present claim. The respondent is CS (OS) 1421A of 2006 Page 6 of 17 liable to reimburse the cost of idle labour to the Claimant as under:-
Amount claimed by Rs.2,21,916/- plus interest.
the Claimant
Amount awarded Rs.1,91,325/-
plus interest which is dealt with separately"
15. The objection of NPCC to Claim No.3 is without merit. Once the learned Arbitrator found as it was NPCC which was responsible for the hindrances caused including the delays on account of the collapse of Span 4-B, the Claimant was entitled to be compensated for idle labour which was one of the consequences. The learned Arbitrator has entertained the claim for idle labour only for the period after 10th December 1981.
16. Claim No.4 was for a sum of Rs.3,62,050 for the work done in relation to the collapsed Span 4-B. Significantly, in a letter dated 24th February 1983, NPCC informed the Claimant that its claim in this regard "has already been sent to the Northern Railways for their consideration. As this claim is linked with our claim to Railways, as per Clause 30 of the Agreement condition, this can only be released after it is released to NPCC." Therefore, NPCC initially did not deny its responsibility. However, before the learned Arbitrator as well as this Court, NPCC has placed reliance on Clause 29 to urge the rejection of the said claim. Once CS (OS) 1421A of 2006 Page 7 of 17 the contract itself made it clear that the erection had to be strictly in accordance with the directions of the Engineer In-charge ('EIC'), the NPCC had to bear the consequence of the collapse of Span 4-B. The Enquiry Committee which went into the said incident - recommended that the entire centering be redesigned as such. Prior to the collapse, the concreting was still in progress in the final stages and all the centering and scaffolding as erected were still in position. The collapse occurred due to collapse of centering. The responsibility for removal of the faulty concrete as a result of collapse of Span 4-B could not obviously be fastened upon the Claimant by resorting to Clause 29. Once it was established that the very design was faulty, as per the Report of the Enquiry Committee, the claim of the Claimant could not be rejected.
17. The objections as regards Claim No.4 are hereby rejected.
18. Claim No.5 was for a sum of Rs.13,52,020 which was for the extra expenses incurred for the increased sleepers after the collapse of Span 4- B. This again had to be allowed on the same reasoning as Claim No.4. However, the learned Arbitrator has not allowed the entire claim. He has concluded, after examining the evidence, that the increase in the number of sleepers required to be compensated was 1600 but they were retrievable and usable after use. Therefore, only a part of these additional sleepers was awarded i.e. to the extent of 50%. As regards batons and CS (OS) 1421A of 2006 Page 8 of 17 additional vertical supports, 10% was deducted for salvage. The Award is a well reasoned one. There is no merit in the objection to the Award in relation to Claim No.5.
19. Claim No.6 was for a sum of Rs.1,30,742 towards freight charges for the cribs and centering material to be supplied by NPCC on hire. Again, NPCC relied on Clause 29 of the SCC and Clause 5 of the SCC which permitted recoveries to be made by it.
20. The learned Arbitrator discussed the above claim at great length with particular reference to Annexure R-5 being the letter dated 5th April 1982 of NPCC. The reliance placed on Clause 29 was rejected since it did not apply. Additional costs claimed by the Claimant were necessitated due to the change in the programme which resulted in additional freight due to delays caused by NPCC. The impugned Award in this regard is well reasoned. The objection to the Award in respect of Claim No.6 is hereby rejected.
21. Under Section II of the Claims, the Claimant submitted 46 claims. Claim Nos. 7 to 52 were titled as "Extra Items". NPCC objected to the impugned Award in respect of Claim No.17. The learned Arbitrator explained his approach as under:
"Keeping in view all the records, pleadings, written and oral CS (OS) 1421A of 2006 Page 9 of 17 submissions of both the parties I conclude that these claims have not been paid or adjusted or credited as stated by the respondent. I also conclude that the rates already accepted by the parties in terms of Annexure II/14 and II/15 are reasonable and allow claimant for these extra items at these rates. I restrict the payment to the Claimant of these claim items, to the respondent's recorded quantities in the Measurement Book and since these have not been paid I treat these as payable to the claimant by the respondent. Accordingly I proceed Claim wise first in respect of Claim Nos.7, 8, 9, 10, 11, 12, 15, 17, 18, 19 and 20 as under. Other extra item claim are dealt separately later."
22. Thereafter, with particular reference to Claim No.17, which was for providing water spouts, the learned Arbitrator awarded Rs.1600 as per the record of measurement of NPCC itself. This Court is unable to find any illegality in the above approach of the learned Arbitrator or the decision in respect of Claim No.17.
23. Claim No.28 was for rectification of the shuttering plates. According to NPCC, under Clause 6 of the SCC the Claimant was required to return the shuttering plates to the NPCC in good usable condition. It is submitted that since the Claimant had admitted that all drawings as well as the site were handed over in June 1981, the claim was untenable.
24. The reasoning of the learned Arbitrator in this regard is as under:
"The claimants in their rejoinder have stated that drawings for CS (OS) 1421A of 2006 Page 10 of 17 pre stressed concrete beams had not been received and shuttering for six numbers bottoms of beams and two number sides of the beams had been fabricated as directed. Design of shuttering had been changed. Shuttering had been rectified on the receipt of the drawings for pre-stressed beams, due to change in design, Rectification of shuttering under the circumstances is an additional item payable separately. The claimants have referred to their letter to the respondents written on 14-8-1981 (Annexure II/34), 17-8-1981 (Annexure II/35) and 31-8-1981 (Annexure II/36).
The respondent in its letter Annexure II/14 has not rejected this claim but recorded as approximately two beam fabrication "details of work done awaited from contractor."
I agree with the Claimant that this item is payable to him and is not covered as stated by the respondent in its reply. This item has arisen due to change in the design of beams by the respondent. After considering all the records made available and oral submissions and considering the extent of rectification required and the wastage on account of rectification I allow Rs.26,100 to be paid by the respondent to the claimant plus interest for two beams fabrication."
25. This Court is unable to find any illegality in the learned Arbitrator allowing Claim No.28 to the above extent.
26. The next objection is in respect of the Award of Claim No.36 CS (OS) 1421A of 2006 Page 11 of 17 towards railing. The design of the precast hand railing had undergone change. The changed design was complicated and involved complicated shuttering. The claim for extra item was on this account. The learned Arbitrator, on examination of the evidence, found that the drawings which were issued six months after commencement of work were more complicated as curved shuttering was involved. After adjudicating the rate fixed for items, the learned Arbitrator considered a sum of Rs.1,03,346.50 as being reasonable. After accounting for the sum already included in the final bill on this account, an additional amount of Rs.49,924 plus interest was held payable by NPCC to the Claimant.
27. No fault can be found with the above reasoning or conclusion of the learned Arbitrator which is based on the evidence on record.
28. The next objection is to the Award in respect of Claim No.42, being the extra item on account of erection of precast end blocks for Span 8B. The learned Arbitrator found, as a matter of fact, that the said item had not been included in the final bill and no payment towards the said item had been made by the NPCC. The learned Arbitrator allowed Rs.330 per metric tonne for the said item and this worked out to Rs.1188. The objection in regard to Claim No.42 is rejected.
29. Claim No.44 was towards supply of labour. A bill amounting to CS (OS) 1421A of 2006 Page 12 of 17 Rs.8657 had been submitted on 4th February 1983. A further bill of Rs.958.30 was submitted on 4th February 1983 for skilled and unskilled labour. The documents were produced before the learned Arbitrator and, on checking the documents, he held the claim to be proved. Again, there is no merit whatsoever in the said objection.
30. Claim No.52 was for refund of excess recovery made for supply of R.S.J. for leveling of shuttering and centering in the sum of Rs.4750 plus interest. The claim was allowed after examining the records. It was held that excess recovery of Rs.4,000 was refundable to the Claimant. Again, there is no ground made out for setting aside the Award in respect of Claim No.52.
31. Claim No.53 was for refund of security deposit for labour in the sum of Rs.3750. The reasoning of the learned Arbitrator was under:
"I have examined the Final bill filed by the respondent on 3.5.1991 and have noticed that a recovery of legal expenses amounting to Rs.9196.00 has already been made from the claimant therein. Respondent's contention that the Security Deposit is adjusted legal expenses incurred by respondent is neither supported by any document nor reflected in the final bill. The respondent is also not denying that an amount of Rs.3,750.00 was deducted as Security Deposit of 8th running bill of the Claimant.CS (OS) 1421A of 2006 Page 13 of 17
In view of the above I disagree with the respondent's contention and Claimants are entitled for refund of this Security Deposit.
I therefore, allow the Claimants a refund of Rs.3,750/- payable by the respondent plus interest which is dealt separately."
32. This Court is unable to find any error having been committed by the learned Arbitrator in regard to Claim No.53.
33. Claim No.54 was for interest on mobilization advance in the sum of Rs.15,830. The reasoning of the learned Arbitrator was as under:
"I have gone through all the records placed before me and the oral submissions and I conclude that the respondent as per contract was required to pay the claimant twice every calendar month (Special Condition no.4), one measured bill within first 10 days and other advance bill in third week of every month. The claimant's advance bearing interest was adjusted with the first bill. The claimant has rightly asked for refund of excess recovery of interest due to delay in payments. Claimant has worked out the details beyond 10th of each month the due date of payment vis-à-vis actual date of payment which has been checked to be correct as per records seen. I therefore allow refund of Rs.15,830/- plus interest. Issue of interest is dealt separately."
34. No error can be found in the above reasoning or conclusion of the learned Arbitrator. It is based on the evidence on record. The objection CS (OS) 1421A of 2006 Page 14 of 17 in this regard is rejected.
35. The next objection is to the Award in respect of Claim No.55 in the sum of Rs.2,25,022.83 as regards the balance amount towards the final bill. The learned Arbitrator has carefully analysed the evidence on record and held that there was no justification in the NPCC withholding a sum of Rs.2,21,875.98 from the final bill. Likewise, the withholding of Rs.3,146.85 pertaining to repairing of the wearing coat was also not held to be justified. The objection in this regard is rejected.
36. As regards the award of interest it is submitted that the learned Arbitrator had no jurisdiction to award pendente lite and future interest. Alternatively, it is submitted that the rate of interest awarded is on the higher side. The learned Arbitrator allowed 12% interest during the pre- suit and pendente lite periods and future interest at 18% per annum from the date of the Award till date of payment.
37. Going by the decision of the Supreme Court in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy, AIR 2007 SC 817, this Court considers the interest rate to be on the higher side considering that the claim is an old one and the litigation has been pending for over three decades. Accordingly, the interest rate is reduced to 9% per annum simple interest at all stages, pre-reference, pendente lite and post-Award. CS (OS) 1421A of 2006 Page 15 of 17
38. Counter claim No.1 by the NPCC was on account of losses suffered by it due to collapse of Span 4-B. There is no justification whatsoever for the NPCC to require the Claimant to compensate NPCC for this loss. In fact, the letter dated 22nd April 1983 of the NPCC showed that it had preferred this very claim from the Railways. The Enquiry Committee's Report affirmed that the design of Span 4-B was faulty and required to be revised. Consequently, the rejection by the learned Arbitrator of Counter Claim No.1 cannot be said to be erroneous.
39. For the same reason, Counter Claim No.2 of NPCC against the Claimant on account of damages for loss of reputation and prestige caused to NPCC on account of collapse of Span 4-B cannot be allowed.
40. Counter claim No.3 was for Rs.1,96,250 being the amount incurred for repairs done by the Railway Department to rectify some defects and deficiencies noticed in the work. The learned Arbitrator found that NPCC failed to show which defect in the work was pointed out by it or the Railways. No letter or document was written by the NPCC to the Claimant to this effect during the period of construction or during the period of six months after completion. Accordingly, the Counter Claim No.3 was rightly rejected by the learned Arbitrator.
41. Counter Claim No.4 was for a sum of Rs.91,244.24 on account of failure of the Claimant to return certain tools and plants. The learned CS (OS) 1421A of 2006 Page 16 of 17 Arbitrator observed that NPCC had not proved which plants and tools were retained by the Claimant. No details were provided. The rejection of Counter Claim No.4 was also, therefore, not erroneous.
42. With the counter claims having been rightly rejected, the question of payment of interest thereon did not arise.
43. For the aforementioned reasons, this Court upholds the impugned Award of the learned Arbitrator with only one modification regarding the rate of interest. The rate of interest on the sums awarded by the learned Arbitrator is uniformly reduced to 9% simple interest per annum for all the periods for which the interest has been awarded. Subject to this one modification, the impugned Award is upheld as such.
44. The impugned Award, modified to the above limited extent, is made rule of the Court. The suit is disposed of. Decree sheet be drawn accordingly.
S. MURALIDHAR, J.
March 28, 2012 s.pal CS (OS) 1421A of 2006 Page 17 of 17