Gujarat High Court
Sakshi Enterprise vs Bharat Sanchar Nigam Ltd Through ... on 30 July, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/1402/2013 ORDER DATED: 30/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 1402 of 2013
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SAKSHI ENTERPRISE
Versus
BHARAT SANCHAR NIGAM LTD THROUGH GENERAL MANAGER
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Appearance:
MR ZUBIN F BHARDA(159) for the Appellant(s) No. 1
MR SANDIP C SHAH(792) for the Defendant(s) No. 1
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 30/07/2025
ORAL ORDER
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. Heard the learned counsels for the parties and perused the record. The present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the Act' 1996") is directed against the judgment and order dated 05.03.2013 passed by the 11 th Additional District Judge, Rajkot, in allowing the Civil Misc.Application No.16 / 2011 under Section 34 of the Act' 1996, setting aside the arbitral award dated 30.10.2010. Resultantly, the sum of Rs.1,50,000/- along with the cost and interest has been directed to be paid to the respondent with the finding that the learned Arbitrator has wrongly interpreted the conditions and passed the award beyond the terms and conditions of the contract.
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2. The dispute is about the demand raised by Vodafone Company, which is a third party against the respondent company namely Bharat Sanchar Nigam Ltd. (BSNL) for the damages caused during excavation, trenching, digging for laying underground cable which was carried out by the appellant contractor. The demand note sent by the Vodafone company, third party, has been simply forwarded by BSNL namely the respondent company and an amount of Rs.1,50,000/- was deducted from the final bill submitted by the contractor namely the appellant herein.
3. The dispute revolves around the clauses of the contract, which are as under:-
"13.3.1. During excavation of trench utmost care is to be taken by the contractor so that the existing underground cables are not damaged or cut. IN-case any damage/cut is done to the existing cables, a penalty as per the schedule given below will be charged from the contractor or the amount will be deducted from his running bills:
Size of existing UC/ OF Amount of penalty per cut / cables cut / damaged damage Up to 100 pairs cable Rs.500.00 (Five Hundred) Above 10 pairs & up to 400 Rs.1000.00 (One thousand) pairs Above 400 pairs Rs.2000.00 (Two thousand) OF Cable of any size Rs.5000.00 (Five thousand) Besides the above penalty, the contractor shall carry out such repairs for restoration of the damaged cable free of charge. The cost of jointing kit shall also be borne by the contractor. If contractor fails to repair the damage, the cost of repair (including cost of labour + Jointing ki) shall be recovered from the contractor.
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Tender for Excavation, Trenching, Digging and Laying of Under Ground Optical Fiber Cable & allied works in Rajkot SSA 13.3.2 Contractor shall either pay to third parties all expenditure incurred for restoring services which are damaged by Contractor while carrying out the work or the same amount will be deducted from his bills. Such expenditure shall be intimated to contractor either by Engineer-in-charge or concerned third parties in writing.
The amount deducted by the Contractor from his bill shall be paid to concerned third parties by Divisional Engineer or Accounts Officer 13.3.3 Engineer-in-charge at his absolute discretion shall reserve the right to reject any bill submitted by the Contractor prior to making payment by him to third parties for the damages caused or to deduct same amount from his bill
15. INDEMNITIES 15.1 The contractor shall at all times hold BSNL harmless and indemnify from against all action, suits, proceedings, works, cost, damages, charges claims and demands of every nature and descriptions, brought or procured against BSNL, its officers and employees and forthwith upon demand and without protect or demur to pay to BSNL any and all losses and damages and cost (inclusive between attorney and diet) and all costs incurred in endorsing this or any other indemnity of security which BSNL may now or at any time have relative to the work or the contractors obligation or in protecting or endorsing its right in any suit on other legal proceedings. Charges and expense and liabilities resulting from or incident or incidental or in connection with injury, damages of the contractor or damage to property resulting from or arising out of or in any way connected with or incidental to the operations caused by the contract documents. In addition the contractor shall reimburse BSNL or pay to BSNL forthwith on demand without protect or demur all cost, charges and expenses and losses and damages otherwise incurred by it in consequences of any claim, damages and actions which may be brought against BSNL arising out of or incidental to or in connection with the operation covered by the contractor."
4. The learned Arbitrator, while rejecting the demand to the tune of Rs.1,50,000/- has referred to Clause '13.3.1' of the contract to hold that the deduction of Rs.5000/- as per the said clause of contract is acceptable to the claimant namely the contractor. The reasoning given in the award for allowing Page 3 of 7 Uploaded by MR. SAHIL SAMIULLA RANGER(HC01898) on Thu Jul 31 2025 Downloaded on : Thu Jul 31 22:58:33 IST 2025 NEUTRAL CITATION C/FA/1402/2013 ORDER DATED: 30/07/2025 undefined claim No.1, stating that the action of the BSNL for making deduction of Rs.1.5 lacs from the final bill submitted by the contractor was wrong, are relevant to be noted hereinunder:-
"Claim No.1 (Refund of Rs.1.50,000/- and 9% interest);
Reasoning for award:
a. JTO has given remark that "route indicator has not been shown today during site visited dated 15/4/2009 and no cable damage found" with ref. to letter No.MM/Arbitrator/Sakshi Ent/2010-11/13 dated 20/8/2010. The Respondent argued that JTO is not a member of Committee & cannot be accepted as per Agreement condition No.2 (page 32). JTO is 100% responsible for supervision and accuracy of 100% measurements. In fact JTO is the first Field Officer having first hand information of all execution steps in the work.
b. As per legal requirements, proper Show Cause notice from the AGM(MM) is mandatory for proposing any recovery from the Claimant as Agreement is signed by AGM(MM) and Claimant. No such notice was ever issued to the Claimant by the Respondent. The excavation by JCB was done by Claimant, which is permissible by para-7(b) of section VIII of Agreement (page No.63). No route indicator of any service providers were on the route. Thus there is no need for contractor resorting to manual digging (Refer Claimant's legal advisor's letter dated 05/11/2009). By mistake of JCB operator, OFC cable has been cut. As soon as it came to notice of Claimant through his supervisor, necessary T&P along with labour were arranged and informed the Vodafone in-charge and supervisor. (The cable was cut by mistake)- Refer Annexure-2 of Statement of Facts of Claimant-Letter S-5 dated 13/4/2009 to DE (Trans.) Rajkot, the c. The Claimant specifically asked for Bill, submitted by Vodafone for carrying out rectification of cable, which has not been supplied by Respondent. The rectification job is material/labour based, which can be quantified. The un-intentional damage to the cable was rectified by the Claimant. (S.No.4 & 5 page 2 of the 2nd hearing minutes dated 30/09/2010). The argument of Respondent vide sl.no.4 of letter dated 29/9/10 is acceptable. The deduction of Rs 5000/- as per condition no.13.3.1 is acceptable to the Claimant but deduction of Rs. 1.50 lacs is not correct.
d. The BSNL (HQ) letter no.110-7/2000-Regl. Dated 16/01/2003 cannot be relied upon as Agreement, since it is not forming part of the Agreement and Arbitrator cannot act upon this reference. Further the remote or indirect losses are permitted by Indian contract Act 1972.
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I decide that based on facts of case, the action of making deduction of Rs.1.5 lacs is not legally correct and therefore the claim of refund of Rs.1.50 lacs is decided in favour of Claimant. This amount was deducted w.e.f. 18/04/2009 (the date of Ist and final bill payment) and thus simple interest @ 9% per annum till the date of Award. The respondent should make payment of Rs.1.5 lacs along with interest within 30 (thirty) days from the date of Award. In case of failure to do so, the simple interest of 9% per annum on Rs.1.50 lacs w.e.f. 18/4/2009 to be paid to the Claimant till actual date of payment. (The 30 days exemption period will not be applicable)."
5. From the findings returned by the learned Arbitrator, suffice it to record that the specific contention of the claimant / contractor was that inspite of the demand raised by him for providing bills submitted by Vodafone namely third party for carrying out rectification of cable, etc., the same has not been supplied to him by the BSNL / respondent. The learned Arbitrator records that the rectification job is material / labour based, which was quantifiable. Moreover, unintentional damage to the cable was rectified by the contractor / claimant himself. This finding returned by the learned Arbitrator in the award have not been subjected to challenge before the Court under Section 34 nor any material brought on record by the BSNL to show the contrary. The only issue raised before the Court under Section 34 was about wrong interpretation of the terms and conditions of the contract and the deductions being covered by Clause '13.3.2' of the Contract.
6. The Court under Section 34, while simply recording that the deductions made by the BSNL were covered by the condition No. '13.3.2' of the contract and reference to the condition No. '13.3.1' in the award was wrong, has proceeded Page 5 of 7 Uploaded by MR. SAHIL SAMIULLA RANGER(HC01898) on Thu Jul 31 2025 Downloaded on : Thu Jul 31 22:58:33 IST 2025 NEUTRAL CITATION C/FA/1402/2013 ORDER DATED: 30/07/2025 undefined to uphold the deductions of Rs.1,50,000/- from the final bills of the contractor. The arbitral award has been held to be illegal being contrary to the terms of the contract for the simple reasoning given by the Court under Section 34 that condition No. '13.3.1' was not applicable in the present dispute.
7. Taking note of the reasoning given by the learned Arbitrator and the Court under Section 34, pertinent is to note that the only issue raised by the contractor was about the computations or quantification of the damages claimed by the third party namely Vodafone. The specific claim of the contractor that inspite of repeated asking, the BSNL did not provide bills to the contractor, was not disputed.
8. Having noted the relevant clauses of the contract, pertinent is to note that though the actual expenditure incurred for restoring services by third party for the damage at the hands of the contractor during the work of laying down cables or the damages of any other nature caused to the third party, were liable to be paid by the contractor in terms of clauses '13.3.2' or '15', as the case maybe. However, in both eventualities, either in the case of demand of actual expenditures incurred or seeking indemnification for the damages caused, there was a requirement of quantification of the expenditures incurred or the losses caused to the third party namely Vodafone.
9. On a pointed query made by the Court, it is admitted by the learned counsel for the respondent BSNL that no such quantification was supplied by the third party namely Page 6 of 7 Uploaded by MR. SAHIL SAMIULLA RANGER(HC01898) on Thu Jul 31 2025 Downloaded on : Thu Jul 31 22:58:33 IST 2025 NEUTRAL CITATION C/FA/1402/2013 ORDER DATED: 30/07/2025 undefined Vodafone company to the BSNL and on a simple demand note sent by Vodafone while forwarding the same to the contractor, deductions were made from the final bill of the contractor.
10. Taking note of the above, we do not find any error in the award passed by the learned Arbitrator holding that since quantification of the damages / losses caused to the third party at the hands of the contractor was not provided hence, deduction of Rs.1,50,000/- merely on the demand note of the third party was not justifiable. Moreover, the Court under Section 34 of the Act' 1996 has erred in interpreting clause '13.3.2' ignoring the fact that there was no quantification of the actual expenditures incurred by the third party or the damages caused to it.
11. For the above, while setting aside the judgment and order dated 05.03.2013 passed by the 11 th Additional District Judge, Rajkot under Section 34 of the Act' 1996, the arbitral award dated 30.10.2010 is hereby affirmed. No order as to costs.
(SUNITA AGARWAL, CJ ) (D.N.RAY,J) SAHIL S. RANGER Page 7 of 7 Uploaded by MR. SAHIL SAMIULLA RANGER(HC01898) on Thu Jul 31 2025 Downloaded on : Thu Jul 31 22:58:33 IST 2025