Municipal Corporation Of Greater ... vs Hindustan Construciton Company ...
2010 Latest Caselaw 248 Bom

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            IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                                  
                                     O. O.C. J.




                                                          
                  ARBITRATION PETITION NO.65 OF 2008




                                                         
    Municipal Corporation of Greater Mumbai.        ...Petitioner.
              Versus
    Hindustan Construciton Company Ltd.             ...Respondent.




                                             
                          .......
    Mr.R.D.Dhanuka   with   Mr.H.C.Pimple   and   Mr.R.Y.Sirsekar   i/b. 
                              
    S.H.Ujjainwala & Co. for the Petitioner.
    Mr.Aspi Chinoy, Sr.Advocate with Mr.Kevic Setalwad i/b. M/s.Harish 
    Joshi & Co.  for the  Respondent.
                             
                          ......
                          CORAM : DR. D.Y. CHANDRACHUD, J.

December 3, 2010.

ORAL JUDGMENT :

The challenge in these proceedings under Section 34 of the

Arbitration and Conciliation Act, 1996, is to an arbitral award of 24

September 2007 of an arbitral Tribunal consisting of three Arbitrators.

2. In April 1995, the Petitioner invited tenders for the

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construction and completion of civil work of aerated lagoons at

Bhandup and Ghatkopar on Contracts 10AA and 11AA. The contract

was awarded to the Respondent on 5 January 1996 and a formal

agreement was entered into between the parties on 30 April 1996.

After the work was completed, the Respondent issued a taking over

certificate on 14 March 2001 for the civil work of the aerated lagoons

at Bhandup and for the work at Ghatkopar. The certificate recorded

that the Respondent had substantially completed the entirety of the

work in accordance with specifications and drawings and had agreed

to complete the pending items of work within two months; during the

defects liability period. The defects liability period commenced from

4 March 2001 and ended on 3 March 2002. On 14 March 2002, there

was a general inspection of the work executed by the Respondent and

the Respondent was called upon to rectify certain defects in terms of

clause 49.2 of the Conditions of Contract. On 16 April 2002, the

Chief Engineer (MSDP) of the Petitioner addressed a letter to the

Respondent recording that the balance of the work had been carried

out and that the defects had been rectified. Accordingly, defects

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liability certificates for the work under the contract came to be issued

by the Petitioner to the Respondent under Clause 62.1 of the

Conditions of Contract. These certificates were forwarded by the

Petitioner to the Respondent on 16 April 2002.

3. After the defects liability period had ended, some defects

were noted in June/July 2003 nearly two years after the work was

taken over by the Petitioner. On 15 September 2004, a meeting took

place between the parties. What transpired at the meeting is a matter

of dispute. During the course of the arbitral proceedings, the

Petitioner relied on Minutes of the Meeting. These were disputed by

the Respondent. What was produced before the arbitral Tribunal, was

a photocopy of Minutes which were not signed by the Respondent.

The original document was not produced. The Petitioner retained an

amount of Rs.66,51,987.69 which was otherwise due and payable to

the Respondent on the ground that the work which had been

rendered was defective. The arbitration agreement contained in the

contract was invoked and a three member Arbitral Tribunal presided

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over by a former Judge of this Court, and consisting of a retired Chief

Engineer of the Mumbai Port Trust and a former Chief Secretary of

the State Government was constituted.

4. The arbitral Tribunal found in its award that the

Respondent had duly carried out work under the contract and that the

Petitioner had issued a taking over certificate on 14 March 2001 both

for the work at Bhandup as well as that at Ghatkopar. The balance of

the work which remained as provided in the list annexed to the taking

over certificate was found to have been executed. The defects liability

period ended on 3 March 2002. Defects liability certificates were

issued by the Petitioner to the Respondent. A joint inspection had

taken place on 14 March 2002. The Petitioner was found to have

satisfactorily attended to the minor defects noticed in the work and it

was only thereafter that the defects liability certificates were issued by

the Petitioner to the Respondent. The Tribunal noted that the defects

liability certificates were unconditional. If the Respondent as a

contractor had failed to carry out remedial work within reasonable

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time, the Petitioner as an employer would have, in the normal course,

taken on an alternative agency to execute the work for remedying the

alleged defects. The Tribunal noted that no record was produced by

the Petitioner to show that it engaged any agency to remedy any

alleged defect even during the period of liability or even thereafter. In

these circumstances, the Tribunal held that the documents on record

would show that there was no defect in the work executed by the

Contractor. The alleged leakage was noted in June/July 2003 much

after a lapse of two years of the taking over of the work by the

Petitioner. On these grounds, the Tribunal allowed the claim of the

Respondent for the balance due of Rs. 66.51 lakhs. Interest was

allowed on the aforesaid amount and on a payment which had been

delayed at the rate of 10% per annum; compounded monthly in terms

of clause 60.8 of the applicable General Conditions of Contract.

5. The Petitioner had made a counter claim which was

dismissed. The Tribunal noted that the work executed by the

Respondent was not defective and in any event, the Petitioner had not

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carried out any work of rectification at the risk and cost of the

Respondent in respect of any alleged defective work. The counter

claim was not based on any loss, or damage actually caused to or

suffered by the Petitioner and was in these circumstances rejected.

6. The award of the Tribunal has been assailed on two

grounds at the hearing of the Petition. Counsel appearing on behalf

of the Petitioner submitted that the Tribunal has relied on an

unproved document which was not taken on record by the Tribunal in

the course of the evidence. This document is a report of Dr.Katti. As

a matter of fact, there are two reports of Dr.Katti: an interim report

forwarded along with a letter dated 1 November 2004 and a final

report of 8 November 2004. The second submission is that the

Tribunal has without justification come to the conclusion that the

Minutes of the Meeting held on 15 September 2004 had not been

proved by the Petitioner. These Minutes, according to the Petitioner,

are relevant because the Respondent had agreed at that meeting to

rectify defects that had arisen at its cost. The Tribunal held that the

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original was not produced and, therefore, was not proved. The

submission is that the Petitioner led oral evidence in support of the

document and answers were elicited from the witness for the

Petitioner in the course of the cross-examination. For these reasons,

it is the submission that the minutes of the meeting held on 15

September 2004 were duly proved. The Tribunal has been

inconsistent, when it relied on one of the reports of Dr.Katti and on

the other hand refused to accept the minutes of the meeting of 15

September 2004. This, it is submitted, is in violation of the principles

of natural justice.

7. On the other hand, it has been urged on behalf of the

Respondent by Learned Senior Counsel that the Tribunal was entirely

justified in holding that the minutes of the meeting dated 15

September 2004 were not proved. The fact that the meeting was held

on 15 September 2004 is not in dispute. Almost contemporaneously

with the holding of the meeting the Respondent had addressed a

letter dated 1 November 2004 to the Petitioner placing on record its

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version of what transpired at the meeting. The Petitioner did not

produce the original signed minutes and had no explanation to offer

as to why the signed copy of the minutes was not available. In these

circumstances, the document was not proved and the reasoning of

the Tribunal does not suffer from any perversity or illegality. The

second submission which has been urged on behalf of the Respondent

is that the report of Dr.Katti finds mention in the award only with

reference to what transpired at the alleged meeting of 15 September

2004. At a meeting of the arbitral Tribunal on 6 March 2006, a

statement was made on behalf of the Petitioner that the Petitioner

admits documents, copies whereof were filed in the arbitral

proceedings and it was on that basis that the Respondent stated that it

was not leading any oral evidence. In any event, as a matter of fact,

the contents of the report of Dr.Katti are not the basis of the award.

The basis of the award of the Tribunal is that the Petitioner having

issued a taking over certificate and defects liability certificates and all

the work of rectification having been carried out by the Respondent,

the work was satisfactorily performed and no defect had remained.

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8. In assessing the merits of the rival submissions, it must be

noted at the outset, that the basis of the award of the arbitral Tribunal

is that the Petitioner had duly certified that the work which was

executed by the Respondent was in accordance with the specifications

of the contract. This, according to the Tribunal, was evidenced by the

taking over certificates issued by the Petitioner to the Respondent

both in respect of the work of the aerated lagoons at Bhandup and

Ghatkopar. The work which had remained to be carried out was duly

completed and such defects which were pointed out were found to

have been rectified. Thereupon, the Petitioner had issued defects

liability certificates. This is the foundation and basis of the award of

the arbitral Tribunal. The Petitioner sought to rely on minutes of the

meeting which was held on 15 September 2004 in support of its

submission that at that meeting the Respondent had agreed to rectify

certain defects upon the payment of an amount of Rs.62 lakhs. The

fact that the meeting was held is not in dispute. What transpired at

the meeting is the bone of contention. Now it is an admitted position

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before the Court that the Petitioner did not produce the original

signed minutes of the meeting. The Petitioner had no justification to

offer, when its witness deposed in evidence as to why a signed copy of

the minutes or for that matter, the original of the minutes was not

produced. Admittedly, what is produced in an evidence was a photo

copy of the alleged minutes which was only signed by the Deputy

Municipal Commissioner. The witness, who deposed on behalf of the

Municipal Corporation admitted, in response to Question 47, that a

copy of the minutes was required to be sent to the Respondent, the

contractor. The witness stated that he was unaware as to whether the

office of the Deputy Municipal Commissioner had issued a copy of the

minutes to the contractor. The witness was asked as to whether he

would produce the original of the minutes of the meeting of 15

September 2004 (R-20) to which he answered by stating that he

would try to trace out the original document and would produce it as

early as possible. Thereafter, neither was the original produced, nor

was any justification for leading secondary evidence given. In these

circumstances, on this state of the record, the Tribunal was entirely

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justified in coming to the conclusion that the alleged minutes upon

which reliance has been placed by the Petitioner were not duly

proved. Before concluding this aspect of the matter, it must be noted

that there was an exchange of correspondence between the parties

soon after the meeting of 15 September 2004. On 1 November 2004,

the Petitioner had addressed a letter to the Respondent stating that at

that meeting, the Deputy Municipal Commissioner had promised that

the payment would be effected by the Petitioner to the Respondent.

According to the Respondent, though it was not obliged to obtain a

technical report from Dr.Katti, it had agreed to obtain that report

provided the payment of the final bill was released immediately. By

its letter dated 1 November 2004, the Respondent forwarded a copy

of the interim report of Dr.Katti dated 26 October 2004. The

Respondent's version of what transpired is that it had never agreed to

undertake the work of repair. On this state of the record, and

particularly having regard to the contemporaneous material in the

form of correspondence between the parties exchanged soon after the

meeting, it was not possible for the Tribunal to come to the

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conclusion that the minutes on which reliance was placed by the

Petitioner constitute an authentic record of what transpired at the

meeting. For these reasons, the award of the Tribunal on this ground

cannot be held to be arbitrary, perverse or being illegal.

9. Now it is no doubt well settled that an arbitral Tribunal is

not bound by the strict rules of evidence which govern civil trial. But,

equally ever since the judgment of the Supreme Court in Bareilly

Electricity Supply Co.Ltd. Vs. The Workmen,1 it is well settled that

the principles of natural justice must be observed even if an

adjudicating body is not governed by the strict rules of evidence or

procedure. The Supreme Court observed that the application of the

principles of natural justice does not imply that what is not evidence

can be acted upon. The judgment of the Supreme Court would also

buttress the contention of the Respondent that the minutes of the

meeting of 15 September 2004 could not have been relied upon when

neither the original was produced nor was any justification put fourth

for the absence of the signed copy of the original.

    1 AIR 1972 SC 330





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10. Now, in so far as the report of Dr.Katti is concerned,

Counsel appearing on behalf of the Respondent drew the attention of

the Court to the minutes of the meeting before the arbitral Tribunal

on 6 March 2006. During the course of the hearing before the

Tribunal, the representative of the Petitioner stated that the Petitioner

was admitting documents, copies of which were filed in the arbitral

proceedings. The minutes of the meeting also record that the

Respondent was not leading any oral evidence. The submission which

has been urged on behalf of the Petitioner is that when the

representative of the Petitioner stated that he was admitting the

documents, it only meant that the existence of the documents was

being admitted and not the contents for, if the contents were to be

admitted, there would be nothing that would remain to be tried in

the arbitral proceedings. Be that as it may, and even assuming that

the submission which has been urged on behalf of the Petitioner is

correct, on a reading of the award of the arbitral Tribunal it is clear

that the report of Dr.Katti is not the basis or the foundation of the

award. The report of Dr.Katti is initially referred to in the arbitral

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award while adverting to the case of the claimant. The reference to

the report in the course of the arbitral award is only to be found in the

context of the meeting which took place on 15 September 2004. It is

in the context of that meeting, that the arbitral Tribunal noted that

though there was no contractual obligation on the part of the

Respondent, the Respondent agreed to have a report of Dr.Katti in the

matter without any commitment on its part to bear the costs thereof.

The Tribunal has thereafter observed that even the minutes which

were relied upon by the Petitioner do not record that the Respondent

had agreed to carry out the work of repair as sought to be suggested

by the Petitioner and that no agreement to carry out repairs to the

alleged defective or damaged work on the part of the Respondent was

arrived at during the meeting of 15 September 2004. In these

circumstances, I am of the view that the question as to whether

Dr.Katti's report could have been relied upon as substantive evidence

is of no significance because the arbitral award as a matter of fact is

not based on the report of Dr.Katti.

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11. Besides this, it has been submitted on behalf of the

Respondent by the Learned Counsel that at no stage during the course

of the arbitral proceedings had the Petitioner ever contended that the

report of Dr.Katti was not proved or could not be referred to.

12. For all these reasons, I am of the view that the arbitral

award does not suffer from any illegality or perversity.

13. The Petition is accordingly dismissed. No costs.

( Dr.D.Y.Chandrachud )