Bombay High Court
The Board Of Trustees Of The Port Of ... vs Afcons Infrastructure Limited on 23 December, 2016
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.868 OF 2012
The Board of Trustees Of The )
Port of Mumbai, )
a body corporate, constituted under )
the provisions of Major Port Trusts Act, )
1963, having its Registered Office at )
Port House, Shoorji Vallabhdas Marg, )
Ballard Estate, Mumbai - 400 038. ) .. Petitioner
Versus
M/s.Afcons Infrastructure Limited )
having its Registered Office at AFCONS )
House, 16, Shah Industrial Estate, )
Veera Desai Road, Azad Nagar P.O. )
Mumbai - 400 053. ) .. Respondent
---
Mr.S.G. Aney, Senior Counsel with Mr.Umesh Shetty, Ms.D. Kale,
Mr.F.N. Pavri, Ms.P.R. Patel and Ms.S.S. Sahay i/b Mulla & Mulla & C.
B. & C. for the Petitioner.
Mr.D.J. Khambatta, Senior Counsel with Mr.Cherag Balsara, Mr.Hirak
Mukhopadhayay, Mr.Phiroze Mehta, Mr.Arjun Srivastava and Mr.Akshay
Doctor i/b Desai & Diwanji for the Respondent.
---
CORAM : R.D. DHANUKA, J.
RESERVED ON : 27th September 2016
PRONOUNCED ON : 23rd December 2016
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Judgment :-
. By this petition filed under section 34 of the Arbitration &
Conciliation Act, 1996 (for short "Arbitration Act") the petitioner has
impugned the arbitral award dated 26 th November, 2011 and a
clarificatory award dated 22nd February, 2012 passed by the learned
arbitrator allowing some of the claims made by the respondent and
dismissing the counter claims made by the petitioner. Some of the
relevant facts for the purpose of deciding this arbitration petition are as
under :-
2. The petitioner herein was the original respondent, whereas
the respondent herein was the original claimant in the arbitral
proceedings.
3. On or about 26th June, 1998, the petitioner issued a public
invitation for pre-qualification of bids for the award of contract for the
proposed work of modernization of the existing Marine Oil Terminal and
berths / jetties J1, J2 and J3 at their multi-user and multi-cargo Marine
Oil Terminal at Jawahar Dweep based in the Mumbai Harbour. The
petitioner also arranged for pre-bid meetings and visits to the site of
work which were attended by the respondent along with other prospective
bidders. The petitioner had also sent replies to various queries asked by
the bidder's numbering 117 to all the bidders together with addendum
No.1.
4. On 17th January, 2000, the respondent submitted its bid
comprising of technical and price bid to the petitioner aggregating to
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Rs.144,44,25,199/-. On 19th September, 2000, the petitioner issued its
initial letter conveying acceptance of the bid submitted by the
respondent. On 28th September, 2000, the petitioner issued a detailed
Letter of Acceptance to the respondent. It is the case of the petitioner that
in the said Letter of Acceptance issued by the petitioner, it was made
clear that the bid price of the respondent would be inclusive of Customs
and Excise Duties.
5. On 6th October, 2000, the parties entered into a full - fledged
agreement in respect of the work covered under the said contract. The
said agreement provided priorities of contract documents in a particular
sequence. It is the case of the petitioner that the Invitation for Pre-
qualification bids did not form part of the contract.
6. On 16th October, 2000, the petitioner issued a letter
instructing the respondent to commence the work. The period of
completion of work was stipulated as 32 months from the date of
commencement, including the period of monsoon. The stipulated date of
completion was thus 15th June, 2003.
7. It is the case of the petitioner that due to gross delay on the
part of the respondent, the respondent applied for extension of time for
delay upto 31st March, 2003, for delays during 1st April, 2003 to 10th
December, 2003 and for delays during 11th December, 2003 to 10th June,
2004. The Engineer granted total extension of 177 days to the
respondent. It is the case of the petitioner that the date of completion of
the work thus stood extended to 9th December, 2003, the respondent
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however completed the work under the contract on 28 th December, 2004.
It is the case of the petitioner that in view of inordinate delays in
execution of the work by the respondent, the petitioner deducted a sum of
Rs.4,31,74,152/- as per the contract conditions by way of liquidated
damages out of the moneys payable by the petitioner to the respondent
under the concerned interim bills raised by the respondent.
8. On 29th March, 2004, the respondent filed Arbitration
Petition (288 of 2004) under section 9 of the Arbitration Act in this Court
in respect of the deduction of the liquidated damages made by the
petitioner from the interim bills raised by the respondent. By an order
dated 30th June, 2004, this Court directed the petitioner to deposit the said
sum of Rs.1,41,82,944/- in this Court and directed to take steps for
constitution of the arbitral tribunal to decide the dispute. This Court
disposed of the said arbitration petition. On 19th July, 2004, this Court
passed an order clarifying the said order dated 30 th June, 2004. The
petitioner preferred an Appeal (487 of 2004) and impugned the said order
dated 30th June, 2004 passed by this Court before the Division Bench of
this Court. The petitioner filed a Notice of Motion (2251 of 2004) in the
said Appeal No.487 of 2004 for interim reliefs. By an order dated 9 th
August, 2004, the Division Bench of this Court directed that the order of
the learned single Judge shall not be stayed since the withdrawal of the
amount by the respondent contractor was made conditional by the learned
single Judge on furnishing the bank guarantee. The Division Bench
granted extension of three days to the petitioner to deposit the said
amount. The petitioner filed Special Leave Petition (16816 of 2004)
before the Supreme Court of India and impugned the order dated 9 th
August, 2004 passed by the Division Bench of this Court.
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9. On 20th October, 2004, the respondent addressed a letter to
the petitioner for referring the disputes to arbitration. It is the case of the
petitioner that by the said letter the respondent requested for the reference
of not only the existing disputes but also future disputes to arbitration.
10. By its letter dated 11th November, 2004 to the respondent,
the petitioner made it clear that the petitioner had proposed to appoint an
arbitrator only in respect of the pending disputes / claims and the
proposal of the respondent to refer the future disputes, if any, to the sole
arbitrator was not accepted since they could be decided at appropriate
time in terms of the contract.
11. On 6th December, 2004, the Supreme Court appointed a
former Chief Justice of India as a sole arbitrator and disposed of the said
special leave petition filed by the petitioner. It is the case of the petitioner
that by the said order dated 6th December, 2004, the Supreme Court
appointed the learned arbitrator to adjudicate upon the pending disputes
between the petitioner and the respondent as mentioned in the letter dated
11th November, 2004, which was addressed by the petitioner to the
respondent.
12. On 24th December, 2004, the learned arbitrator appointed by
the Supreme Court, commenced the arbitral proceedings and issued
various directions to the parties to file the pleadings and documents. On
11th February, 2005, the respondent filed its Statement of Claims inter-
alia praying for extension of time and also claiming (i) a sum of
Rs.52,73,92,129/- by way of damages for the alleged extended period of
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work, (ii) a sum of Rs.7,85,66,365.01 by way of loss of Deemed Export
Benefits, (iii) a sum of Rs.2,83,65,888/- by way of refund of liquidated
damages recovered by the petitioner and (iv) a sum of Rs.10,546,905/-
deducted by the petitioner for Interim Bill no.22 together with interest at
the rate of 18% p.a.
13. On 31st March, 2005, the petitioner filed its written statement
and counter claim and denied the claims made by the respondent. The
petitioner in its counter claim prayed for withdrawal of a sum of
Rs.2,83,65,888/- being the proceeds of liquidated damages which have
been lying with the learned Prothonotary & Senior Master of this Court
and also prayed for a sum of Rs.40,99,93,029/- against the loss alleged to
have been caused to the petitioner on account of the delays in execution
of work on the part of the respondent. The respondent filed its rejoinder
on 13th April, 2005. Both the parties also filed their respective documents.
14. The respondent led oral evidence before the learned
arbitrator through its witness Sanath Kumar and tendered the documents
through the said witness and also another witness. The said Sanath
Kumar however, did not make himself fully available for cross-
examination. The cross-examination of the said witness thus remained
incomplete. The petitioner also examined its witness.
15. On 24th April, 2006, the learned arbitrator passed an order
and held that "if the witness had decided not to come and give an
opportunity to the other side to cross-examine and continue his cross-
examination, the evidence given by him upto that stage would have no
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value and could not be relied upon by the party which had called him as a
witness, except that any admissions made by the witness would be relied
upon by the other side." The learned arbitrator rejected the application
filed by the petitioner for issuance of witness summon upon the said
Sanath Kumar.
16. Some time in the year 2006, the petitioner filed Arbitration
Petition (207 of 2006) under section 27 of the Arbitration Act challenging
the order passed by the learned arbitrator, rejecting the application of the
petitioner for summoning the witness of the respondent Sanath Kumar.
17. By an order dated 20th September, 2006, this Court dismissed
the said Arbitration Petition No.207 of 2006, filed by the petitioner under
section 27 of the Arbitration Act.
18. The respondent had also examined two other witnesses viz.
Mr.P.G. Mandre and Mr.Sanjeev Agarwal, who were extensively cross-
examined by the petitioner through its counsel. Both the parties also field
their written submissions before the learned arbitrator. The arguments of
both the parties were concluded on 12th October, 2010.
19. On 26th November, 2011, the learned arbitrator made an
award awarding a sum of Rs.52,73,91,129/- in respect of issue no.7,
Rs.4,31,74,141/- in respect of issue nos.9 and 10 and Rs.7,85,66,365/- in
respect of issue no.13 making up in the aggregate a sum of
Rs.64,91,31,635/- together with interest at the rate of 12% p.a. from the
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date of notice invoking arbitration agreement until the date of payment.
The learned arbitrator dismissed the counter claim filed by the petitioner.
20. On 22nd February, 2012, the learned arbitrator passed a
clarificatory award pursuant to the joint letter dated 14th February, 2012
moved by the parties thereby correcting the mistakes in the impugned
award dated 26th November, 2011. The petitioner therefore filed this
arbitration petition under section 34 of the Arbitration Act impugning the
arbitral award dated 26th November, 2011 and a clarificatory award dated
22nd February, 2012 on various grounds.
21. Learned senior counsel appearing for both the parties filed
their notes of arguments on various issues and claims and also made
extensive arguments on each of the claim awarded by the learned
arbitrator and also made few submissions on the counter claims rejected
by the learned arbitrator.
22. Mr.Aney, learned senior counsel for the petitioner at the
thresh-hold made his submissions on the issue of jurisdiction in respect
of some of the claims made by the respondent before the learned
arbitrator which objections were raised under section 16 of the
Arbitration Act and were rejected by the learned arbitrator. Learned
senior counsel for the parties have addressed this Court on the issue of
jurisdiction at length. Before I discuss the merits of the claim awarded or
rejected by the learned arbitrator, I shall first deal with the issue of
jurisdiction raised by the petitioner in respect of some of the claims made
by the respondent.
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Whether the learned arbitrator had jurisdiction to entertain
and adjudicate upon any of the claims made by the respondent ?
23. In support of his submission that some of the claims made
by the respondent were beyond the scope of reference made to the
learned arbitrator and were without jurisdiction, Mr.Aney, learned senior
counsel for the petitioner invited my attention to some of the
correspondence exchanged between the parties which are referred to
hereinafter.
(a) On 30th April, 2003, the respondent made an application for first
extension of time for 472 days i.e. from 16 th October, 2000 to 31st
March, 2003. On 17th December, 2003, the Engineer recorded his
decision and partially allowed the first extension of time to an
extent of 90 days.
(b) On 21st January, 2004, the respondent made an application for
second extension of time for 242 days i.e. from 1 st April, 2003 to
10th December, 2003. On 12th April, 2004, the Engineer recorded
his decision and partially allowed an extension of time to the
respondent to the extent of 71 days. On 21st April, 2004, the
respondent informed the petitioner that as the respondent was not
satisfied with the decision of the Engineer, they notified their
intention to commence the arbitration. On 29 th April, 2004, the
respondent addressed a similar letter to the petitioner that they were
not satisfied with the decision of the Engineer and notified their
intention to commence the arbitration.
(c) On 28th June, 2004, the respondent addressed a letter to the
Engineer and desired a further extension of time for a period of 11
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days in reference to 4 Piles and agreed to submit the details in
respect thereof in due course.
(d) On 2nd August, 2004, the respondent made an application for the
extension of time for 100 days i.e. from 11th December, 2003 to 10th
June, 2004.
(e) On 20th October, 2004, the respondent addressed a letter to the
petitioner notifying their intention to commence the arbitration in
accordance with clause 67.1 of the contract. By their letter dated
20th October, 2004, the respondent referred to their letters dated 21 st
April, 2004 and 29th April, 2004 addressed earlier by which the
respondent had notified their intention to commence the arbitration
in accordance with clause 67.1 of the contract. The respondent
proposed the name of a former Judge of the Supreme Court of
India for concurrence of the petitioner as the sole arbitrator. It was
however mentioned in the said letter that the respondent had
proposed that future disputes, if any, regarding extension of delay /
compensation thereof and also the matters connected with Deemed
Export Benefits made may also be referred to the sole arbitrator
and sought the concurrence of the petitioner.
(f) The petitioner vide their letter dated 11 th November, 2004 proposed
to appoint a retired Chief Justice of India as the sole arbitrator in
respect of the pending disputes/claims and requested the
respondent to convey their concurrence to the same. In the said
letter, the petitioner made it clear that insofar as the proposal of the
respondent to refer the future disputes, if any, to the sole arbitrator
is concerned, the same was not accepted on the ground that they
could be decided at appropriate time in terms of the contract.
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(g) On 6th December, 2004, the parties filed the consent terms before
the Supreme Court in the said special leave petition filed by the
petitioner. Clauses 1 and 2(e) of the said consent terms which are
relevant are extracted as under :-
"1. The Respondent (AFCONS) agrees to the proposal of the
petitioner's (Mumbai Port Trust) letter dated 11.11.2004 that
Hon'ble Mr.Justice P.N. Bhagwati (retired) be appointed a Sole
Arbitrator in respect of all pending disputes / differences and
claims and accordingly the said pending disputes / differences
will stand referred to the said Sole Arbitrator.
2(e). All proceedings before the Sole Arbitrator shall be
decided in accordance with law and without being influenced
by observations recorded in the Orders of the Bombay High
Court."
24. Mr.Aney, learned senior counsel for the petitioner invited my
attention to clauses 67.1 to 67.4 of the General Conditions of Contract
which provides for procedure for referring the disputes to arbitration and
for the appointment of an arbitrator. It is submitted by the learned senior
counsel that before issuing any notice invoking arbitration agreement
under clauses 67.1 read with 67.3 is issued by a party for appointment of
an arbitrator, all such disputes in connection with or arising out of the
contract or execution of the works, whether during execution of works or
after their completion and whether before or after repudiation or other
terms and conditions of the contract etc. has to be first place in writing to
the Engineer. The Engineer is under obligation to convey his decision to
the employer and the contractor. He submits that only if the employer or
the contractor is dis-satisfied with the decision of such Engineer or if the
Engineer fails to give notice of his decision on or before eighty-fourth'
day after the date on which he received reference, then either the
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employer or the contractor may on or before the prescribed time therein
has to give notice to other party with a copy for information of the
Engineer, of his intention to commence arbitration as to the matter in
dispute.
25. It is submitted that unless the disputes arises between the
parties and such disputes are referred to the Engineer and if any adverse
decision is taken by the Engineer or no such decision is taken within the
time prescribed, only such existing dispute can be referred to arbitration
and not any other dispute. He submits that compliance of procedure under
clause 67.1 is mandatory and cannot be waived.
26. It is submitted by the learned senior counsel that the learned
arbitrator thus can entertain and adjudicate upon only those claims which
were first referred to the Engineer and when decision is either rendered
by the Engineer within the time prescribed or no decision is taken within
the time prescribed by the Engineer. It is submitted that insofar as claim
no.7 is concerned, the said claim was arising out of the alleged bill which
was raised for the first time by the respondent in the statement of claim
filed before the learned arbitrator. A part of the said claim was made by
the respondent after commencement of the arbitral proceedings. It is
submitted that the claim no.4 was arising out of the alleged delay after
10th June, 2004 which was not referred to the Engineer under clause 67.1
of the General Conditions of Contract and thus was beyond the scope of
reference and was not arbitrable.
27. Learned senior counsel led emphasis on the proposal of the
respondent made in the letter dated 20th October, 2004 that future
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disputes, if any, regarding extension of time/compensation thereof and
also the matters connected with the Deemed Export Benefits be also
referred to the learned arbitrator, for which the respondent had sought
concurrence of the petitioner. He submits that the petitioner vide its letter
dated 11th November, 2004, in response to the said letter dated 25 th
October, 2004 had categorically refused to accept the said proposal of the
respondent to refer the future disputes, if any, to the sole arbitrator. The
petitioner had made clear in the said letter that the petitioner had
proposed to appoint a retired Chief Justice of India as a sole arbitrator in
respect of the pending disputes/claims and had called upon the
respondent to convey its concurrence to the same. He submits that the
question of referring of any future disputes to arbitration pursuant to the
notice dated 25th October, 2004 read with reply dated 11 th November,
2004 did not arise.
28. Insofar as the order passed by the Supreme Court in terms of
the consent terms on 6th December, 2004 in the special leave petition filed
by the petitioner is concerned, it is submitted by the learned senior
counsel that it was provided in the consent terms that the respondent had
agreed to the proposal of the petitioner made in the letter dated 11 th
November, 2004 that a retired Chief Justice of the Supreme Court of
India be appointed as a sole arbitrator in respect of the pending disputes /
differences and claims and accordingly the said pending disputes /
reference will stand referred to the said sole arbitrator. He submits that in
the said consent terms, it was also agreed between the parties that all the
proceedings before the sole arbitrator shall be decided in accordance with
law.
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29. It is submitted that in the said consent terms, it was further
agreed that the respondent will be entitled to apply to the learned
arbitrator for the payment of Rs.2.83 crores lying deposited in this Court
to the respondent and that the petitioner herein would be entitled to
oppose such an application of the respondent. He submits that the
Supreme Court has also referred the disputes to arbitration in accordance
with the said consent terms, which were pending disputes/differences and
claims in terms of the letter dated 11 th November, 2004 addressed by the
petitioner to the respondent. He submits that the Supreme Court by the
said order dated 6th December, 2004 has not expanded the scope of
reference. He submits that the parties had not given a go bye to the
mandatory procedure under clauses 67.1 to 67.3 of the General
Conditions of Contract and have not expanded the scope of reference.
Learned senior counsel for the petitioner placed reliance on the judgment
of this Court in case of Patel Engineering Co. Limited vs. B.T. Patil &
Sons Belgaum (Construction) Private Limited, reported in 2016(3)
Arb.L.R. 162 and in particular paragraphs 121 to 124, 128 to 134 and
142.
30. Mr.Aney, learned senior counsel for the petitioner invited my
attention to the grounds raised in the petition on the issue of jurisdiction
in respect of claim nos.4 and 7 and also to ground nos.31 to 39 of the
petition and to the findings of the learned arbitrator and also paragraphs
15 to 19 of the impugned award on the issue of jurisdiction.
31. Mr.Khambatta, learned senior counsel for the respondent, on
the other hand, submits that the jurisdiction of the learned arbitrator in
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this case emanated from the order of the Supreme Court dated 6 th
December, 2004 and thus question of following procedure under clauses
67.1 of the General Conditions of Contract as canvassed by the petitioner
did not arise. He submits that the respondent had applied for extension of
time to the Engineer of the petitioner on 30 th April, 2003, 17th November,
2003, 19th January, 2004, 21st January, 2004, 19th March, 2004, 2nd
August, 2004 and 28th June, 2004. He submits that in some of these
letters the respondent had based its claims on the basis of various clauses
of the contract including clauses 6.4, 12.2 and 17.1, which includes cost
component.
32. It is submitted that the respondent had also subsequently
made a demand in the letter dated 19th January, 2004 for additional costs
under clauses 12.2, 44, 51 and 52 and agreed to furnish the details to the
Engineer in due course. He submits that by another letter dated 21st
January, 2004, the respondent had expressly stated that the costs part
arising with the extension of time would be dealt with separately. He
submits that in the letter dated 19 th March, 2004, the respondent had
made it clear that they were entitled for extension of time and the
additional costs under clauses 12.2, 44, 51 and 52, though had agreed to
furnish the details in due course. Similar demand was also made vide
letter dated 2nd August, 2004, 28th June, 2004 and 20th November, 2004.
33. It is submitted by the learned senior counsel that the
arbitration agreement arrived at between the parties before the Supreme
Court covered not only the pending disputes but also pending differences
and claims which agreement was wider than an agreement to refer merely
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disputes which was a narrower term, and had encompassed even any
differences and claims. He submits that the petitioner was aware of the
difference between the terms "disputes" and "claim" and had used those
terms in contra-distinction to each other in its written statement before
the learned arbitrator. Reliance is placed on paragraphs 4 and 5 of the
written statement.
34. It is submitted by the learned senior counsel that for arising a
dispute, it requires an assertion by one and denial whether express or
implied by other. He submits that on the contrary a difference or claim is
a wider term embracing every species of legal demand which may or may
not have yet turned into a dispute. Learned senior counsel placed reliance
on page 129 of commentary by Mustill & Boyd, Commercial Arbitration
(Second Edition). He placed reliance on the judgment of this Court in
case of M/s.Chadalavada Infratech Ltd. vs. Tata Capital Financial
Services Limited, reported in 2013 SCC OnLine Bom.1490 and in
particular paragraphs 2 and 6 to 8 in support of his submission that if
there was a demand and though there is no denial of the claim, there was
still dispute between the parties which could be referred to arbitration. He
submits that the respondent had specifically made a demand not only for
extension of time but also for payment of costs payable under the terms
of the contract.
35. It is submitted that it was the duty of the Engineer to
quantify not only the time required to be extended but also costs and for
compensation arising out of such extended period and the Engineer not
having computed any costs though demanded by the respondent, the
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dispute existed between the parties. He submits that all such letters of
extension raising a demand for payment of costs were addressed before
invoking arbitration agreement and thus the Engineer of the petitioner not
having quantified the costs and the petitioner not paying only
compensation to the respondent, the disputes, differences or claims had
arisen and were pending on the date of invocation of the arbitration
agreement and were thus within the scope of reference to the learned
arbitrator.
36. Learned senior counsel for the respondent placed reliance on
the judgment of this Court in case of Nissan Copper Limited & Anr. vs.
L & T. Finance Limited delivered on 30th September, 2013 in Arbitration
Petition (Lodging) No.674 of 2013 and in particular paragraphs 1 and 3
in support of his submissions that the disputes / differences and claims in
respect of claim nos.4 and 7 already having arisen and were pending on
the date of invocation of the arbitration agreement were within the scope
of a reference.
37. Learned senior counsel for the respondent placed reliance on
the judgment of the Madras High Court in case of Thangia @
Thangavelu Onthiriyan & Ors. Vs. The Hanuman Bank Limited,
reported in AIR 1958 Madras 403 and in particular paragraph 17 in
support of his submission that the claim is a word of very extensive
signification embracing every species of legal demand. Reliance is also
placed on the judgment of the Jammu & Kashmir in case of Ghulam
Qadir Baksh vs. State of Jammu & Kashmir & Ors., reported in AIR
1972 Jammu & Kashmir 44 and in particular paragraphs 5 and 11 to 13
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on the interpretation of the words "all disputes" or "all claims". He also
placed reliance on the judgment of the Queen's Bench Division in case of
West Wake Price & Co. vs. Ching, reported in (1956) 3 All E.R. 821 and
would submit that the claim is not the same thing as the cause of action
by which the claim may be supported or on the grounds on which it may
be based.
38. It is submitted by the learned senior counsel that since the
matter was referred to arbitration in view of the order passed by the
Supreme Court in accordance with the agreement arrived at between the
parties before the Supreme Court, the respondent was not required to
comply with any of the pre-requisite conditions of clause 67. He submits
that in any event the parties had waived the requirement, if any, of such
pre-conditions of issuance of notices by consenting to the order dated 6th
December, 2004, passed by the Supreme Court He submits that there was
comprehensive reference made to arbitration of not only all the pending
disputes on which the petitioner or its Engineer had expressly repudiated
the claims of the respondent but also pending differences and claims
made by the respondent which were not expressly denied by the
petitioner or its Engineer. He submits that the Court cannot adopt a hyper
technical approach while construing the arbitration agreement otherwise,
the whole purpose of arbitration as an alternate to a Civil Court's
proceedings would be defeated. In support of this submission, he placed
reliance on the judgment of the Supreme Court in case of Sangamner
Bhag Sahakari Karkhana Limited vs. M/s.Krupp Industries Limited,
reported in AIR 2002 SC 2221 and more particularly paragraph 9 thereof.
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39. Learned senior counsel distinguished the judgment of this
Court in case of Patel Engineering Company Limited (supra) on the
ground that the said judgment does not apply to the facts of this case.
This Court in the said judgment was concerned with whether pre-
requisites conditions of a contractual arbitration clause had been
complied with or not. This Court found that the mandatory procedure
prescribed by the contract had not been complied with in respect of some
claims and thus found that the learned arbitrator had no jurisdiction to
determine such claims. He submits that in this case, the parties have
referred the disputes to arbitration in accordance with the arbitration
agreement arrived at before the Supreme Court which agreement did not
contemplate any precondition of referring the claims to the Engineer.
40. It is submitted by the learned senior counsel for the
respondent that various notices issued by the respondent or claiming
extension of time ipso facto included the claim for cost also. He
submits that even if the cost is not specifically claimed by the
respondent, the Project Engineer has to add the cost while considering
the application for extension filed by the respondent from time to time.
He submits that merely because the respondent had addressed a letter
quantifying the claim after appointment of the arbitrator by the
Supreme Court, it would be of no relevance. He placed reliance on
FIDIC form of contract to butress his submission that the cost had to be
quantified by the Project Engineer and was not required to be
quantified by the respondent based on the extent of extension sought
by the respondent and considered by the Project Engineer.
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41. Learned senior counsel placed reliance on the judgment of
the Calcutta High Court in the case of Nandram Hanutram Vs.
Raghunath and Sons Ltd., reported in AIR 1954 CALCUTTA 245
and in particular paragraphs 7 and 8 thereof. He submits that the
cause of action or dispute may arise even if the repudiation by the other
party is implied which may be either by words or by conduct. He
submits that since the Project Engineer did not quantify the cost while
considering the application for extension time, dispute between the
parties had already arisen. He submits that failure to pay under a claim
or right is certainly a dispute.ig
42. Learned senior counsel for the respondent placed reliance
on the judgment of the Madhya Pradesh High Court in the case of State
of M.P. Vs/M/s.Technodrillers, reported in 1998 (1) M.P.K.J. 602 and
in particular paragraph 6 and would submit that since the respondent
had made a demand for extension and also for cost, silence on the part
of the Project Engineer or by the petitioner to such letters of demand
would also amount to refusal on the part of the petitioner to grant
extension or to pay the amount of cost and thus upon such silence
maintained by the petitioner, dispute and difference had already arisen.
The respondent was not expected to wait till rejection in writing by
the petitioner or their Project Engineer was received by the respondent.
43. Learned senior counsel for the respondent placed reliance
on the judgment of the Supreme Court in the case of Mcdermott
International Inc. Vs. Burn Standard Co. Ltd. & Ors., reported in
(2006) 11 SCC 181 and in particular paragraphs 96 to 100 and would
21 arbp-868.16(j).doc
submit that since the claim was made prior to invocation of arbitration,
it become a dispute within the meaning of the provisions of the
Arbitration Act. He submits that while claiming cost arising out of
such extension, the respondent was not required to quantify the claim for
compensation and/or cost which is merely a matter of proof and could
be submitted even after invocation of arbitration agreement or even at
the stage of filing of statement of claim.
44. Learned senior counsel for the respondent invited my
attention to the discussion and findings of the learned arbitrator on the
issue of jurisdiction in respect of claim nos.4 and 7 framed by the
learned arbitrator as issue nos.I and II and would submit that the learned
arbitrator after considering the evidence led by the parties and upon
interpretation of the contract entered into between the parties and the
order passed by the Supreme Court appointing the learned arbitrator has
rendered a finding that the learned arbitrator had jurisdiction to entertain
the claim nos.4 and 7 filed by the respondent which cannot be interferred
by this Court.
45. Mr.Aney, learned senior counsel for the petitioner in
rejoinder on the issue of jurisdiction invited my attention to paragraph
(e) of the order passed by the Supreme Court which provided that "all
proceedings before the sole arbitrator shall be decided in accordance
with law and without being influenced by observations recorded in
the orders of the Bombay High Court." He submits that it is thus clear
that the learned arbitrator was required to decide the dispute in
accordance with the substantive law for the time being in force and was
22 arbp-868.16(j).doc
bound to take into account the terms of the contract which provided for
a mandatory procedure required to be followed by the contractor before
invoking the arbitration agreement.
46. It is submitted that in view of specific conditions referred to
aforesaid, more particularly clauses 67.1 to 67.4 of the General
Conditions of Contract, both the parties were bound to follow the
requisite procedure for making a demand and for referring the dispute to
the arbitration. It is submitted that even if the learned arbitrator could
entertain not only dispute but all also such claims and differences, the
same could be entertained only after compliance of the mandatory
requirements under clauses 67.1 to 67.4 of the General Conditions of
the Contract by the respondent herein. It is submitted that whatever may
have been the pending disputes at the time of passing of the order by
the Supreme Court, except for a claim of liquidated damages of
Rs.2,83,65,888/- which had been agitated before this Court and the
Supreme Court by the respondent, there was no other dispute pending
with reference to any monetary claims.
47. In so far as the reliance placed by the respondent on
clauses 6.4 read with 6.5, 12.2, 17.1, 42.2 and 44.1 is concerned, it is
submitted by the learned senior counsel for the petitioner that though
some of the above referred clauses make it incumbent on the Engineer to
determine the monetary compensation in the form of any amount of
any cost which may have been incurred by the respondent, such a
determination would be with reference to the relevant subject matter
relating to that clauses before the Engineer. He submits that the
respondent had applied for extension of time relatable to incorrect survey
23 arbp-868.16(j).doc
data, obstructions in piling works, delay due to excess and extra quantity
of the works, difficulties posed by climatic conditions, time taken for
handing over of sites, for restriction in execution of hot-works, for certain
purchase specification approvals and other miscellaneous works. It is
submitted that in respect of such of these claims where the Engineer
chose to grant extension of time, the respondent had received benefits
in terms of price escalation and appropriate reduction in liquidated
damages in terms of the provisions of clauses 70.1 and 47.2. The
respondent had not made any other claim beyond the claim granted by
the Engineer when he had granted extension of time.
48. In so far as the submission of the learned senior counsel for
the respondent that it was the duty of the Engineer to quantify the cost
when the respondent had applied for extension of time or that the
quantification of the claim or proof of such claims for compensation
could be submitted even after invocation of the arbitration agreement or
at the stage of filing of statement of claim is concerned, learned senior
counsel for the petitioner submits that the respondent ought to have
quantified the claims with detailed particulars as contemplated under
clauses 44.2 and 53.3 which were not furnished to the Engineer by the
respondent in respect of claim nos.4 and 7.
49. It is submitted that the Engineer could not have imagined
what claim could be raised in connection with the claims for
compensation arising under clauses 6.4 read with 6.5, 12.2, 17.1, 42.2
and 44.1. He submits that the question of the Engineer quantifying the
monetary compensation therefore did not arise. It is submitted that there
24 arbp-868.16(j).doc
was thus no subsisting dispute, difference or claims in respect of claim
nos.4 and 7 in so far as quantification thereof on the date of invocation
of the arbitration agreement by the respondent is concerned. He submits
that the General Conditions of Contract provided a detailed procedure for
making claims in clauses 53.1 to 53.5. The respondent could have
approached the Engineer under clauses 44.2 read with 53.1 to 53.3.
50. It is submitted by the learned senior counsel that even in
their letters dated 21st January 2004 and 2nd August 2004 addressed by
the respondent, the respondent had desired to raise a claim which
cannot be stretched to include any actual amount of money. In so far
as the letters dated 28th June 2004, 20th November 2004 addressed by
the respondent which related to 4th extension of time is concerned, it is
submitted by the learned senior counsel that though both these letters
were issued by the respondent before the order of the Supreme Court
came to be passed, since the claims had not progressed through the
procedure laid down by clauses 44.2 and 67, the learned arbitrator had
no jurisdiction to entertain those claims.
51. It is submitted that the respondent had not provided details
of these claims with those two letters and thus the Engineer could never
have acted merely on the basis of those two letters. He submits that
those two letters did not constitute either a dispute or a difference. It is
submitted that by the said order dated 6 th December 2004 passed by the
Supreme Court, only pending disputes, differences and claims as on the
date of passing of the said order of the Supreme Court, could only be
the subject matter of the arbitration and thus the claim nos.4 and 7
which did not satisfy the test of pending dispute, differences and claims
25 arbp-868.16(j).doc
as contemplated under the said order of the Supreme Court and without
satisfying the requirement of clause 67.1 of the contract, those claims
were ex facie beyond the scope of reference made to the learned
arbitrator.
52. Learned senior counsel for the petitioner distinguishes the
judgments relied upon by the learned senior counsel for the respondent
on the issue of jurisdiction on the ground that each of those judgments
which dealt with the arbitrability of subsisting disputes, differences or
claims were thus not applicable to the facts of this case.
53. Learned senior counsel for the petitioner distinguishes the
judgment of the Jammu and Kashmir High Court in the case of Ghulam
Qadir Baksh Vs. State of Jammu and Kashmir & Ors., reported in
AIR 1972 J & K 44 on the ground that in the said judgment, the Jammu
and Kashmir High Court has dealt with the arbitration agreement as
defined under Section 2(a) of the Arbitration Act whereunder present
or future disputes can be referred to arbitration. It is submitted that in
this case, however, under the order of the Supreme Court only pending
disputes, differences and claims were to be referred.
54. It is submitted by the learned senior counsel for the
petitioner that since there was no assertion of the rights in respect of the
said claim nos.4 and 7, question of any inaction or non-action on the
part of the petitioner in respect of those two claims did not arise. Learned
senior counsel for the petitioner distinguishes the judgment of the
Calcutta High Court in the case of Nandram Hanutram Vs. Raghunath
26 arbp-868.16(j).doc
and Sons Ltd.(supra) and the judgment of the Madhya Pradesh High
Court in the case of State of M.P. Vs. M/s. Technodrillers (supra) on
that ground.
55. It is submitted by the learned senior counsel for the
petitioner that in this case, the jurisdiction of the learned arbitrator stood
confined to the pending disputes, differences and claims as stood on 6 th
December 2004 i.e. the date on which the Supreme Court passed an
order. He submits that since there were no subsisting disputes,
differences or claims in respect of claim nos.4 and 7, the learned
arbitrator could not have travelled beyond the terms of reference. Those
claims were not referred to the learned arbitrator and thus could not
have entertained and adjudicated upon by him.
56. Learned senior counsel placed reliance on the judgment of
the Supreme Court in the case of Indian Aluminum Cables Ltd. Vs.
Haryana State Electricity Board and Ors., reported in 1996 (5)
SCALE 708 and in particular paragraphs 2 and 3 in support of his
submission that the learned arbitrator ought to have confined himself to
the reference made to him by the parties or by the Court and could not
have travelled outside the reference merely because under the terms of
contract, the dispute in regard to those claims i.e. claim nos.4 and 7
could have been covered and could have been referred to the arbitration.
57. Mr.Khambatta, learned senior counsel for the respondent
submits that contents of paragraph 1 of the Supreme Court order dated
6th December 2004 referred to all pending disputes, differences and
27 arbp-868.16(j).doc
claims which had the effect of replacing the provisions of clause 67 of
the General Conditions of Contract whereas the contents of paragraph 2(i)
of the order passed by the Supreme Court emanating from the two orders
passed by this Court. The contents of paragraphs 1 and 2(i) of the
order passed by Supreme Court are mutually exclusive. The learned
arbitrator was thus not required to rely upon the provisions of Clauses
67.1 to 67.4 of the General Conditions of Contract.
58. It is submitted by the learned senior counsel that the
application for extension to time ipso facto includes an application for
addition cost. The determination of the compensation for delays is
independent of the provisions of price escalation under clause 70.1 and
liquidated damages under clause 47.2. He submits that in terms of
clause 5.8 of the Contract, the respondent had already contemporaneously
submitted the Daily Shift Reports and the Weekly Progress Reports to
the Engineer within the meaning of clause 53.2 of the General
Conditions of Contract which contained sufficient details facilitating
the Engineer to assess and quantify the compensable delays. He
submits that no instruction was received from the Engineer by the
respondent to keep any further contemporaneous records as were
reasonable to enable the Engineer to determine the related cost.
59. It is submitted that in any event in terms of clause 53.4, the
learned arbitrator was empowered to determine the cost based on
contemporary records, whether or not such records were brought by the
respondent before the Engineer or not. In support of this submission,
learned senior counsel for the respondent placed reliance on the letters
dated 14th January 2002, 30th April 2003, 17th November 2003, 19th
28 arbp-868.16(j).doc
January 2004, 21st January 2004, 19th March 2004, 28 June 2004, 2nd
August 2004, 28th June 2004 and 20th November 2004. It is submitted
that a duty was cast upon the Engineer under clauses 12.2, 44.1(a),
44.1(c), 44.1(d) and 44.1(e) to quantify the related costs due to extension
of contract period. It is submitted by the learned senior counsel that the
petitioner could not distinguish the judgments relied upon by the
respondent and those judgments squarely apply to the facts of this case
and are binding on this Court.
REASONS AND CONCLUSIONS ON THE ISSUE ON
JURISDICTION (CLAIM NOS.4 AND 7) :-
60. Learned arbitrator has framed issue nos.I and II regarding
jurisdiction to entertain and dispose of claim nos.4 and 7 i.e. claims
on account of delay after 10th June 2004 and claim by way of
compensation for extended stay. Learned arbitrator has also framed an
issue as to whether the petitioner herein had waived their rights and/or
estopped and/or precluded from raising the objection relating to the
jurisdiction of the learned arbitrator in respect of claim nos.4 and 7.
61. Learned arbitrator had discussed these two issues in
paragraphs 15 to 17 and has rendered his conclusions in paragraphs 18
and 19 of the impugned award.
62. It is held by the learned arbitrator that on plain interpretation
of the order dated 6th December 2004 passed by the Supreme Court, it
would mean that all pending disputes and differences arising out of the
said contract would be referred to arbitration and thus it would not now
29 arbp-868.16(j).doc
be open to the petitioner herein to contend that they had objected to a
reference of future disputes being referred to arbitration in the letter
dated 11th November 2004 in respect of the future disputes and
differences. It is also observed by the learned arbitrator that objection
raised by the petitioner in the letter dated 11 th November 2004 was not
sustainable as it had pleaded in the correspondence referred by the parties
that the hindrances before 10th June 2004 were sufficient to entitle the
respondent to extension of time till the actual date of completion.
63. It is held by the learned arbitrator that clause 67.3 as
amended in the Conditions of Particular Application sets out that the
arbitrator had full power to open up, review and revise any decision,
opinion or instructions or determination, survey of valuation of the
Engineer related to the disputes. It is held that since the parties had
agreed to the arbitral tribunal being entitled to adjudicate upon any matter
related to the dispute, the arbitral tribunal would have power to resolve
all pending dispute between the parties. It is held by the learned arbitrator
that there was no doubt, a plain interpretation of the order passed by the
Supreme Court read with the correspondence placed on record by the
parties and the objections raised in the submissions in the written
submissions that the parties had agreed to refer all disputes arising out
the said contract to arbitration.
64. Clauses 67.1 to 67.3 of the General Conditions of Contract
which recorded an arbitration agreement and a procedure for invoking
arbitration agreement are extracted as under:-
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Statement of Disputes :-
67.1 Engineer's If a dispute of any kind whatsoever arises between
Decision the Employer and the Contractor in connection
with, or arising out of, the Contract or the
execution of the Works, whether during the
execution of the Works or after their completion
and whether before or after repudiation or other
termination of the Contract, including any dispute
as to any opinion, instruction, determination,
certificate or valuation of the Engineer, the matter
in dispute shall, in the first place, be referred in
writing to the Engineer, with a copy to the other
party. Such reference shall state that it is made
pursuant to this Clause. No later than the eighty-
fourth day after the day on which he received such
reference the Engineer shall give notice of his
decision to the Employer and the Contractor. Such
decision shall state that it is made pursuant to this
Clause.
Unless the Contract has already been repudiated or
terminated, the Contractor shall, in every case,
continue to proceed with the Works with all due
diligence and the Contractor and the Employer
shall give effect forthwith to every such decision
of the Engineer unless and until the same shall be
revised, as hereinafter provided, in an amicable
settlement or an arbitral award.
If either the Employer or the Contractor be
dissatisfied with any decision of the Engineer, or if
the Engineer fails to give notice of his decision on
or before the eighty-fourth day after the day on
which he received the reference, then either the
Employer or the Contractor may, on or before the
seventieth day after the day on which he received
notice of such decision, or on or before the
seventieth day after the day on which the said
period of 84 days expired, as the case may be, give
notice to the other party, with a copy for
31 arbp-868.16(j).doc
information to the Engineer, of his intention to
commence arbitration, as hereinafter provided, as
to the matter in dispute. Such notice shall establish
the entitlement or the party giving the same to
commence arbitration, as herein provided, as to
such dispute and, subject to Sub-Clause 67.4, no
arbitration in respect thereof may be commenced
unless such notice is given.
If the Engineer has given notice of his decision as
to matter in dispute to the Employer and the
Contractor and no notice of intention to
commence arbitration as to such dispute has been
given by either the Employer or the Contractor on
or before the seventieth day after the day on which
the parties received notice as to such decision
from the Engineer, the said decision shall become
final and binding upon the Employer and the
Contractor.
67.2 Amicable Where notice of intention to commence arbitration
Settlement as to a dispute has been given in accordance with
Sub-Clause 67.1, the parties shall attempt to settle
such dispute amicably before the commencement
of arbitration. Provided that, unless the parties
otherwise agreed the arbitration may be
commenced on or after the Fifty Sixth (56) day
after the day on which notice of intention to
commence arbitration of such dispute was given,
even if no attempt at amicable settlement thereof
has been made.
67.3 Arbitration Any dispute in respect of which:
(a) the decision, if any, of the Engineer has not
become final and binding pursuant to Sub-Clause
67.1, and
(b) amicable settlement has not been reached
within the period stated in Sub-Clause 67.2
shall be finally settled, unless otherwise specified
in the Contract, under the Rules of Conciliation
and Arbitration of the International Chamber of
Commence by one or more arbitrators appointed
32 arbp-868.16(j).doc
under such Rules. The said arbitrator/s shall have
full power to open up review and revise any
decision, opinion, instruction, determination,
certificate or valuation of the Engineer related to
the dispute.
Neither party shall be limited in the proceedings
before such arbitrator/s to the evidence or
arguments put before the Engineer for the purpose
of obtaining his said decision pursuant to Sub-
Clause 67.1. No such decision shall disqualify the
arbitrator/s on any matter whatsoever relevant to
the dispute.
Arbitration may be commenced prior to or after
completion of the Works, provided that the
obligations of the Employer, the Engineer and the
Contractor shall not be altered by reason of the
arbitration being conducted during the progress of
the Works.
65. A perusal of the order passed by the Supreme Court on 6 th
December 2004 in Special Leave to Appeal (Civil) No. 16816 of 2004
which was disposed of in terms of the consent terms filed by the parties
indicates that the respondent had agreed to the proposal of the petitioner's
letter dated 11th November 2004 that a retired Chief Justice of India was
appointed as an arbitrator in respect of all pending dispute, differences
and claims. There is no dispute that prior to the date of the said consent
terms filed before the Supreme Court, both the parties had exchanged
several letters in respect of various claims made by the respondent under
various provisions of the General Conditions of Contract. The respondent
had made some of the claims before the Engineer under clause 67.1 of
the General Conditions of Contract. Some of such letters addressed by
the respondent were responded to by the Engineer of the petitioner.
66. The respondent had also made a specific demand for
33 arbp-868.16(j).doc
referring the dispute to the arbitration in accordance with clauses 67.1 to
67.3 of the General Conditions of Contract. The respondent had also
made a demand for referring the dispute to the arbitration in respect of
the claims which may arise in future. In this background of the matter,
questions that arise for consideration is (i) whether the arbitration
agreement recorded in clauses 67.1 to 67.4 of the General Conditions
of Contract was substituted by the consent terms filed by the parties
before the Supreme Court or not (ii) whether in view of the consent
terms filed by the parties before the Supreme Court, procedure required
to be followed under clauses 67.1 to 67.3 of the General Conditions of
Contract was not required to be followed.
67. A perusal of the clauses 67.1 to 67.3 of the General
Conditions of Contract provides that the dispute of any kind whatsoever
between the employer and the contractor in connection with, or arising
out of, the contract or the execution of the works, whether during the
execution of the Works or after their completion and whether before or
after repudiation or other termination of the Contract etc. has to be
referred to in writing to the Engineer, with a copy to the other party. The
Engineer has to give notice of his decision to the employer or the
contractor within the time prescribed therein. The employer or the
contractor if dissatisfied with any decision of the Engineer or the
Engineer fails to give any notice of his decision within the time
prescribed then within the time prescribed under clause 67.1, either the
employer or the contractor has to give notice to the other party, with a
copy for information to the Engineer, of his intention to commence
arbitration. If no such notice of intention to commence arbitration is
given as to such dispute on or before the prescribed period, the decision
34 arbp-868.16(j).doc
shall become final and binding upon the employer and the contractor.
68. A perusal of the clauses 67.1 to 67.3 of the General
Conditions of Contract indicates that it does not refer to a reference of
any claim of any of the parties to the arbitration but only refers to
disputes between the parties.
69. A perusal of the order passed by the Supreme Court on 6 th
December 2004 in terms of the consent terms however indicates that the
parties had agreed to refer all pending disputes/differences and claims,
for adjudication thereof to the arbitration of a retired Chief Justice of
India. This Court thus will have to consider whether the claims made in
the statement of claim filed by the respondent before the learned
arbitrator would fall within the parameters of the reference to arbitration
agreed upon by the parties before the Hon'ble Supreme Court or not.
70. In my view, by virtue of the consent terms having been filed
by the parties before the Supreme Court thereby referring all pending
disputes/ differences and claims of the parties referred to the arbitration
of a retired Chief Justice of India, the procedure prescribed in clause 67.1
to 67.3 of the General Conditions of Contract was superseded and was
waived by the parties.
71. This Court in the case of Chadalavada Infratech Ltd. Vs.
Tata Capital Financial Services Ltd. (supra) has dealt with an arbitration
clause which provided that disputes, differences and/or claims arising
out of those presents or as to the construction, meaning or effect thereof
or as to the rights and liabilities of the parties therein shall be settled by
35 arbp-868.16(j).doc
arbitration in accordance with the provisions of the Arbitration and
Conciliation Act, 1996. This Court held that non-payment of dues on
demand having been raised, dispute between the parties had arises and
thus such dispute was required to be referred to the arbitration under the
said arbitration agreement. This Court after interpreting the similar
agreement has held that even in case of claim of the respondents and/or
the petitioners, such claim could have been referred to arbitration and
has to be settled by arbitration.
72. This Court rejected the submission of the learned counsel for
the petitioners therein that since there was no denial of the claim, there
was no dispute and thus arbitrator could not have been appointed under
the arbitration agreement read with Section 7 of the Arbitration and
Conciliation Act, 1996. It is held that non-payment of dues on demand
having been raised amounts to dispute which can be referred to
arbitration. This Court also adverted to the earlier judgment of this Court
delivered on 30th September 2013 in the case of Nissan Copper Ltd. &
Anr. Vs. L & T Finance Ltd. (supra) in Arbitration Petition (L) No.674
of 2013.
73. Since this Court is of the view that the arbitration agreement
recorded in clauses 67.1 to 67.3 of the General Conditions of Contract is
superseded by the consent terms filed by the parties before the Supreme
Court which provides that all disputes/differences and claims of the
parties were agreed to be referred to arbitration, the judgment of this
Court in the case of Nissan Copper Ltd. & Anr. Vs. L & T Finance Ltd.
(supra) would squarely apply to the facts of this case. I am respectfully
36 arbp-868.16(j).doc
bound by the said judgment.
74. This Court in the case of Nissan Copper Ltd. & Anr. Vs. L
& T Finance Ltd. (supra) had considered a similar clause and has held
that even claims made by the parties were required to be referred to the
arbitration. The judgment of this Court in the case of Nissan Copper
Ltd. & Anr. Vs. L & T Finance Ltd. (supra) applies to the facts of this
case.
75. Madras High Court
ig in the case of Thangia alias
Thangavelu Onthiriyan & Ors. (supra) has construed the term "claim".
It is held that the said term "claim" also signifies a demand made of a
right or supposed right, a calling of another to pay something due or
supposed to be due, as a claim for wages or services. The term "claim"
is sufficiently comprehensive to embrace actions founded on torts as
well as actions founded on contract. It is held that the term "claim" is a
word of very extensive signification embracing every species of legal
demand.
76. In my view, a perusal of the correspondence exchanged
between the parties to which my attention is invited by the learned
senior counsel for the parties clearly indicates that in respect of the claims
made by the respondent by various correspondence prior to the date of
filing of the consent terms before the Supreme Court, all the claims made
in the statement of claim before the learned arbitrator were already
demanded by the respondent from the petitioner. Even if there was no
specific denial or there was total silence on the part of the petitioner in
not specifically rejecting those claims made by the respondent, even
37 arbp-868.16(j).doc
such claims were agreed to be referred to the arbitration in the consent
terms arrived at between the parties before the Supreme Court. In my
view, there is thus no substance in the submission of the learned senior
counsel for the petitioner that some of the claims which were not referred
to the Engineer for determination under clause 67.1 of the General
Conditions of Contract could not be referred to arbitration. I am in
agreement with the views expressed by the Madras High Court in the case
of Thangia alias Thangavelu Onthiriyan & Ors. (supra).
77. Jammu & Kashmir ig High Court in the case of Ghulam
Qadir Baksh Vs. State of Jammu & Kashmir and Ors.(supra) has held
that the term "difference" indicates the working of the mind of a
particular party with respect to a certain matter. The term "difference" is
a more positive term. When such differences assume a more definite
and concrete form, they become dispute. The Jammu and Kashmir High
Court also adverted to the treatise of Russel in his book of Arbitration
in 15th Edition on the term "all disputes" or "all claims" by itself is
wider than "all disputes arising out of the contract." In the said treatise,
it is mentioned that failure to pay under a claim of right is certainly a
dispute. The claim of right need not necessarily be expressed. It may
and should justly be inferred against the defendant from his sphinx like
silence in an appropriate case. It is provided that it is not the law that
person who desires to evade arbitration may not write letters in answer
to a claim explaining, justifying his conduct and then turn round and say
there is no dispute.
78. Queen's Bench Division in the case of West Wake Price
38 arbp-868.16(j).doc
& Co. Vs. Ching (Supra) has construed the word "claim" and has held
that the word "claim" -whether used in a popular sense or in a strict
legal sense is such as to attach to it the object that is claimed and is not
the same thing as the cause of action by which the claim may be
supported or as the grounds on which it may be based. In the Oxford
Dictionary "claim" is defined as first, "A demand for something as
due; an assertion of a right to something."
79. In my view, though in respect of some of the claims though
made by the respondent before the Engineer in terms of clause 67.1 of
the General Conditions of Contract which were not supported with the
contemporary documents, it could not be said that such claims would
not be covered by expression "claim" agreed to be referred to the
arbitration under the consent terms arrived at between the parties before
the Hon'ble Supreme Court.
80. Supreme Court in the case of Sangamner Bhag Sahakari
Karkhana Ltd. Vs. M/s.Krupp Industries Ltd. (supra) has adverted to
its earlier judgment in the case of Renusagar Power Co. Ltd. Vs.
General Electric Company & Anr., reported in (1984) 4 SCC 679 and
has held that the arbitration agreement recorded between the parties was
of widest amplitude wherein the expression such as 'arising out of' or
'in respect of' or 'in connection with' or 'in relation to' or 'in consequence
of' or 'concerning' or 'relating to' the contract which are interpreted and
it was held that it was the substance of the claim made before the
arbitration which has to be seen. The Court would not construe the nature
of claim by adopting too technical an approach or by indulging into hair-
39 arbp-868.16(j).doc
splitting. Otherwise the whole purpose behind holding the arbitration
proceedings as an alternate to civil Court's forum would stand defeated.
81. In my view, the learned arbitrator in this case has rightly
interpreted the consent terms which was in my view was an arbitration
agreement arrived at by and between the parties before the Supreme
Court thereby superseding the arbitration agreement recorded in clause
67.1 of the General Conditions of Contract. The interpretation of the
learned arbitrator of the arbitration agreement recorded in consent terms
is a possible interpretation and cannot be substituted by this Court by
another interpretation.
82. In so far as the judgment of this Court in the case of Patel
Engineering Co. Ltd. (supra) relied upon by Mr. Aney, learned senior
counsel for the petitioner is concerned, in my view, Mr.Khambatta,
learned senior counsel for the respondent has rightly distinguished the
said judgment in the facts of this case on the ground that in this case, the
arbitration agreement recorded in clause 67.1 of the General Conditions
of Contract and the procedure prescribed therein was superseded by
virtue of the consent terms arrived at between the parties by recording
another arbitration agreement before the Supreme Court. In my view, the
judgment of this Court in the case of Patel Engineering Company Ltd.
(supra) is clearly distinguishable in the facts of this case and would not
assist the case of the petitioner.
83. Calcutta High Court in the case of Nandram Hanutram
Vs. Raghunath and Sons Ltd. (supra) has held that cause of action of
dispute may arise even if the repudiation by the other party is implied
40 arbp-868.16(j).doc
which may either by words or by conduct.
84. Madhya Pradesh High Court in the case of State of M.P. Vs.
M/s. Technodrillers (supra) has held that a difference or dispute does not
arise in a vacuum. When the petitioner had sent series of correspondences
asserting his dues to be paid to him but sphinx-like silence was
maintained and no action was taken, it can be inferred that the difference
had already arisen. It is held that silence is not a golden one, was in
fact, a repudiation of the claim asserted by the claimant. The claimant
is not expected to wait till the authorities wake up from their slumber
and react nor is it expected from him to cultivate job's patience. It is held
that once there is assertion or denial, either expressed or implied, there
comes into existence a dispute.
85. In my view, since the respondent had demanded various
claims from time to time prior to the date of filing the consent terms
before the Hon'ble Supreme Court which were not considered by the
petitioner or were not specifically rejected and the silence was maintained
in respect thereto, the dispute/difference had arisen between the parties
which were referred to arbitration pursuant to the arbitration agreement
arrived at before the Hon'ble Supreme Court by filing consent terms.
I am in agreement with the views expressed by the Calcutta High Court
in the case of Nandram Hanutram Vs. Raghunath and Sons Ltd.
(supra) and by the Madhya Pradesh High Court in the case of State of
M.P. Vs. M/s. Technodrillers (supra).
86. In so far as the submission of the learned senior counsel for
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the petitioner that the respondent ought to have not only made a demand
under clause 67.1 of the General Conditions of Contract but also ought
to have quantified the claims for determination of the Engineer is
concerned, since this Court is of the view that the arbitration agreement
recorded in clause 67.1 of the General Conditions of Contract was
superseded by a separate agreement arrived at between the parties before
the Hon'ble Supreme Court, the alleged non-compliance on the part of
the respondent of the provisions of clauses 67.1 to 67.3 of the General
Conditions of Contract could not have precluded the learned arbitrator
from exercising his jurisdiction.
87. Supreme Court in the case of McDermott International
Inc. Vs.Burn Standard Co. Ltd. and Ors. (supra) has held that once
a claim was made prior to invocation of the arbitration agreement, it
became a dispute within the meaning of the provisions of the 1996 Act.
It is held that while claiming damages, the amount therefore was not
required to be quantified. Quantification of a claim is merely a matter of
proof. In my view, since clauses 67.1 to 67.3 of the General Conditions
of Contract were not applicable in view of the consent terms filed
between the parties, even if the petitioner had quantified various claims
after the order of the Supreme Court, the learned arbitrator did not cease
to have jurisdiction to decide the quantification of the claim made by the
petitioner.
88. Be that as it may, since the Engineer appointed by the
petitioner has already rejected the claim for extension of time for
substantial period, the respondent was not precluded from raising the
claim for quantification in the arbitration proceedings. A perusal of the
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correspondence exchanged between the parties clearly indicates that the
respondent had quantified the claims in respect of some of the claims
and had agreed to provide such details subsequently. Be that as it may,
the judgment of the Supreme Court in the case of McDermott
International Inc. Vs.Burn Standard Co. Ltd. and Ors. (supra) holding
that while claiming damages, amount was not required to be quantified
which is merely a matter of proof applies to the facts of this case. I am
respectfully bound by the said judgment.
89. In so far as the submission of the learned senior counsel for
the petitioner that even if the parties had agreed to appoint an arbitrator
by filing consent terms before the Hon'ble Supreme Court and it was
agreed that the disputes/differences and claims were referred to the
arbitration of the learned sole arbitrator, the mandatory procedure under
clauses 67.1 to 67.3 of the General Conditions of Contract was not
dispensed with and the learned arbitrator could not have jurisdiction to
decide the claims if mandatory procedure was not followed is concerned,
in my view, the said issue was not kept open by the Honble Supreme
Court while referring the disputes/differences and claims to the learned
arbitrator. It is not in dispute that the petitioner did not apply for
modification of the consent terms before the Supreme Court or for
clarification of the said order passed by the Supreme Court in terms of
the consent terms filed by the parties. In my view, the entire clauses
67.1 to 67.3 of the General Conditions of Contract stood substituted
by the provisions of the consent terms filed by the parties before the
Hon'ble Supreme Court.
90. In so far as the submission of Mr.Aney, learned senior
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counsel for the petitioner that since the respondent had not quantified
the claims with detailed particulars as contemplated under clauses 44.2
and 53.3 to the Engineer in respect of the claim nos.4 and 7, the
Engineer could not have imagined what claim could be raised in
connection with the claims for compensation arising under clauses 6.4
read with 6.5, 12.2, 17.1, 42.2 and 44.1 is concerned, in my view,
there is no substance in this submission of the learned senior counsel for
the petitioner on the issue of jurisdiction raised by the petitioner. The
respondent in any event had to prove their claim for compensation
independently before the learned arbitrator.
91. The petitioner did not raise any issue before the Supreme
Court that the learned arbitrator will not have jurisdiction to entertain
the claims on the ground of alleged non-compliance of clauses 44.2 and
53.3 by the respondent. In my view, there is no substance in the
submission of the learned senior counsel for the petitioner that the
learned arbitrator has travelled beyond the terms of the reference or that
he could not have entertained and adjudicated upon various claims made
by the respondent on the ground that the terms and conditions of clauses
67.1 to 67.3 of the General Conditions of Contract were not complied
with by the respondent though the Hon'ble Supreme Court had appointed
an arbitrator by consent of parties thereby referring all disputes/
differences and claims made by the parties.
92. In so far as the judgment of the Supreme Court in the case
of Indian Aluminum Cables Ltd. Vs. Haryana State Electricity Board
and Ors.(supra) is concerned, Supreme Court has held that the learned
arbitrator has to confine himself to the reference made to him by the
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parties or by the Court and cannot travel outside the reference is
concerned, in my view, in view of the arbitration agreement recorded by
the parties before the Supreme Court in the consent terms, the learned
arbitrator has decided the claims according to the terms of the reference
recorded in the consent terms and thus the petitioner cannot be allowed
to urge that the learned arbitrator has decided outside the reference made
by the parties or by the Court. The judgment of the Supreme Court in the
case of Indian Aluminum Cables Ltd. Vs. Haryana State Electricity
Board and Ors.(supra) thus would not assist the case of the petitioner.
93.
In so far as the submission of the learned senior counsel for
the respondent that the respondent had already submitted
contemporaneous record to the Engineer withing the meaning of clause
53.3 is concerned, this issue will be decided by this Court while dealing
with the claims for compensation made by the respondent and awarded
by the learned arbitrator in latter part of this judgment. In my view, there
is thus no merit in the submission of the learned senior counsel for the
petitioner that any of these claims made by the respondent in the arbitral
proceedings were beyond the scope of reference or that the learned
arbitrator has travelled beyond his jurisdiction and the reference made to
him by the parties or by the Court.
94 .(i) Whether claim for reimbursement of deemed export and
customs duty made by the respondent was beyond the
jurisdiction of the learned arbitrator not having been raised
before the Engineer nor before the Supreme Court on 6 th
December 2004.
(ii) Whether the payment of customs duty and excise duty was
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included in the bill amount submitted by the respondent or was
separately payable by the petitioner and whether the award in
respect thereof was contrary to the terms and conditions of the
contract.
95. Learned senior counsel for the petitioner made his
submission in respect of this claim in two parts i.e. on issue of
jurisdiction and on merits. In so far as the issue of jurisdiction raised
by the petitioner for consideration of this Court is concerned, it is
submitted that the claim for reimbursement of deemed export and
customs duty was never raised by the respondent before the Engineer as
contemplated under clause 67.1 of the General Conditions of Contract. It
is submitted that the said claim was also not raised when the order dated
6th December 2004 was passed by the Supreme Court appointing the
learned arbitrator and referring various disputes to arbitration.
96. It is submitted that since the claim was required to be made
before the Engineer which was not made in this case, the arbitration
agreement could not have been invoked without following the mandatory
conditions of making claim before the Engineer. Learned senior counsel,
however, fairly concedes that in so far as the claim for deemed export
and customs duty made by the respondent in the statement of claim is
concerned, no issue of jurisdiction was raised by the petitioner under
Section 16 of the Arbitration Act before the learned arbitrator in the
statement of defence filed by the petitioner or by making any application
under Section 16 of the Arbitration Act before filing of statement of
defence.
97. It is submitted by the learned senior counsel that though the
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issue of jurisdiction was not specifically raised by the petitioner in so
far as this claim is concerned, before the learned arbitrator under Section
16 of the Arbitration Act, since the learned arbitrator has to decide in
accordance with the provisions of contract and substantive law of India
in view of Section 28 of the Arbitration Act, there being pre-condition
for making a claim before the Engineer by the Contractor before invoking
arbitration agreement, the learned arbitrator was bound to reject the claim
for reimbursement of deemed export and customs duty being contrary
to and without complying with mandatory conditions under clauses 67.1
to 67.3 of the General Conditions of Contract. He submits that since the
learned arbitrator had decided contrary to the terms of the contract, the
said issue can be raised by the petitioner even at this stage in this
arbitration petition.
98. Without prejudice to the submissions of the petitioner on
the issue of jurisdiction in respect of this claim, learned senior counsel
for the petitioner made submissions on maintainability of the claim itself
as under :-
99. Learned senior counsel for the petitioner placed reliance on
clause 2.1 of Section I of Instructions to Bidders forming part of
Volume I of Tender Documents and submits that under the said clause,
it was clearly provided that although the source of funding was the Asian
Development Bank, no party other than the petitioner would derive any
rights from the loan. He submits that there is no dispute that the petitioner
had never availed of loan from Asian Development Bank. He placed
reliance on clause 14.3 of Section I of Instructions to Bidders and
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submits that it is specifically provided therein that the Customs duty
and Excise duty would be included in the rate and prices and the total
bid price. The evaluation and comparison of bids shall be made
accordingly. He placed reliance on clause 14.4 of Section I of Instructions
to Bidders and would submit that the bidder was required to take into
consideration the payment of Customs duty and Excise duty 28 days
prior to the dead line for submission of bids. He also placed reliance on
clause 70.3 of Conditions of Particular Application and submits that it
is specifically provided therein that in case of change of law leading to
increase in duties and if such change occurred in 28 days prior to
submission of the final price bid, then the respondent would be
indemnified by the petitioner for increased cost. He submits that under
clause 70.4 of Conditions of Particular Application, it is provided that if
the taxes are reduced after the award of contract, the benefit of reduction
of such taxes would be given to the petitioner.
100. Learned senior counsel for the petitioner placed reliance on
clause 26.2 of Special Conditions of Contract which deals with the
payment of customs duty and would submit that the customs duty was
applicable as per Project Import Chapter 9801.00 read with Notification
No.11-97, Serial No.226 (vi) and Notification No.23-98 of Customs
Tariff, Government of India. He also placed reliance on clause 2.0 of
the Preamble to the Bill of Quantities which provided that the rates and
prices shall include for various items including Excise Duty, duties etc.
(other than Customs Duty for materials to be permanently incorporated
into works) and for compliance with the Conditions of Contract and
Conditions of Particular Application etc.
101. It is submitted that there is some ambiguity in the said
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clause 2.0 of the Preamble to the Bill of Quantities and thus the priority
of contractual documents as stated in clause 5.2 of the General Conditions
of Contract, Part II, Conditions of Particular Application along with its
amendment has to be considered. He submits that the Priced Bill of
quantities is at serial no.8 of the list of priority provided in the said
provision. It is submitted that only in the rejoinder filed before the
learned arbitrator, the respondent had alleged that the respondent was
not liable to include the customs duty in the price bid. It is submitted
that in case of any inconsistency in various documents and in this case,
in case of Priced Bill of Quantities and preamble thereto with the
Letter of Acceptance and other documents at serial nos.1 to 7 as per
clause 5.2 of the General Conditions of Contract, what is stated in Letter
of Acceptance and other documents which are above at serial no.8
would prevail.
102. It is submitted by the learned senior counsel that pre-bid
meeting was held on 15th and 16th November 1999 in which various
queries raised by the bidders were answered and were recorded which
were forwarded by the petitioner to the bidders including the respondent
vide letter dated 1st December 1999. He submits that in the said pre-bid
meeting, a specific query was raised by one of the bidders about kind of
help that would be extended by the petitioner to expedite procuring
materials, plant, contractor's equipment, service etc. from sources outside
India. The petitioner had specifically clarified that the assistance of
the petitioner would be limited to as specified in Sub-clause 26.2 of
the Conditions of Contract. He submits that it was thus clear that the
rates and prices were inclusive of Customs Duty and in any event, it
49 arbp-868.16(j).doc
was the duty of the respondent to avail of any such concession by
obtaining the Essentiality Certificate.
103. Learned senior counsel invited my attention to some of the
correspondence exchanged between the parties relating to this claim for
reimbursement of deemed export and customs duty.
104. On 17th January 2000, the respondent addressed a letter to
the petitioner thereby submitting their technical bid. The respondent
had submitted their Bill of Quantities along with their price bid. The
said price bid submitted by the respondent was accepted by the petitioner
on 19th September 2000. It is submitted that the respondent had appointed
their sub-contractor who was informed that they will have to pay
customs duty. He submits that even the contract entered into between the
respondent and their sub-contractor would clearly indicate that price
bid was inclusive of customs duty. On 28 th September 2000, the petitioner
forwarded a Detailed Letter of Acceptance. Clause 6 of the said letter
clearly provided that the customs duty on materials to be imported and
permanently incorporated into the works, shall be deemed to be included
in the rates and prices quoted by the respondent.
105. On 16th February 2001, the respondent addressed a letter to
their sub-contractors. Clause 5 of the said letter provided that there was
a "likelihood" of obtaining concessions on Customs duty and that the
respondent was eligible to get an Essentiality Certificate. The said clause
further stated that the quoted rates should be inclusive of Customs duty.
The respondent issued work orders to their sub-contractor M/s.Raunaq
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International Ltd. Clause 5 of the said work orders also referred to
similar provision which was referred in the letter dated 16 th February
2001.
106. On 25th September 2001, the respondent addressed a letter
to the petitioner claiming a refund of the Central Excise Duty paid on
inputs used in the Project from DGFT and stated that they required
Project Authority Certificate and Certificate of payments as per the
enclosed formats.
107.
On 27th September 2001, the petitioner replied to the letter
of the respondent requesting the respondent to clarify as to how the
respondent was entitled to refund of excise duty paid on inputs used in
the Project from DGFT with the supporting documents. The petitioner
also conveyed that the certificate as requested by the respondent could
not be given since certain stipulations were not factually correct namely
the contract awarded to the respondent was not for supply of goods, the
tender evaluation was carried out including the customs duty and the
supplies had not been accepted by the petitioner at site etc.
108. Vide their letter dated 6th November 2001, the respondent
alleged that since the project was aided by multinational funding
agencies, they were entitled to the benefit of refund of Central Excise
Duty. It was stated that the payment certificate and other allied
certificates to be issued by the petitioner were required to facilitate the
process of retrieving the refund.
109. The petitioner vide their letter dated 9th January 2002 replied
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to the letter dated 6th November 2001 and denied that the contract
awarded to the respondent allowed benefit to the respondent for deemed
export project under Chapter X of EXIM Policy on the ground that the
project was to be funded by Asian Development Bank. The petitioner
clarified that the contract did not envisage availing of any benefit for
refund of Excise Duty to the contractor. It was also placed on record
that the offer submitted by the respondent did not stipulate any such
requirement. Attention of the respondent was invited to clause 14.3 of
Instructions of Bidders and clause no.2 of Preamble to Bill of
Quantities and it is stated that rates and prices quoted by the respondent
were inclusive of all taxes and duties whatsoever including the excise
duty. The petitioner in the said letter stated that the tender evaluation
had been done inclusive of Customs Duty and thus the said contract did
not envisage refund of any duty. The Finance Manager of the
respondent had agreed to re-examine the issue.
110. On 16th January 2002, the respondent addressed a letter to
the petitioner and requested for making an arrangement of Essentiality
Certificate from the Ministry. The respondent requested the petitioner to
be consignee in the matter of permanent materials to be imported by the
respondent at their cost (covering payments of materials by letter of
credit) including freight insurances, taxes, custom duty and any other
charges whatsoever payable in connection with the import and its
incorporation in the work. In the said letter, the respondent confirmed
that the petitioner becoming consignee, it would not absolve the
respondent from any of the obligations and would not alter the payment
terms under the contract dated 19 th September 2000 awarded to the
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respondent by the petitioner.
111. The respondent in the said letter dated 16 th January 2002
gave an undertaking to abide by all the obligations, responsibilities
etc. as if the respondent themselves were the consignees and agreed to
indemnify the petitioner for such consequences arising ouot of the
petitioner becoming the consignee.
112. The respondent clarified that the responsibilities of the
petitioner would be the same as under the contract and would be limited
to issuing required recommendatory letters for obtaining such permits
and licenses and made it clear that the said undertaking did not in any
way vitiate their contractual liabilities and the obligations cast upon the
respondent under the contract dated 19th September 2000. The respondent
accordingly requested the petitioner to grant Essentiality Certificate at
the earliest to enable the respondent to expedite the procurement action.
113. On 2nd February 2002, the respondent addressed a letter to
the petitioner and alleged that the respondent was entitled for deemed
export benefits under Chapter X of the EXIM Policy and was liable for
deemed export benefits under clause 10.2(d) of the EXIM Policy. In the
said letter, the respondent conveyed that since the subject project was
now no longer being funded by the Asian Development Bank, the
respondent proposed that in order to maintain equity, the clause 10.2(g)
of the EXIM Policy may be considered and necessary certificate be
issued to the respondent.
114. On 2nd April 2002, the petitioner addressed a letter to the
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respondent and enclosed various documents in respect of the Essentiality
Certificate and requested the respondent to take necessary action in terms
of clause 26.2 of the Conditions of Particular Application and addendum
so as to ensure timely clearance of materials from customs. The
respondent vide their letter dated 3rd April 2002 to the petitioner enclosed
copies of formats of Certificates for information of the petitioner and for
necessary action. The respondent, however, deleted the portion reading
as "agreement of which provides for tender evaluation without including
customs duty and the import content of the order is Rs. _______
(figures in words) ______."
115. On 8th October 2002, the respondent addressed a letter to
the petitioner and submitted various details and submitted that the
Essentiality Certificate was required to be revised and requested the
petitioner to forward the said proposal to the Ministry for approval. The
petitioner accordingly forwarded a revised Essentiality Certificate to the
respondent on 6th December 2002.
116. It is submitted by the learned senior counsel for the
petitioner that the first arbitration meeting was held on 24 th December
2004. The respondent addressed a letter to the Engineer on 5 th January
2005 raising a claim for the first time for Rs.7,85,66,365/- towards
excise duty benefit. He submits that the said claim was addressed to the
Engineer for the first time after passing an order by the Supreme Court
and thus was clearly beyond the scope of reference and was without
complying with the procedure under clauses 67.1 to 67.3 of the General
Conditions of Contract.
117. It is submitted by the learned senior counsel that though
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there was some ambiguity resulted from clause 2.0 of the Preamble to
the Bill of Quantities which provided that rates and prices would be
inclusive of certain items other than customs duty, clause 5.2 of the
General Conditions of Contract as amended by clause 5.2 of the Special
Conditions of Contract, specified priority of Contractual documents,
the provisions of the Letter of Acceptance would prevail in case of such
alleged discrepancies in the Preamble to the Bill of Quantities. He
submits that in any case such discrepancies were never raised by the
respondent before the Engineer nor before the learned arbitrator.
118.
It is submitted that even the learned arbitrator did not render
any reasons which according to him, would have justified disregarding
the other documents of higher priority and grant primacy to the Bill of
Quantities. It is submitted by the learned senior counsel that under
clauses 2.00 and 6.00 of the Detailed Letter of Acceptance dated 28 th
September 2000, it was explicitly made clear that the bid prices to be
submitted by the petitioner to the respondent were to be inclusive of
customs duty and excise duty and thus the claim for reimbursement for
deemed export benefit and for payment of customs duty was clearly
prohibited under the terms of Contract and was not arbitrable.
119. It is submitted that the learned arbitrator, however,
erroneously and contrary to the provisions of the contract came to the
conclusion that price bids were submitted by the respondent on the basis
of Notification bearing Nos.108/95 and 84/97 and that the respondent
had altered their position to their detriment. He submits that these
findings of the learned arbitrator are ex facie contrary to the contractual
clauses and the extent to EXIM Policy and shows perversity and patent
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error on the face of the award. He submits that the findings of the
learned arbitrator that the EXIM Policy made it clear that the
respondent would have been entitled to Excise and customs Duty
drawback in the event of project being an Asian Development Bank
funded project is totally perverse and contrary to the provisions of the
contract.
120. It is submitted by the learned senior counsel for the
petitioner that the respondent was fully aware and was made clear under
the provisions of the contract that their bid was inclusive of Excise and
Customs duties and accordingly in their sub-contract awarded to the
Sub-contractor, similar provision was inserted by the respondent. There
was thus no ambiguity in the line of events that the price bid was
inclusive of Excise and Customs duty.
121. It is submitted that the learned arbitrator has totally
overlooked this crucial aspect in the impugned award. He submits that
the petitioner had only assisted the respondent in obtaining Essentiality
Certificate and had not agreed for reimbursement of any customs duty
or excise duty attracted on various materials and other items required
for use in the project. The learned arbitrator did not even consider the
documents of sub-contract executed by the respondent to find out that
both the parties were ad-idem that the petitioner was not liable to
reimburse the payment of Excise and Customs Duty and the same was
included in the price bid submitted by the respondent.
122. In so far as the issue of jurisdiction raised by the learned
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senior counsel for the petitioner in respect of this claim is concerned,
Mr.Khambatta, learned senior counsel for the respondent submits that
admittedly the petitioner had not raised an issue of jurisdiction regarding
this claim before the learned arbitrator under Section 16 of the Arbitration
Act and thus cannot be allowed to raise this issue across the bar and
such objection is deemed to have been waived under Section 4 of the
Arbitration Act. He submits that the petitioner has not raised this
ground even in this arbitration petition filed under Section 34 of the
Arbitration Act and thus cannot be allowed to urge this ground across
the bar for the first time at the stage of final hearing of this petition.
123. In support of this submission, learned senior counsel placed
reliance on the judgments of the Supreme Court in the cases of Union
of India Vs. Pam Development Private Limited, reported in (2014) 11
SCC 366 (paragraph 18) and Bharat Sanchar Nigam Limited and
Anr. Vs. Motorola India Private Limited, reported in (2009) 2 SCC
337 (paragraph 39) and the judgment of the Delhi High Court in the
case of S.N. Malhotra & Sons Vs. Airports Authority of India & Ors.,
reported in 2008(2) Arb.LR 76 (Delhi) (paragraph 33).
124. In so far as the issue raised by the petitioner about
maintainability of this claim is concerned, it is submitted by the learned
senior counsel for the respondent that the learned arbitrator had framed
various issues arising out of this claim as Issue Nos.12A, 12B, 12C,
12D and 13 and submits that the learned arbitrator has interpreted
various provision of the contract which was within the sole domain of
the learned arbitrator and has rightly arrived at the conclusion that this
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claim made by the respondent was not contrary to the terms of the
contract and was maintainable. He submits that the respondent vide their
letters dated 14th April 2003, 2nd June 2003, 11th October 2003, 27th
November 2003, 13th January 2004 and 11th October 2004 had made
claims for reimbursement of the excise and customs duty paid. He
submits that the learned arbitrator has harmoniously read correspondence
along with various provisions of the contract and has rightly held that
the respondent was not required to include customs duty and excise
duty in its quoted rates and prices under the contract. He submits that
interpretation of the contract by the learned arbitrator being a possible
interpretation cannot be substituted by another interpretation by this
Court in this petition under Section 34 of the Arbitration Act.
125. Learned senior counsel for the respondent placed reliance
on invitation to Bid dated 24 th September 1999 and would submit that
the petitioner had stated clearly in the said document that it had received
approval for a loan from the Asian Development Bank towards the cost
of subject project and the bidding was open to all prequalified bidders
from eligible source countries of Asian Development Bank. He submits
that the petitioner had represented in clause 2.1 thereof that it had
received the loan from Asian Development Bank for the subject project
and its intention to apply part of the proceeds of the loan for eligible
payment for the subject contract in question.
126. It is submitted that the reference to the customs duty in the
contact does not detract from the statutory exemption then available
for customs and excise duty provided that the project was funded by
a loan from the Asian Development Bank. It is submitted by the learned
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senior counsel that under various provisions of the contract relied upon
by the petitioner, the onus was cast on the respondent-contractor of
ascertaining the applicability of duties and other levies on the part of
the bidder and to price their bid suitably based on the applicable law at
28 days prior to the deadline for submission of their bids. He submits
that the bidder was to include customs duty if at all payable under the
contract and to the extent payable which could be anywhere between
zero and the tariff rate and thus the words "payable under the contract"
were required to be construed accordingly. He submits that since as of
28 days prior to the submission of the price bid, custom and excise duty
were exempted by Notification No.108/95 dated 28 th August 1995 and
Notification No.84/97 dated 11th November 1997 which were prevailing
at the time of price bid and under those two notifications, the bidder was
not required to factor excise and custom duty in its bid, the respondent
was not bound to include the factor of payment of excise and custom
duty in their bid and the same was separately payable by the petitioner.
He submits that all the provisions of the contract are to be harmoniously
construed and read as a whole. In support of this submission, learned
senior counsel placed reliance on the judgment of the Supreme Court in
the case of Bank of India Vs. K. Mohandas, reported in (2009) 5
SCC 313 and in particular paragraph 31 thereof.
127. It is submitted by the learned senior counsel that since it
was the decision of the petitioner to cancel the Asian Development
Bank funding for the project, there was loss of exemption from
customs and excise duty which caused loss and damage to the
respondent. He submits that the respondent had submitted their bid on
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the basis of the provisions of the contract and representation made
therein, however, the contract bid and rates became irrelevant on
account of loss of exemption from custom and excise duty due to the
reasons solely attributable to the petitioner. The respondent was thus
entitled to seek compensation from the petitioner on this ground.
128. It is submitted that the respondent had altered their position
to its detriment in view of the representation made by the petitioner and
the respondent having altered their position based on such representation
to its detriment. He submits that principles of promissory estoppel
apply and to bind the petitioner for its representations. In support of
this submission, learned senior counsel for the respondent placed
reliance on the judgments of the Supreme Court in the cases of
M/s.Tarapore & Co. Vs. Cochin Shipyard Ltd. reported in AIR 1984
SC 1072 and in particular paragraphs 37 and 38 and M.P. Sugar Mill
Co. Ltd. Vs. State of Uttar Pradesh, reported in AIR 1979 SC 621 and
more particularly paragraphs 7 to 10, 19, 24, 27, 28 and 33 thereof.
129. In so far as the submission of the learned senior counsel for
the petitioner that the Bill of Quantities was the document with least
priority and in view of clause 5.2 of Conditions of Particular Application,
Letter of Acceptance would prevail is concerned, it is submitted by the
learned senior counsel for the respondent that the petitioner has not
raised this issue in this petition filed under Section 34 of the Arbitration
Act and also did not raise this issue before the learned arbitrator and thus
cannot be allowed to raise this issue across the bar. He submits that in
any event, it was the sole domain of the learned arbitrator to interpret
the terms of the contract and to arrive at a conclusion as to which
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provision would prevail. It is submitted that in any event, deeming
provision of Letter of Acceptance and more particularly clause 6
thereto has to be read conjointly with the provisions of clause 26.2 and
cannot read in isolation. He submits that reliance placed on minutes of
pre-bid meeting on this issue by the petitioner is totally misplaced.
130. It is submitted by the learned senior counsel that the
respondent has not claimed or derived any rights from the Loan
Agreement between the petitioner and the Asian Development Bank in
so far as this claim is concerned or otherwise. He submits that this claim
is not under the Loan Agreement but had arisen out of the fact that the
petitioner having taken a loan from the said Asian Development Bank
which in turn entitled to apply for certain fiscal benefits under
Notification Nos.108/95 dated 28th August 1995 and 84/97 dated 11 th
November 1997. The claim made by the respondent arose in respect of
denial of fiscal benefits of the respondent which could be availed of due
to cancellation of the loan by the petitioner after awarding the contract
to the respondent.
131. It is submitted that the learned arbitrator has considered all
these crucial facts and has rightly awarded the claim made by the
respondent. It is submitted that in view of the provisions contained in
clause 2 of preamble to the Bill of Quantities, the respondent was not
required to include the custom duties for materials to be permanently
incorporated into the works. He submits that under clause 26.2 of the
Conditions of Particular Application, the respondent was not required to
factor the custom duty in its price bid.
132. It is submitted by the learned senior counsel that EXIM
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policy does not supersede or affect the unqualified provisions of the
two statutory notifications relating to customs duty and excise duty
issued under the provisions of the Customs Act and the Central Excise
and Salt Act, 1944. It is submitted by the learned senior counsel that the
respondent had always claimed exemption under the provisions of those
two statutory notifications in respect of supply of all goods to the Asian
Development Bank Aided Project. Since the petitioner had cancelled
the said loan, the respondent had addressed a letter dated 2 nd February
2002 seeking reliefs under clause 10.2(g) of EXIM policy on an
equitable basis whilst maintaining its entitlement under clause 10.2(d)
of the EXIM policy.
133. In so far as the submission of the learned senior counsel that
the respondent had applied for Essentiality Certificate and the petitioner
had assisted the respondent for availing of such certificate is concerned,
it is submitted by the learned senior counsel that the respondent had
applied for Essentiality Certificate after cancellation of Asian
Development Bank finance by the petitioner in respect of project in
question and with a view to mitigate the loss suffered due to non-
availability of the custom duty exemption. He submits that the claim
raised by the respondent before the learned arbitrator was for
reimbursement or compensation on the basis that the respondent would
have been entitled to the exemption if the petitioner would not have
cancelled the Asian Development Bank loan.
134. Learned senior counsel placed reliance on the work orders
dated 16th February 2001 and 26th February 2001 issued in favour of
sub-contractor of the respondent by the respondent and would submit
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that it was specified in those two work orders that a concessional rate of
customs duty could be attracted which would mean anywhere between
zero rate and full tariff rate since the project in question was Asian
Development Bank funded project. Reliance is placed on the words
"concessional rate" as per Webster's Dictionary which means "the act
of conceding" or "a grant." He submits that the petitioner had suppressed
the fact that the respondent was not intending to avail of the Asian
Development Bank loan for the project. The respondent was under
impression that the petitioner was itself availing the Asian Development
Bank loan and therefore, the work orders issued to the sub-contractor
of the respondent had referred to "a likelihood of obtaining concessions
on the customs duties."
135. In support of his submission that if the interpretation of the
contract by the learned arbitrator is a possible interpretation, the same
cannot be substituted by another interpretation by this Court, learned
senior counsel for the respondent placed reliance on the following
judgments of the Supreme Court:-
(i) National Highways Authority of India Vs. M/s.J.S.C.
Centrodorstroy, reported in AIR 2016 SC 1965 (paragraph 11),
(ii) National Highways Authority of India Vs. ITD Cementation
India Limited, reported in (2015) 14 SCC 21 (paragraphs 21, 22, 24
and 25),
(iii) Bank of India & Anr. Vs. K. Mohandas & Ors. along with
other connected matters, reported in (2009) 5 SCC 313 (paragraphs
28, 31 and 32)
(iv) M/s.Tarapore & Co. Vs. Cochin Shipyard Ltd. (supra)
63 arbp-868.16(j).doc
(paragraphs 37 and 38).
136. Mr.Aney, learned senior counsel for the petitioner in
rejoinder submits that the petitioner never made any representation to
the respondent that they were entitled to the benefits of deemed export
and customs duty. He submits that the petitioner had consistently
maintained from the date of such issuance of tender condition and all
throughout that the respondent must quote its rate inclusive of
customs duty. He submits that it is not the case of the petitioner that
interpretation of contract by the learned arbitrator is not a possible
interpretation but it is the case of the petitioner that the learned arbitrator
has awarded this claim by overlooking and deciding contrary to those
relevant provisions of the contract such as clause 26.2, minutes of pre-
bid meeting and more particularly answer to the bidder's query no.4,
detailed Letter of Acceptance etc.
137. It is submitted by the learned senior counsel for the
petitioner that admittedly the respondent had made this claim to the
Engineer for the first time on 5th January 2005 i.e. after passing of the
order dated 6th December 2004 by the Supreme Court. The said claim
was admittedly not arising out of any pending disputes or differences.
Learned senior counsel for the petitioner fairly invited my attention to
the judgment of the Supreme Court in the case of M/s.MSP
Infrastructure Ltd. Vs. M.P. Road Development Corporation Ltd.
reported in 2015 (1) All MR 952 (SC) and in particular paragraphs 1 to
8 and would submit that even if on the basis of the said judgment of
the Supreme Court, the petition not having raised an issue of jurisdiction
under Section 16 before the learned arbitrator which may amount to
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waiver under Section 4 of the Arbitration Act, the petitioner is still
entitled to challenge the said award under Section 34(2)(b) of the
Arbitration Act on the ground that the Court if finds that the arbitral
award is in conflict with the public policy of India. i.e. if the award is
contrary to the terms of the contract under Section 28 of the Arbitration
Act, the Court can set aside such an award on its own even if the
petitioner had not raised an objection under Section 16 of the
Arbitration Act or had not urged that ground in the arbitration petition.
Learned senior counsel for the petitioner distinguishes the judgments
referred to and relied upon
ig by the learned senior counsel for the
respondent on the ground that the facts before the Court in those
judgments were totally different and clearly distinguishable in the facts
of this case.
138. In so far as the judgment of the Supreme Court in the case
of National Highways Authority of India Vs.M/s.J.S.C. Centrodorstroy
(supra) relied upon by the learned senior counsel for the respondent
on the ground that in this case, the learned arbitrator had not
interpreted the provisions of the contract but has totally ignored and
decided contrary to the provisions of the contract.
139. Mr.Balsara, learned counsel for the respondent in sur-
rejoinder submits that if the interpretation of the interaction between
Sections 4, 16, 28 and 34 as canvassed by the learned senior counsel
for the petitioner is accepted, it would render the provisions of Sections
4 and 16 of the Arbitration Act otiose. He submits that deemed export
benefit was already raised by the respondent prior to 6 th December 2004
when the Supreme Court had passed an order. It is submitted by the
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learned counsel that in the impugned award, the learned arbitrator has
considered the provisions of clause 2.1, 14.3 of Instructions to Bidders,
detailed Letter of Acceptance dated 28th September 2000 and clause
26.2 of the Condition of Particular Application while rendering his
finding in respect of issue no.12A. Reliance is placed on paragraphs
94C, 94D, 96, 99 and 100 of the impugned award.
REASONS AND CONCLUSIONS ON THE ISSUE OF
JURISDICTION AND FOR REIMBURSEMENT OF DEEMED
EXPORT AND CUSTOMS DUTY :-
140. Learned arbitrator has framed as issue nos.12A to 12D and
13 in so far as this claim for reimbursement of deemed export and
customs duty is concerned. Learned arbitrator has discussed this claim
in paragraphs 94 to 114 of the impugned award.
141. In paragraph 102 of the impugned award, the learned
arbitrator has held that some of the provisions referred to in the earlier
paragraph of the award showed that in fact the petitioner had made a
representation that the contract was an Asian Development Bank
funded project. The price bid submitted by the respondent was in fact
based on eligibility to structure, the prices excluding excise duty and
availing of customs duty benefits on imported component of goods
intended to be used in the project in question by the respondent herein.
Learned arbitrator has held that the petitioner subsequently changed
their pattern of funding disentitling the respondent to avail of the benefits
of the notifications whereby the respondent would be entitled to excise
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duty and customs duty benefits.
142. In paragraph 104 of the impugned award, it is held by the
learned arbitrator that the correspondence referred to in the earlier
paragraph showed that both the parties had proceeded on the basis of
the contract being an Asian Development Bank funded contract. The
learned arbitrator rejected the submission of the petitioner that clause
70.3 of the Conditions of Contract of Particular Application was
intended to provide for additional cost which the contractor would
incur to the submission of bid that related to increase in taxes and
duties apart from the elements mentioned in the cost which would
become automatically reimbursable by addition to the contract price.
It is held that both the parties proceeded on the basis the contract being
an Asian Development Bank funded contract.
143. In paragraph 106 of the impugned award, the learned
arbitrator has held that the notifications dated 28 th September 1995 and
11th November 1997 were in force at the time of submission of the bid.
He held that EXIM Policy makes it clear that the respondent would
have been entitled to excise and customs duty drawback in the event
of the project in question being an Asian Development Bank funded
project. It is held that clauses 24.3, 14.4 and 31.2 relied upon by the
petitioner would not assist their case as the same did not show that the
respondent would be disentitled to customs and excise duty drawback.
Learned arbitrator has accordingly held that the representation was made
by the petitioner that the contract was in respect of an Asian Development
Bank funded project entitling the respondent to the benefits of exemption
from payment of customs and excise duty and that the respondent had
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tendered its bid on the basis of such representation.
144. In paragraph 111 of the impugned award, the learned
arbitrator has held that in view of the representation made by the
petitioner to the respondent and the respondent having altered their
position to their detriment based on such representation, the same would
constitute promissory estoppel and thus the petitioner would be liable
to compensate the respondent on account of the petitioner subsequently
changing their stand that they would not avail of Asian Development
Bank funding as represented to the respondent in the bid documents.
145. In paragraph 114 of the impugned award, in so far as the
quantification of the claim of Rs.7,85,66,365.01 made by the respondent
is concerned, it is held by the learned arbitrator that the respondent vide
their letter dated 5th January 2005 submitted details in 18 annexures
to the Engineer which supplies had been linked up to material required
for the project in question and it could not be said that the said goods
had not been delivered for the project in question. It is held that the
respondent had furnished with exactitute the details of payments
towards excise as well as customs and had also disclosed supporting
documents in their affidavit dated 14th September 2005 and had
relied upon several letters in order to substantiate their claim. It is
held that since the goods covered in the letter dated 5 th January 2005
had been clearly delivered by the respondent for the project in question
and the respondent had paid excise and customs duty in respect
thereof, the respondent was entitled to the said amount of
Rs.7,85,66,365.01 from the petitioner.
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146. I shall first decide whether the claim for reimbursement of
the deemed export and custom duty made by the respondent was beyond
the jurisdiction of the learned arbitrator not having been raised before the
Engineer nor before the Supreme Court on 6th December 2004. Learned
senior counsel appearing for the parties have addressed this Court not
only on the issue of jurisdiction of the learned arbitrator in respect of
these two claims but also on merits.
147. In so far as the issue of jurisdiction raised by the petitioner is
concerned, the case of the petitioner is that these claims were never
raised by the respondent before the Engineer as contemplated under
clause 67.1 of the General Conditions of Contract and these claims were
also not raised when the order dated 6 th December 2004 was passed by
the Supreme Court appointing the learned arbitrator and while referring
various disputes/differences and claims to the learned arbitrator for
adjudication.
148. Mr.Khambatta, learned senior counsel for the respondent
while dealing with the issue of jurisdiction raised by the petitioner in
respect of these two claims invited my attention to some of the
correspondence referred to aforesaid in support of his submission that
the claims were already made by the respondent before the Engineer of
the petitioner and/or to the petitioner prior to the date of filing consent
terms before Hon'ble Supreme Court. He submits that admittedly not
only disputes/differences were referred to the arbitration but also the
claims. In my view, Mr.Khambatta, learned senior counsel for the
respondent is right in his submission that the respondent had already
made these claims prior to the date of filing consent terms before the
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Supreme Court for reimbursement of deemed export and custom duty
and these claims were also referred to the learned arbitrator.
149. Be that as it may, there is no dispute that though the
petitioner had filed detailed written statement, admittedly no issue of
jurisdiction was raised by the petitioner in respect of these two claims
under Section 16 of the Arbitration and Conciliation act, 1996 nor any
application raising issue of jurisdiction was made before filing written
statement before the learned arbitrator.
150.
Mr.Aney, learned senior counsel for the petitioner fairly
admitted that no such issue of jurisdiction in respect of these two claims
was raised by the petitioner before the learned arbitrator at any stage.
151. The submission of the learned senior counsel for the
petitioner in respect of these two claims in so far as the issue of
jurisdiction is concerned is that though the objections were not raised by
the petitioner regarding jurisdiction of the learned arbitrator under
Section 16 of the Arbitration and Conciliation Act, 1996, since the
learned arbitrator has not decided these two claims in accordance with
the mandatory conditions under clauses 67.1 to 67.3 of the General
Conditions of Contract, the award rendered by the learned arbitrator in
respect of these two claims was in violation of and in breach of Section
28(3) of the Arbitration and Conciliation Act, 1996 and the impugned
award was thus in conflict with the public policy.
152. Mr.Aney, learned senior counsel for the petitioner fairly
invited the attention of this Court to the judgment of the Supreme Court
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in the case of M/s.MSP Infrastructure Ltd. Vs. M.P. Road Development
Corporation Ltd. (supra) and submits that the respondent not having
raised issue of jurisdiction under Section 16 of the Arbitration and
Conciliation Act, 1996 before the learned arbitrator, it may amount to
waiver. In my view, once the petitioner admittedly having not raised an
issue of jurisdiction which could have been raised under Section 16 of
the Arbitration and Conciliation Act, 1996 in the written statement or by
filing a separate application before filing written statement, it amounted
to waiver under Section 4 of the Arbitration and Conciliation Act, 1996.
In my view, objection regarding alleged non-compliance of mandatory
procedure for invoking arbitration agreement is derogable and can be
waived under Section 4 of the Arbitration and Conciliation Act, 1996.
153. In my view, the issue of jurisdiction cannot be allowed to be
raised on the ground that there was alleged non-compliance on the part
of the respondent of the mandatory conditions under clauses 67.1 to 67.3
of the General Conditions of Contract and that the learned arbitrator
decided contrary to clauses 67.1 to 67.3, in view of the issue of
jurisdiction based on non-compliance of the terms and conditions of the
contract touching the issue of jurisdiction not having been raised by the
petitioner under Section 16 of the Arbitration and Conciliation Act, 1996.
In my view, no issue of jurisdiction thus can be raised indirectly on the
ground that the learned arbitrator decided contrary to the terms of the
arbitration agreement. There is thus no substance in this submission of the
learned senior counsel.
154. I shall now deal with the issue whether these two claims
were permissible under the terms of the contract entered into between
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the parties and whether the learned arbitrator has allowed these claims
contrary to the terms of the contract other than the provisions of
clauses 67.1 to 67.3 of the General Conditions of Contract.
155. A perusal of clause 2.1 of Section I of Instructions to
Bidders which was admittedly forming part of Volume I of Tender
Documents indicates that it was provided that although the source of
funding was the Asian Development Bank, no party other than the
petitioner would derive any rights from the loan. Clause 14.3 of Section
I of Instructions to Bidders specifically provided that the Customs duty
and Excise duty would be included in the rate and prices and the total
bid price. The evaluation and comparison of bids shall be made
accordingly. Clause 14.4 of Section I of Instructions to Bidders provided
that the bidders were required to take into consideration the payment of
Customs duty and Excise duty 28 days prior to the dead line for
submission of bids. Clause 70.3 of Conditions of Particular Application
specifically provided that in case of change of law leading to increase in
duties and if such change occurred in 28 days prior to submission of the
final price bid, then the respondent would be indemnified by the
petitioner for increased cost.
156. Clause 26.2 of Special Conditions of Contract provided that
the customs duty was applicable as per Project Import Chapter 9801.00
read with Notification No.11-97, Serial No.226 (vi) and Notification
No.23-98 of Customs Tariff, Government of India. Clause 2.0 of the
Preamble to the Bill of Quantities provided that the rates and prices
shall include for various items including Excise Duty, duties etc. (other
than Customs Duty for materials to be permanently incorporated into
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works) and for compliance with the Conditions of Contract and
Conditions of Particular Application etc.
157. Clause 5.2 of the General Conditions of Contract, Part II
provides as to what would prevail in case of any ambiguity in various
contractual documents. There is no dispute that the Priced Bill of
quantities is at serial no.8 of the list of priority provided under clause
5.2 of the General Conditions of Contract. It was the case of the
petitioner that that there was inconsistency in case of Priced Bill of
Quantities and preamble thereto with the Letter of Acceptance and
other documents at serial nos.1 to 7 as per clause 5.2 of the General
Conditions of Contract and thus what was stated in Letter of Acceptance
and other documents which were above at serial no.8 would prevail.
158. The minutes of the pre-bid meeting indicates that a specific
query was raised by one of the bidders about kind of help that would be
extended by the petitioner to expedite procuring materials, plant,
contractor's equipment, service etc. from sources outside India. The
petitioner had specifically clarified in response to the said query
raised by one of the bidders that the assistance of the petitioner would
be limited to as specified in Sub-clause 26.2 of the Conditions of
Contract. It is not in dispute that the said minutes of the said pre-bid
meeting were also binding on the parties.
159. A perusal of the record further indicates that the respondent
had appointed their sub-contractor in respect of the work awarded to
them by the petitioner who were categorically informed that they will
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have to pay customs duty. The contract entered into between the
respondent and their sub-contractor also indicates that price bid was
inclusive of customs duty. It is thus clear that the respondent was fully
aware that price bid submitted by the respondent was inclusive of
customs duty and was not separately payable. Accordingly, the
respondent had imposed similar condition in the sub-contract awarded
to their sub-contractor.
160. A perusal of the Detailed Letter of Acceptance dated 28 th
September 2000 and more particularly clause 6 thereof clearly indicates
that the customs duty on materials to be imported and permanently
incorporated into the works, shall be deemed to be included in the rates
and prices quoted by the respondent.
161. A perusal of the letter addressed by the respondent on 16th
February 2001 to their sub-contractors and the work order issued by the
respondent to their sub-contractors also included similar provision
indicates that the rates quoted by the sub-contractors should be inclusive
of Customs duty. The said provisions were similar to the terms and
conditions in the contract between the petitioner and the respondent.
162. In response to one of the letters addressed by the petitioner
raising a query as to how the respondent was entitled to refund of
excise duty paid on inputs used in the Project from DGFT with the
supporting documents recording that the contract awarded to the
respondent was not for supply of goods, the tender evaluation was
carried out including the customs duty, the respondent vide their letter
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dated 6th November 2001 alleged that since the project was aided by
multinational funding agencies, they were entitled to the benefit of
refund of Central Excise Duty.
163. The petitioner vide their letter dated 9th January 2002
denied that the contract awarded to the respondent allowed benefit to
the respondent for deemed export project under Chapter X of EXIM
Policy on the ground that the project was to be funded by Asian
Development Bank. The petitioner also made it clear that the offer
submitted by the respondent did not stipulate any such requirement. The
petitioner also invited the attention of the respondent to clause 14.3 of
Instructions of Bidders and clause no.2 of Preamble to Bill of
Quantities and made it clear that rates and prices quoted by the
respondent were inclusive of all taxes and duties whatsoever including
the excise duty. The Finance Manager of the respondent had agreed to
re-examine the issue.
164. It is not in dispute that the respondent thereafter requested
the petitioner to make an arrangement for Essentiality Certificate from
the Ministry. In the said letter dated 16th January 2002, the respondent
requested the petitioner to be consignee in the matter of permanent
materials to be imported by the respondent at their cost (covering
payments of materials by letter of credit) including freight insurances,
taxes, custom duty and any other charges whatsoever payable in
connection with the import and its incorporation in the work. In the said
letter, the respondent confirmed that the petitioner becoming consignee,
it would not absolve the respondent from any of the obligations and
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would not alter the payment terms under the contract dated 19 th
September 2000 awarded to the respondent by the petitioner.
165. The respondent also gave an undertaking on 16 th January
2002 to abide by all the obligations, responsibilities etc. as if the
respondent themselves were the consignees and agreed to indemnify
the petitioner for such consequences arising out of the petitioner
becoming the consignee. The respondent also made it clear that the
responsibilities of the petitioner would be the same as under the contract
and would be limited to issuing required recommendatory letters for
obtaining such permits and licenses and the same would not in any way
vitiate their contractual liabilities and the obligations cast upon the
respondent under the contract. Based on such undertaking given by the
respondent, the petitioner took various steps to grant Essentiality
Certificate.
166. A perusal of the letter dated 2nd February 2002 addressed by
the respondent to the petitioner clearly indicates that the respondent
conveyed to the petitioner that since the subject project was now no
longer being funded by the Asian Development Bank, the respondent
proposed that in order to maintain equity, the clause 10.2(g) of the
EXIM Policy may be considered and necessary certificate be issued to
the respondent. It is thus clear beyond reasonable doubt that various
terms and conditions referred to aforesaid forming part of the contract
clearly indicated that all taxes and duties including customs and excise
duties were included in the bid price quoted by the respondent and was
not separately payable. Both the parties were ad-idem on this issue.
The respondent had demanded payment based on equity and contrary
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to the terms and conditions of the contract entered into between the
parties.
167. In my view, even if there was any ambiguity resulted from
clause 2.0 of the Preamble to the Bill of Quantities, in view of clause 5.2
of the General Conditions of Contract as amended by clause 5.2 of the
Special Conditions of Contract, specified priority of Contractual
documents, the provisions of the Letter of Acceptance would prevail over
the Preamble to the Bill of Quantities.
168.
A perusal of the award on this claim indicates that the
learned arbitrator has allowed this claim on the ground that price bids
were submitted by the respondent on the basis of Notification bearing
Nos.108/95 and 84/97 and that the respondent had alleged to have
altered their position to their detriment. In my view, the finding of the
learned arbitrator is ex facie contrary to the aforesaid provisions of the
contract which clearly provided that the price bid required to be
submitted by the respondent was inclusive of Excise and Customs duties
and thus claim for reimbursement of deemed export benefit and for
payment of customs duty was clearly prohibited under the terms of the
contract. In my view, the impugned award, in so far as this claim is
concerned, shows perversity and patent illegality.
169. In so far as the submission of the learned senior counsel for
the respondent that the learned arbitrator has harmoniously read
correspondence along with various provisions of the contract holding
that the respondent was not required to pay Excise and Customs duties
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in its quoted rates and price in the contract and the interpretation of the
learned arbitrator being a possible interpretation cannot be substituted
by another interpretation by this Court is concerned, in my view, the
learned arbitrator cannot decide contrary to the terms of the contract by
interpreting the terms of the contract. In my view, the interpretation of
the learned arbitrator in this case, in so far as this claim is concerned, is
ex facie contrary to the terms of the contract and is not a possible
interpretation.
170. In so far as the submission of the learned senior counsel for
the respondent that since under the terms and conditions of the contract,
the respondent was not liable to pay any customs duty at all on import
being made, the question of the respondent including the customs duty
in the price bid did not arise is concerned, in my view, there is no merit
in this submission of the learned senior counsel. The provision of the
contract including the notifications referred to by the learned arbitrator
in the impugned award made it clear that the customs duty was payable
on import of various items. In my view, the learned arbitrator cannot
interpret a contract in such a way which would violate the terms and
conditions of the contract. Since the learned arbitrator has decided
contrary to the terms and conditions of the contract, this Court has
ample power to set aside such arbitral award. The judgment of the
Supreme Court in the case of Bank of India Vs. K. Mohandas (supra)
does not assist the case of the respondent.
171. In my view, even if the petitioner had decided not to avail
of Asian Development Bank funding for the project, the respondent
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was still bound by the terms and conditions of the contract. The
respondent did not make any claim for damages on account of the
petitioner not having availed of Asian Development Bank funding for
the project. In my view, the learned arbitrator could not have decided
on the basis of equity and contrary to the terms and conditions of the
contract. In these circumstances, in my view, the judgments of the of
the Supreme Court in the cases of M/s.Tarapore & Co. Vs. Cochin
Shipyard Ltd. (supra) and M.P. Sugar Mill Co. Ltd. Vs. State of Uttar
Pradesh (supra) would not assist the case of the respondent at all. It is
not in dispute that even after decision of the petitioner not to avail of
Asian Development Bank funding for the project, the respondent had
applied for Essentiality Certificate and had made it clear beyond
reasonable doubt that the provision of the contract would be still binding
upon the respondent and indemnified the petitioner for any claim even
if the petitioner had issued necessary certificate for availing Essentiality
Certificate by the respondent. In my view, there is no merit in the
submission of the learned senior counsel for the respondent that the
claim made by the respondent before the learned arbitrator was for
reimbursement or compensation on the basis that the respondent would
have been entitled to exemption if the petitioner would not have
cancelled the Asian Development Bank loan. It was clearly provided in
the contract that although the source of funding was the Asian
Development Bank, no party other than the petitioner would derive any
rights from loan.
172. Various judgments relied upon by the learned senior counsel
for the respondent in support of the submission that since interpretation
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of the learned arbitrator on the terms and conditions of the contract was
a possible interpretation and cannot be substituted by the another
interpretation by this Court, there is no dispute about the propositions of
law laid down in those judgments. However in the facts of this case, in
my view, the interpretation of the learned arbitrator is contrary to the
terms of the contract and not being a possible interpretation, interference
with such so called interpretation of the learned arbitrator is permissible
under Section 34 of the Arbitration and Conciliation Act, 1996. A perusal
of the impugned award on this issue indicates that the learned arbitrator
has totally overlooked the aforesaid provisions of the contract which
were binding not only on the parties but also on the learned arbitrator.
The learned arbitrator has decided contrary to the terms of the contract.
In my view, the award of the learned arbitrator on this claim thus
deserves to be set aside.
173. A perusal of the paragraph 114 of the impugned award, in
so far as the quantification of the claim of Rs.7,85,66,365.01 made by the
respondent is concerned, the petitioner had disputed the quantification
of claim and thus the learned arbitrator even otherwise could not have
allowed the said claim without proof of the payment of the custom duty
etc. The award is based on no evidence and thus the award in respect of
this claim deserves to be set aside on this ground also.
CLAIMS FOR COMPENSATION
MADE BY THE RESPONDENT UNDER SEVEN HEADS
174. Learned arbitrator has decided these claims under Issue
nos.3, 4, 5 and 8. The respondent had applied for extension of 7711
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days under various heads before the Engineer. The Engineer, however,
had granted extension of 177 days. It is the case of the petitioner that
the said period of 177 days extension did not include a period of 36
days extension which was never brought for consideration of the
Engineer. The respondent, however, ultimately claimed extension of
1805 days only in their statement of claim filed before the learned
arbitrator. Learned arbitrator in the impugned award has granted
extension of 1437 days.
175. Learned senior counsel for the petitioner has filed a detailed
statement giving break-up of delay before this Court as alleged by the
respondent before the learned arbitrator.
176. Learned senior counsel for the petitioner invited my
attention to some of the correspondence exchanged between the parties
in so far as these claims are concerned and would submit that in so far as
the issue no.8 decided by the learned arbitrator in respect of alleged
delay concerning obstruction of piling is concerned, the same clearly
fell outside the scope of arbitral disputes and was beyond the scope of
the order passed by the Supreme Court on 6 th December 2004. He
submits that the claim for extension was made by the respondent under
various heads. Learned senior counsel submits that the findings of the
learned arbitrator in respect of these claims are totally perverse. The
award is based on the evidence.
177. It is submitted that in so far as the issue no.3 discussed by
the learned arbitrator in respect of delay of 53 days and of 462 days
and also the part of issue no.3 in so far as delay of 36 days is
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concerned, the impugned award rendered by the learned arbitrator is ex
facie perverse. It is submitted that the Engineer had rightly awarded
extension only for 177 days after considering the facts on record which
could not have been increased by the learned arbitrator and that also
without disclosing any reason as to why he disagreed with the findings of
the Engineer. He submits that the learned arbitrator had not disclosed
in the impugned award as to on what basis or on the basis of which
documentary or oral evidence or by adopting which method, he had
disagreed with the extension of 177 days awarded by the Engineer.
178.
Learned senior counsel for the petitioner submits that the
respondent had examined Mr.Sanath Kumar as one of their witnesses to
prove the disputed documents and also the contents thereof. The said
Mr.Sanath Kumar had filed affidavit in lieu of examination of chief on
behalf of the respondent. He submits that the respondent had also
examined Mr.Sanjeev Agarwal and Mr.P.G.Mandre as their witlessness
with regard to specific issue. The said Mr.Sanath Kumar was examined
as regards Serial Nos.1, 3, 5, 14, 36, 38 and 47 of Issue Nos.3, 4, 5 and 8.
179. It is submitted that since the said Mr.Sanath Kumar did not
remain present for the purpose of cross-examination and had left his
evidence midway, the learned arbitrator could not have relied upon the
evidence deposed by the said Mr.Sanath Kumar in examination-in-chief
or in toto except the admissions made by him. He submits that though
the learned arbitrator had given a ruling that the said Mr.Sanath Kumar
could not remain present for the entire cross-examination and his
evidence would not be considered, learned arbitrator however has placed
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reliance upon the evidence led by Mr.Sanath Kumar which was not
permissible in law. Claims for damages/ compensation thus made by the
respondent and in support of those claims, the said Mr.Sanath Kumar
was examined by the respondent had not been proved. The claims for
damages thus awarded by the learned arbitrator by relying upon the
evidence of Mr.Sanath Kumar deserves to be set aside.
180. It is submitted by the learned senior counsel that the learned
arbitrator did not pass any order directing the said Mr.Sanath Kumar to
remain present for the purpose of cross-examination. The petitioner,
therefore, had filed an application under Section 27 of the Arbitration
Act before this Court for issuance of witness summons upon the said
Mr.Sanath Kumar. The said application however was rejected by this
Court on the ground that the learned arbitrator himself had not made
such application or had not granted liberty to the petitioner to apply for
assistance of this Court under Section 27 of the Arbitration Act. He
submits that the said Mr.Sanath Kumar had also given his evidence on
the issue of piling. He led evidence on the allegations of delay of 53
days dealt with under Issue No.3. The learned arbitrator has allowed
the extension of 53 days on account of delay alleged by the respondent
relying upon the evidence of Mr.Sanath Kumar which is ex-facie
perverse.
181. Learned senior counsel for the petitioner submits that even
in respect of extension of 34 days, learned arbitrator referred to and
relied upon the evidence of Mr.Sanath Kumar inspite of objection
specifically raised by the petitioner and that also without dealing with
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the said objection raised by the petitioner. He submits that though the
said Mr.Sanath Kumar was not available in cross-examination, the
learned arbitrator marked various documents and more particularly
Jackup reports which was sought to be proved by the respondent through
the said witness Mr.Sanath Kumar. It is submitted by the learned senior
counsel that the learned arbitrator could not have placed reliance upon
the purported Daily Shift Reports/Daily Survey Reports/Daily Progress
Reports also which was sought to be proved through the said witness
Mr.Sanath Kumar.
182.
It is submitted that in any event the award is contrary to the
evidence on record and particularly, the answers given by the said
Mr.Sanath Kumar including the answer to question no.93. He submits
that the respondent had not proved either by way of documentary
evidence or oral evidence, their entitlement in respect of the claim for
extension of 53 days. The learned arbitrator without any documentary
evidence or oral evidence on record or without any basis held that the
alleged delay of 53 days was on account of incorrect data alleged to
have been furnished by the Engineer of the petitioner.
183. Learned senior counsel for the petitioner submits that the
extension of 53 days granted by the learned arbitrator is also contrary
to Clause 14.1 of the contract which mandated that the contractor shall
furnish scheduled period of commencement and completion of the
work. He submits that even the said Mr.Sanath Kumar in his evidence
had admitted that prior to 17th November 2000, no survey was carried
out. He submits that there was thus no delay in respect of the said work
attributable on the part of the petitioner.
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184. Learned senior counsel for the petitioner invited my
attention to various portions of the cross-examination of other two
witnesses who were examined by the respondent to prove the claim for
compensation/damages and would submit that conclusion of the learned
arbitrator is totally erroneous and contrary to the evidence on record.
The finding of the learned arbitrator that the entire time extended by the
petitioner from 2nd March 2002 in revising specifications was lost is
totally perverse and based on no evidence. He submits that the evidence
led by the petitioner is completely ignored by the learned arbitrator.
185.
Learned senior counsel for the petitioner invited my
attention to page 240 of the arbitration petition and would submit that
though the learned arbitrator had given a ruling that the petitioner could
rely upon the admissions, if any, of the said Mr.Sanath Kumar in his
evidence, though the said Mr.Sanath Kumar had made various admissions
during the course of his cross-examination, the learned arbitrator has
ignored those admissions made by the said Mr.Sanath Kumar in the
impugned award.
186. Learned senior counsel for the petitioner invited my
attention to the cross-examination of Mr.Mandre who was examined by
the respondent in which the said witness had admitted that the drawings
submitted by the respondent were not based on P & ID drawings.
Finalization of vendor was not the responsibility of the petitioner but
was of the respondent. He submits that ultimately the respondent had
supplied pump of the same specifications and thus delay could not be
attributable against the petitioner.
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187. It is submitted by the learned senior counsel for the
petitioner that the respondent had made claim for delay of 7711 days in
the statement of claim, however, had restricted their claim for alleged
delay of 1805 days in the written arguments filed before the learned
arbitrator. The Engineer had approved the delay of 177 days only. The
learned arbitrator, however, has granted compensation and extension in
respect of 1437 days as alleged delayed period not attributable on the
part of the respondent.
188. Learned senior counsel invited my attention to paragraphs 76
to 79 of the impugned award which recorded the conclusion drawn by
the learned arbitrator in respect of the claim for compensation under
Issue No.7. It is submitted by the learned senior counsel that save and
except two items i.e. Rs.8,34,68,833/- in respect of the loss alleged to
have been incurred by the respondent on account of opportunity cost of
Rs.21,07,655/- and in respect of compensation for reimbursement of
price adjustments, the learned arbitrator did not give any findings in
respect of five other components totalling to Rs.44,18,15,614/- and
awarded the entire claim of Rs.52,73,92,129.01 in favour of the
respondent. He submits that the entire award in respect of the claim for
compensation shows perversity, arbitrariness, non-application of mind on
the part of the learned arbitrator and shows patent illegality.
189. It is submitted by the learned senior counsel that the claim
for loss of opportunity was not even referred for adjudication of the
Engineer as contemplated under Clause 67.3 of the General Conditions
of Contract as well as Conditions of Particular Application. He submits
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that the said claim was thus without jurisdiction. It is submitted that
even if any delay was attributable on the part of the petitioner, the
learned arbitrator could not have allowed the claim for compensation
unless the respondent would have proved the actual loss suffered by
them due to such alleged delay attributable on the part of the petitioner.
He submits that loss of opportunity was neither made before the Supreme
Court nor before the Engineer. He submits that the compensation
awarded by the learned arbitrator is not mathematically deduced. The
learned arbitrator has not disclosed in the impugned award as to how
the alleged delay on the part of the petitioner was translated into money.
190. Learned senior counsel invited my attention to the pages 192
to 198 of the arbitration petition i.e. part of the award in respect of the
claim for compensation and would submit that in those paragraphs, the
learned arbitrator has only recorded the submissions of both the parties.
The learned arbitrator, however, has not dealt with those submissions
while drawing a conclusion by recording reasons or otherwise. He
submits that the learned arbitrator has allowed the claim for loss of
opportunity @10% of the average turnover of the respondent by
accepting the figures of such alleged turnover mentioned in the
certificate alleged to have been issued by the Chartered Accountant
appointed by the respondent which certificate was not proved by the
respondent.
191. It is submitted by the learned senior counsel that the claim
for compensation was not supported by any contemporaneous documents
as contemplated under Clause 53.4 read with Clauses 53.3 and 53.2 of
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Section 2 of the Conditions of Contract, Part-I of the General Conditions
of Contract forming part of the contract. He submits that to support
the claim for compensation of Rs.52,73,92,129.01 made by the
respondent, the respondent had relied upon a letter dated 4 th January
2005 addressed by the respondent after the appointment of the learned
arbitrator for adjudication of disputes pursuant to the order dated 6 th
December 2004 passed by the Supreme Court and also relied upon the
alleged certificate dated 3rd January 2005 issued by Mr.J.C. Bhatt,
Chartered Accountant allegedly certifying the turnover of the respondent
without any basis, the alleged letter dated 3 rd December 2004 alleged
to have been addressed by M/s.Universal Surveyors and Adjustors
Pvt. Ltd. inter alia showing the depreciation written down value and
the alleged deployment of machinery. The respondent also placed
reliance on the purported break up of manpower cost upto 16 th
January 2003 issued by Mr.J.C. Bhatt, Chartered Accountant vide his
letter dated 12th April 2005.
192. Learned senior counsel submits that none of the above
referred documents relied upon by the respondent were admitted by the
petitioner. He submits that though the respondent had not proved the
existence and contents of those documents including the alleged
certificate issued by the Chartered Accountant and the Surveyor, the
learned arbitrator heavily placed reliance upon those disputed and
unproved documents. He submits that the award is in gross violation of
principles of natural justice and the principles of Evidence Act which
are applicable to the arbitration proceedings. He submits that the
aggregate claim of Rs.52,73,92,129.01 made by the respondent and
awarded by the learned arbitrator are not at all supported by any
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evidence or proof. He submits that in any event, none of those claims
or compensation were sustainable on account of non-compliance of the
mandatory obligations on the part of the respondent under Clauses 53.2
and 53.3 of Section 2 of the Conditions or Contract, Part-II of the
General Conditions of Contract read with Clause 67.3 thereof.
193. In so far as the claim "on account of Reimbursement of
Equipment Cost- Rs.25,06,56,010/-" awarded by the learned arbitrator is
concerned, it is submitted by the learned senior counsel that no finding
has been rendered by the learned arbitrator in respect of this claim at all
while allowing the said claim in the aggregate amount of compensation
of Rs.52,73,92,129/-. It is submitted that in support of this claim, the
respondent had placed reliance on the alleged detailed break up of the
claim contained in their letter dated 4th January 2005, their written
submissions containing calculations for monthly hire charges based on
assumptions and without any supporting proof, the alleged assessment
report of the Surveyor, the alleged documents at Serial No.1311 to
1313 of the affidavit of documents dated 10th August 2005 filed by the
respondent before the learned arbitrator and some of the documents
under Volume GG regarding some of the equipment allegedly taken on
hire.
194. It is submitted by the learned senior counsel that none of
those documents were admitted by the petitioner. He submits that the
respondent had not proved the existence and contents of those documents,
the learned arbitrator however relied upon those unproved and disputed
documents while allowing the said claim. He submits that the respondent
had failed to produce and prove before the learned arbitrator that they
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had maintained and produced for the perusal of the Engineer any
contemporary records as required to be produced under the provisions
of the Contract in support of this claim. No such alleged contemporary
records were produced and proved even before the learned arbitrator
by the respondent.
195. It is submitted by the learned senior counsel that though the
respondent had admittedly not examined the Surveyor who alleged to
have submitted the assessment report which was relied upon by the
respondent before the learned arbitrator which alleged documents were
within the knowledge of the respondent and which alleged report was
based on the data alleged to have been given by the staff of the
respondent, the learned arbitrator strongly placed reliance on the
alleged Surveyor's report in violation of principles of natural justice
and principles of Evidence Act. The respondent had not produced any
proof of actual deployment of the machinery and equipment and date
of purchase. He submits that if the Surveyor would have been examined
as one of the witnesses by the respondent to prove the contents and
existence of the said alleged report, the petitioner could have cross-
examined him.
196. Learned senior counsel invited my attention to pages 195
of the arbitration petition i.e. forming part of the award which records
that the evidentiary value of the certificate of the respondent was disputed
between the parties. He submits that though admittedly the said Chartered
Accountant was not examined as witness by the respondent, the learned
arbitrator still heavily placed reliance on the said alleged certificate
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issued by the Chartered Accountant while allowing the claim for
compensation made by the respondent.
197. Learned senior counsel placed reliance on Section 19(3) of
the Arbitration and Conciliation Act, 1996 and would submit that even
under the said provision, the learned arbitrator could not have overlooked
the procedure agreed by and between the parties under Clause 53.4 of
the General Conditions of Contract and was bound to decide in
accordance with the provisions of the Contract. He submits that except
the certificate issued by the Chartered Accountant
ig and the alleged
Surveyor's report, the respondent did not produce any contemporaneous
records as contemplated under the provisions of the Contract before the
learned arbitrator. The learned arbitrator accepted the alleged documents
mechanically without any proof. The objections raised by the petitioner
in respect of the existence and contents of those documents have not
been dealt with by the learned arbitrator though such objections were
recorded by the learned arbitrator in the impugned award.
198. In so far as the claim made by the respondent "on account
of Reimbursement of Manpower Cost-Rs.1,52,68,804/-" is concerned,
it is submitted by the learned senior counsel that the respondent had not
adduced any documentary or oral evidence or examined any concerned
person with regard to actual deployment of manpower during the alleged
extended period of contract for which the respondent had prayed for
reimbursement of manpower cost. The respondent had also not produced
any contemporaneous documents in respect thereof. Learned senior
counsel submits that the award of this claim is also challenged on the
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similar grounds raised in respect of the claim on account of
reimbursement of equipment cost.
199. In so far as the claim "on account of Reimbursement of
Overhead Cost-Rs.11,53,63,161/-" is concerned, it is submitted by the
learned senior counsel for the petitioner that the learned arbitrator did
not arrive at any conclusion in respect of the said claim and wrongly
included the amount of Rs.11,53,63,161/- under the said claim in the
total sum of Rs.52,73,92,129/- awarded by the learned arbitrator towards
damages in favour of the respondent. He submits that the said claim is
also awarded by the learned arbitrator mechanically without any evidence
and the award of this claim is also challenged on the similar grounds on
which the claim on account of reimbursement of manpower cost is
challenged by the petitioner.
200. In so far as the claim "on account of Compensation for
hike in steel price hike-Rs.4,89,19,973/-" is concerned, it is submitted
by the learned senior counsel that the learned arbitrator has not given
any findings in respect of the said claim in the impugned award at all.
He submits that as per Clause 70.1 of Conditions of Particular
Application, the petitioner had already paid the escalation cost
aggregating to Rs.9,78,30,634/- to the respondent for the work done
by the respondent upto 30 th October 2004 and thus the respondent was
not entitled to make any claim for the alleged hike in steel price hike.
He submits that the alleged hike in steel price hike was over lapping
with the amount of escalation already paid by the petitioner to the
respondent. He submits that escalation amount of Rs.9,78,30,634/- paid
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by the petitioner to the respondent included the escalation in respect of
the items comprising of steel. He submits that in any event, the said
claim was not supported by any acceptable or admissible evidence.
201. It is submitted by the learned senior counsel that there
were gross discrepancies between Annexure-IV to the letter dated 4 th
January 2005 of the respondent and the interim Bill No.24 raised by
the respondent after completion of the whole work under the contract.
He submits that the petitioner had disputed the contents of the letter
dated 4th January 2005 and the Annexures thereto. It is submitted that
no contemporaneous documents in support of such huge claim as
required under Sub Clause 53.4 of Section 2 of Conditions of Contract,
Part-I of General Conditions of Contract had been produced by the
respondent before the learned arbitrator. He submits that the entire award
suffers from non-application of mind and shows patent illegality.
202. In so far as the claim "on account of Compensation for
Financial Cost-Rs.1,16,07,691/-" is concerned, it is submitted by the
learned senior counsel for the petitioner that the learned arbitrator did
not give any findings in respect of this claim and included the said claim
amount in the huge claim of Rs.52,73,92,129/- mechanically. He
submits that though the learned arbitrator had recorded the submissions
advanced by both the parties, he came to a conclusion in so far as this
claim is concerned without dealing with the submissions made by both
the parties and more particularly the petitioner. The respondent had not
produced any contemporaneous records as contemplated under Clauses
53.4, 53.2 and 53.3 of General Conditions of Contract or any evidence
and thus failed to substantiate the said claim.
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203. In so far as the claim "on account of Compensation for
Loss of Opportunity-Rs.8,34,68,833/-" is concerned, it is submitted by
the learned senior counsel for the petitioner that the learned arbitrator
awarded the said claim without any material evidence on record and
overlooking the mandatory provisions of the contractual Clause 53.4
of General Conditions of Contract. He submits that the learned arbitrator
had totally overlooked and ignored Clause 53.4 read with Clauses
53.2 and 53.3 of the General Conditions of Contract under which the
learned arbitrator under an obligation to ascertain whether the respondent
had produced any contemporary documents in support of the said claim.
The entire claim awarded by the learned arbitrator was based on no
evidence.
204. In so far as the claim "on account of Reimbursement of
Price Adjustment-Rs.21,07,655/-" is concerned, it is submitted by the
learned senior counsel that this claim awarded by the learned arbitrator
is also based on no evidence and contemporaneous documents as
required under Clause 53.4 read with Clauses 53.2 and 53.1 of
Section 2 of Conditions of Contract. The learned arbitrator even did
not consider the material on record and submissions made by the
petitioner. He submits that this part of the claim in respect of increment
in labour charges was contrary to clause 70.1 of the Conditions of
Particular Application.
205. Learned senior counsel for the petitioner placed reliance on
the judgment of the Supreme Court in the case of Associate Builders
Vs. Delhi Development Authority, reported in (2015) 3 SCC 49 and
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in particular paragraphs 28 to 37 and 40 in support of the submissions
that since the award rendered by the learned arbitrator shows patent
illegality and perversity, the same deserves to be set aside. He also
placed reliance on the judgment of the Supreme Court in the case of
Navodaya Mass Entertainment Ltd. Vs.J.M. Combines, reported in
2015 (5) SCC 698 and more particularly paragraph 8 thereof. He
distinguished the judgment of the Supreme Court in the case of
Ravindra Kumar Gupta and Company Vs. Union of India, reported
in (2010) 1 SCC 409.
206.
Learned senior counsel for the petitioner placed reliance on
an unreported judgment delivered by this Court on 24 th June 2013 in
the case of M/s.J.N. Construction Vs.M/s.Shah Jagshi Jethabhai in
Appeal No.707 of 2012 in Arbitration Petition No.348 of 2009 and
would submit that the Division Bench has set aside the arbitral award
awarding the claim for compensation which was allowed without
entering into a finding to the effect that the present Hudson's formula
was an appropriate formula to adopt and since the award had merely
recorded that it was well known that there were various formulae for
the purpose of computing the damages. The award did not indicate any
evaluation for adopting a particular basis or formula. Division Bench
had set aside the arbitral award on the ground that the learned arbitrator
had proceeded to divide the period of delay and to apportion it equally
between the parties thereto without any evidence being adduced by the
appellant and held that the said award was founded on no evidence at
all. It is submitted by the learned senior counsel that in this case, the
learned arbitrator has allowed the entire claim for compensation based
on no evidence and contrary to the principles of law laid down by this
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Court in the case of M/s.J.N. Construction (supra). It is submitted that
the pleadings filed by the respondent cannot be considered as proof
which has been done by the learned arbitrator in this case.
207. Learned senior counsel for the petitioner placed reliance on
the judgment of the Delhi High Court in the case of Avi Coach Builders
Vs. Union of India, reported in 2009 (1) Arb.LR 254 (Delhi) (DB)
and more particularly paragraph 13 thereof and would submit that even
though the arbitral award recites that the pleadings filed by both the
parties, documentary evidence produced by them and the detailed
arguments were put forth by each of the parties, the award was lacking
in reasons. He also placed reliance on the judgment of the Delhi High
Court in the case of Delhi Development Authority Vs.Sunderlal
Kothari and Sons, reported in [ILR (2009) III Delhi 648] and more
particularly paragraph 33 and would submit that the learned arbitrator
could not have given reasons in support of the part of the claim and not
in support of the other claims.
208. Mr.Khambatta, learned senior counsel for the respondent,
on the other hand, submits that in view of the amendment to Section 34
of the Arbitration and Conciliation Act, 1996, the Wednesbury principles
interpreted by the Supreme Court in the case of ONGC Vs. Western
GECO International Ltd., reported in (2014) 9 SCC 263 cannot be
made applicable by this Court in this case. He placed reliance on
recommendation made by the Law Commission considered by this Court
in the case of M/s.Rendezvous Sports World Vs. The Board of Control
for Cricket in India delivered on 14th June 2016 in Chamber Summons
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No.1530 of 2015 in Execution Application (L) No.2481 of 2015 and
more particularly paragraphs 23, 24, 26, 36 and 41 thereof. He
submits that the principles of law laid down by this Court in the said
judgment after construing various amendments to the Arbitration and
Conciliation Act, 1996 would apply to this case while dealing with the
application under Section 34 of the Arbitration Act. He submits that the
amended grounds under Section 34 only can be applied to the present
proceedings and thus Wednesbury principles cannot be applied.
209. Without prejudice to the aforesaid submissions made by the
learned senior counsel on the limited scope of reference of the Arbitration
Act, it is submitted by the learned senior counsel that the respondent
had claim first extension for 674 days, second extension for 160 days,
third extension for 163 days and fourth extension for 36 days totaling
to 1033 days. The respondent, however, was able to complete the work
in 562 days. The learned arbitrator awarded extension of 562 days
and awarded compensation in respect thereof. He submits that the
claims concerning delay and grant of extension are dealt with the
learned arbitrator under Issue nos.3, 4, 5 and 8. It is submitted that the
findings recorded by the learned arbitrator on those four issues are
purely factual in nature and cannot be interfered with by this Court.
He submits that this Court cannot re-appreciate the evidence on record
which was extensively led before the learned arbitrator and considered
by the learned arbitrator.
210. It is submitted that the learned arbitrator has interpreted the
terms of the contract and since his interpretation is a possible
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interpretation, the same cannot be substituted by another interpretation
by this Court.
211. It is submitted by the learned senior counsel that the bid of
the respondent was accepted on 30 th May 2000. The letter of
acceptance was issued on 19th September 2000 which was clarified
on 28th September 2000, stipulated date for completion of work was
15th June 2003 and the work was actually completed by 28 th December
2004 to the satisfaction of the petitioner. There was thus delay of 562
days beyond stipulated period of completion beyond the control of the
respondent. Learned senior counsel placed reliance upon several letters
addressed by the respondent to the Engineer of the petitioner for seeking
extension of time for number of days with the reasons recorded therein
not attributable to the respondent. He submits that the respondent did
not finally press in respect of all the items as claimed in the statement
of claims and more particularly on account of mechanical delays before
the learned arbitrator and had restricted their claim to the delay events
provided in the tabulations appended to the written note submitted by
the respondent before the learned arbitrator in Volume 21 and more
particularly on pages 11 to 38 thereof.
212. It is submitted by the learned senior counsel that the learned
arbitrator considered each and every delay on its individual merits
without reference to the parallel effect and found that those delays
were not attributable to the respondent but were attributable to the
petitioner. He submits that though the respondent was entitled to much
more than the actual delay of 562 days, the learned arbitrator had
awarded the claim for delay of only 562 days. He submits that there is
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thus no perversity in the impugned award rendered by the learned
arbitrator as canvassed by the learned senior counsel for the petitioner.
213. Learned senior counsel for the respondent would submit that
9 days extension awarded by the learned arbitrator was due to such
delay overlapping the other delays. He submits that if there was any
mistake on the part of the learned arbitrator in considering the delay
attributable on the part of the petitioner, at most it could be considered
as a mistake of fact and the impugned award thus could not be set aside
on the ground of the alleged mistake of fact.
ig He submits that no
application was filed by the petitioner for clarification of the impugned
award or for additional award under Section 33 of the Arbitration Act.
He submits that the learned arbitrator has not allowed the claim on the
basis of what the respondent could claim as actual entitlement but
allowed the claim on the basis of actual additional days taken by the
respondent in carrying the work.
214. It is submitted by the learned senior counsel that clause 5.8
of the Contract Volume 10 at page 156 provides for submission of
reports on a regular frequency to the Engineer of the petitioner which
report was submitted as per the Contract to the said Engineer for the
purpose of apprising the status of works and availability of resources.
He submits that those documents were within the meaning of words
"contemporaneous records" under Clauses 53.2 and 53.4 of the General
Conditions of Contract. He submits that there was no complaint against
the respondent by the petitioner or its Engineer at any point in time
that clause 5.8 of the contract had not been complied with or there
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had been a wrong reporting in the said reports. He submits that in any
event, under clause 53.4 of the General Conditions of Contract, the
contractor could submit the said contemporaneous records directly
before the learned arbitrator also.
215. It is submitted that the respondent had actually submitted
those reports before the learned arbitrator along with their pleadings
and not for the first time through Mr.Sanath Kumar (CW-1). It is
submitted that the petitioner, however, vide their letter dated 20 th May
2005 had denied some of the documents which documents did not
contain any of those reports. He submits that mere tendering of those
documents of Mr.Sanath Kumar was a matter of formal proof which can
be dispensed with in arbitration proceedings. The learned arbitrator is
empowered to rely upon those documents which were admitted by the
petitioner and were part of the project documentation, submitted
contemporaneously to the Engineer of the petitioner under the provisions
of the contract by the respondent. He submits that the respondent had
filed Daily Progress Reports/Weekly Progress Reports/Daily Shift
Reports before the learned arbitrator. It is submitted that the Daily Shift
Reports were never disputed before the learned arbitrator and there was
no dispute that the reports were maintained according to the contractual
provision. He submits that even the petitioner had referred to some of
those reports in their written arguments filed before the learned
arbitrator.
216. In so far as the Weekly reports for the period from 14 th
November 2000 to 20th December 2004 produced before the learned
arbitrator is concerned, it is submitted that these volumes of records
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which were produced before the learned arbitrator were maintained in
ordinary course of business. He placed reliance on letter dated 20 th
May 2005 addressed by the learned advocate for the petitioner to the
learned advocate for the respondent and would submit that none of
Daily reports or Weekly reports except one were disputed by the
petitioner. He submits that such reports were the primary evidence.
217. In so far as the oral evidence of Mr.Sanath Kumar examined
by the respondent is concerned, it is submitted by the learned senior
counsel that the award cannot be said to have been based upon the
evidence of Mr.Sanath Kumar alone. He submits that the learned
arbitrator in the impugned award and more particularly in paragraph
21 had categorically mentioned that the correspondence as well as the
evidence of the witness placed on record by the respondent clearly
shows that the respondent was furnished with inaccurate data leading
to delay in the implementation of the project. He submits that the learned
arbitrator thus considered the correspondence also and not the evidence
of Mr.Sanath Kumar alone. It is submitted that to what extent such
evidence was relied upon by the learned arbitrator cannot be discerned
from the award.
218. It is submitted by the learned senior counsel that there was
no specific reference to the question and answer of Mr.Sanath Kumar
in the impugned award. The submissions made by the learned senior
counsel for the petitioner are merely speculative. He submits that even
if Mr.Sanath Kumar did not attend for the purport of his cross-
examination, the same would not make any difference on merits of the
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claims made by the respondent and the impugned award cannot be set
aside on that ground. He submits that the learned arbitrator had not
followed the procedure of marking of documents relied upon by both
the parties.
219. It is submitted by the learned senior counsel that Mr.Mandre,
one of the witnesses examined by the respondent while answering the
question no.464 had categorically stated that the preceding activity for
installation of fire water pump was completion of deck slab at pump
house and had confirmed that the deck slab was completed on 23 rd
March 2002. Admittedly, the time required for manufacturing and
procurement of pump was six months after finalization of purchase
specification.
220. In so far as the quantification of claim awarded by the
learned arbitrator is concerned, it is submitted by the learned senior
counsel for the respondent that in paragraph 74 of the impugned award,
the learned arbitrator had categorically rendered a finding of fact that
in view of answers to Issue nos.3, 4 and 5 in the affirmative, the
respondent herein would be entitled to damages on account of extended
stay and costs incurred by the respondent and they would also be
entitled to damages. He submits that the learned arbitrator has applied
his mind to the evidence placed before him and has given various
findings and conclusions based on such evidence.
221. It is submitted by the learned senior counsel that in so far as
equipment cost is concerned, the learned arbitrator has considered the
letter dated 4th January 2005 by which the respondent had submitted a
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detailed break-up of the said claim. The said letter is considered in
paragraph 1.20(i)(a) at page 193 of the arbitration petition. The learned
arbitrator has also considered the detailed basis of the said claim
furnished by the respondent in their written submissions. The respondent
had computed the hire charges of each machinery in accordance with
the provisions of IS No.11590 and replacement value of equipment.
He has also considered the Assessment Report of the Surveyor
regarding each machinery, list of actual deployment period, date of
purchase, replacement value, depreciated value and balance service life
in respect of each machinery certified by the said Surveyor. Learned
senior counsel submits that the learned arbitrator had also considered
the documents at Serial Nos.1311 to 1313 of the Affidavit of documents
dated 10th August 2005 and also the documents filed in Volume GG
regarding equipment taken on hire from different suppliers disclosed
through the Affidavit of Documents filed on 25 th November 2005. He
submits that in paragraph 75.1.20(i)(c) at page 193 of the arbitration
petition, the learned arbitrator has rendered a finding that it can safely
concluded that the details furnished by the respondent herein are
relevant parameters for determining the hire charges of the respective
machinery/equipment.
222. In so far as the manpower cost is concerned, the learned
senior counsel for the respondent submits that the learned arbitrator has
considered Annexure-II of Volume E which was consisting of detailed
computation of manpower cost, Auditor's Certificate for manpower cost,
Salary and Wage Register Volume EE and FF. He invited my attention
to paragraph 1.20(ii)(b) at page 195 of the arbitration petition and
submits that the learned arbitrator has rendered a finding that the
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respondent had contended that they had incurred actual manpower cost
of Rs.2,64,10,905/- during the contractual period. The aforesaid figure
was supported by the salary/wage register produced by the respondent
before the learned arbitrator. In so far as the overhead cost is concerned,
it is submitted by the learned senior counsel for the respondent that the
learned arbitrator has considered Annexure-II of Volume E which was
consisting of computation of overhead costs with details of overhead
expenses, Auditor's Certificate for Head Office overheads and site
overhead expenses and original vouchers, invoices and receipts.
223.
In so far as the claim for compensation of price hike of
steel is concerned, it is submitted by the learned senior counsel that the
learned arbitrator has considered the letter dated 4 th January 2005
addressed by the respondent wherein the respondent had submitted a
detailed break-up of the said claim. The learned arbitrator has also
considered the invoices of steel filed vide Affidavit dated 10 th August
2005.
224. In so far as the claim of Financing cost is concerned, it is
submitted by the learned senior counsel for the respondent that the
learned arbitrator has considered the letter dated 4th January 2005
addressed by the respondent wherein the respondent had submitted a
detailed break-up of the said claim. The learned arbitrator rendered a
finding in paragraph 1.20(iv)(b) at page 197 of the arbitration petition
that the respondent herein had showed that the cost of overhead and
profit was 25.97% of the contract i.e.Rs.30 crores amounting to
Rs.7.2 crores. The respondent was required to finance the said amount
of Rs.7.2 crores by utilizing their own finances suffering an interest
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loss of Rs.1.16 crores calculated @18% p.a. It is submitted that
additionally, the learned arbitrator has rendered a findings on two
further heads i.e. loss of opportunity and reimbursement on price
adjustment in paragraph 78 at page 200 of the arbitration petition.
225. It is submitted by the learned senior counsel that the learned
arbitrator had considered the original vouchers/receipts of materials,
salary receipts, proof of mobilization and demobilization machinery.
He submits that the respondent had provided all details and particulars
with all supporting vouchers in support of the amounts of
Rs.52,73,92,129/- claimed by the respondent under different seven
heads. It submitted by the learned senior counsel that the petitioner by
its letter dated 2nd December 2005 had requested the respondent to
bring those documents in original before the learned arbitrator which
were brought by the respondent to the arbitration proceedings for the
sake of inspection. The petitioner, however, did not deny any of those
documents.
226. Learned senior counsel placed reliance of the judgment of
the Supreme Court in the case of Associated Builders (supra) and in
particular paragraph 33 and would submit that this Court while deciding
the petition under Section 34 of the Arbitration Act cannot interfere with
the findings of facts and cannot re-appreciate the evidence considered by
the learned arbitrator. He submits that since the approach of the learned
arbitrator is not arbitrary or capricious, no interference with the approach
of the learned arbitrator is permissible under Section 34 of the Arbitration
Act. The learned arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon when he delivered his final award.
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227. It is submitted that whether the documents produced by the
respondent including computations, registers, Surveyor's report,
Auditor's Certificate etc. had probative value or were proved was a
matter entirely within the domain of the learned arbitrator. He submits
that the arbitrator is thus the sole judge of quality as well as the quantity
of evidence. In support of this submission, learned senior counsel placed
reliance on the judgments of the Supreme Court in the cases of
Municipal Corporation of Delhi Vs. Jagan Nath Ashok Kumar, reported
in (1987) 4 SCC 497 (paragraph 4), Sudarsan Trading Co. Vs.
Government of Kerala, reported in (1989) 2 SCC 38 (paragraph 29)
and the Associate Builders (supra) (paragraph 52). Learned senior
counsel for the respondent placed reliance on the judgment of the Delhi
High Court in the case of Delhi Development Authority Vs. Harbans
Singh & Sons, reported in 2008 (105) DRJ 60 (DB) and would
submit that the learned arbitrator was not required to give details of his
computation and give his mental meanderings. He submits that this
Court cannot go into the reasonableness of reasons or sufficiency of
the reasons recorded by the learned arbitrator.
228. Learned senior counsel placed reliance on the judgment of
this Court in the case of Union of Indian Vs. Sagar Construction
Company, reported in 2009 SCC Online Bom 1812 wherein this Court
has held that the Court must see an award in totality and some lacuna
or lack of details is not reason enough to treat an award as unreasoned
or interfere with it.
229. Learned senior counsel for the respondent distinguishes the
judgment of the Delhi High Court in the case of Avi Coach Builders
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(supra) relied upon by the learned senior counsel for the petitioner on
the ground that in that judgment, the award was set aside on the ground
that the arbitrator had not referred at all to any of the relevant
documents and had not even given brief reasons whereas, in this case,
the learned arbitrator had referred to various documents referred to and
relied upon by the respondent and has passed a reasoned award. He
distinguishes the judgment of the Delhi High Court in the case of
Delhi Development Authority Vs. Sunder Lal Khatri & Sons, reported
in ILR (2009) III DELHI 648 and would submit that short reasons
are adequate in an arbitral award and giving of reasons is not the same
as giving of a detailed judgment.
230. It is submitted by the learned senior counsel that the learned
arbitrator had accepted the Surveyor's report at page 192 of the
arbitration petition. He submits that paragraph 79 of the impugned
award has to be read with the general findings rendered by the learned
arbitrator in respect of the claim. He submits that though in the
impugned award, there was no positive conclusion that the evidence
produced in respect of the other claims were accepted by the learned
arbitrator for all the claims, the Court has to read those reasons in
respect of all the claims.
231. Learned senior counsel invited my attention to the written
arguments filed by the petitioner before the learned arbitrator and more
particularly on pages 83 to 85 wherein the petitioner had simply
denied the claim of the respondent on the ground that there was no
supporting vouchers or proof produced by the respondent. He submits
that certificate issued by the Chartered Accountant which is considered
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by the learned arbitrator has to be considered along with several
documents and reports produced by the respondent. He submits that it
was not the case of the petitioner that the entire claim for damages is
awarded by the learned arbitrator based on no evidence. He submits that
the process of the learned arbitrator while allowing the claim made by
the respondent is clear and apparent.
232. Mr.Aney, learned senior counsel for the petitioner in
rejoinder submits that the petitioner has not challenged the award on
the basis of erroneous interpretation of the contract by the learned
arbitrator but has challenged on the basis that he did not even consider
or deal with the applicable contractual clauses and has decided
contrary to the express conditions of the contract. He submits that the
petitioner has not made any submissions seeking re-appreciation of
evidence. It is submitted that as per Section 28(3) of the Arbitration
Act, the learned arbitrator was bound to ensure that the award was in
accordance with the contract which the learned arbitrator failed to do
and has decided contrary to Section 28(3) of the Arbitration Act and
the impugned award is in conflict with the public policy.
233. Learned senior counsel placed reliance on paragraph 19
of the judgment of the Supreme Court in the case of Associate Builders
(supra). He submits that the amended Section 34 of the Arbitration Act
would not apply to this petition in view of the fact that this petition is
already pending before this Court on the date of the said amendment
having come into force. He submits that in any event, even if the
amended Section 34 is applicable to the pending petition under Section
34 of the Arbitration Act, the petitioner has sufficiently made out a case
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for interference with this award even under the amended grounds of
challenge available under Section 34 of the Arbitration Act. He submits
that under the amended Section 34(2)(a), an arbitral award arising out
of the arbitrations other than international commercial arbitrations can
also be set aside by this Court, if the Courts finds that the award is
vitiated by patent illegality appearing on the face of the award. In this
case, the award shows illegality appearing on the face of the award filed
by the petitioner in the arbitration petition and during the course of oral
submissions advanced before this Court.
234.
It is submitted that the judgment of the Supreme Court in
the case of ONGC Vs. Western GECO International Ltd. (supra) holds
the field. It is submitted by the learned senior counsel that the impugned
award is not only contrary to the express provisions of the contract but is
based on the evidence of witness Mr.Sanath Kumar through whom the
respondent had submitted and sought to prove the Daily Shift Reports and
Jack up Registers which were not admitted by the petitioner which
witness was never made available for cross-examination. In support of
this submission, learned senior counsel invited my attention to the notes
of evidence of examination-in-chief of Mr.Sanath Kumar at page 3 of
Volume 30. He also placed reliance upon the Minutes of Order dated
11th June 2005 on the issue whether the evidence of Mr.Sanath Kumar
could be considered or not in view of he being not available for cross-
examination.
235. It is submitted that though the learned arbitrator himself had
observed in the impugned award that the petitioner had not admitted
those reports and the said objections had been noted by the learned
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arbitrator and though the respondent had not proved the existence and
contents of those reports, the learned arbitrator placed reliance upon
those disputed documents. He submits that since the said documents
were sought to be proved through the said witness Mr.Sanath Kumar
which was not available for cross-examination, no cognizance thereof
could be taken by the learned arbitrator as authenticate or proved
documents while allowing the claims made by the respondent and more
particularly in support of the claim for extension of time. He submits
that the documents i.e. Daily Shift Reports and Jack up Registers were
sought to be proved through the witness Mr.Sanath Kumar and the
correctness of the contents of the said Daily Shift Reports were not
admitted by the petitioner and Jack up registers were also objected to by
the petitioner.
236. It is submitted by the learned senior counsel of the
petitioner that the learned arbitrator did not give any reasons for
granting the claim of 5 components i.e. (i) Reimbursement of Equipment
cost-Rs.25,06,56,010/-, (ii) Reimbursement of Manpower cost-
Rs.1,52,68,804/-, (iii) Reimbursement of overhead cost-
Rs.11,53,63,161/-, (iv) Compensation for hike in steel price-
Rs.4,89,19,973/- and (v) Compensation for financial cost-
Rs.1,16,07,691/-, totaling to Rs.44,18,15,614/-. He submits that the
respondent cannot rely upon the alleged documentary evidence in these
proceeding to support the reasons recorded by the learned arbitrator in
these proceedings which documents were not considered by the learned
arbitrator in the impugned award. He submits that this Court cannot
probe into the mind of the learned arbitrator and to ascertain whether
the documents which were filed by both the parties must have been
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considered by the learned arbitrator though the same were not reflected,
referred or dealt with by the learned arbitrator in the impugned award.
He submits that the learned senior counsel for the respondent could not
demonstrate before this Court that any reasons were recorded by the
learned arbitrator while allowing the claim of Rs.44,18,15,614/- in the
impugned award. Learned senior counsel also placed reliance on the
paragraph 42.2 of the judgment of the Supreme Court in the case of
Associate Builders (supra).
237.
reading of the award itself,
It is submitted by the learned senior counsel that from plain
it is clear that out of total claim of
Rs.52,73,92,129.01, save and except two items i.e. Rs.8,34,68,833/- in
respect of alleged loss incurred by the respondent on account of loss of
opportunity and Rs.21,07,655/- in respect of reimbursement of price
adjustments, the learned arbitrator did not give any reasons or findings
for the award of 5 other components referred to aforesaid in the impugned
award. The award is ex-facie in violation of Section 31(3) of the
Arbitration Act and deserves to be set aside on that ground alone. He
submits that in respect of the other claims allowed by the learned
arbitrator, the claims are awarded though the documents in support of
those components were not proved.
238. Learned senior counsel reiterated his submission based on
the judgments of the Supreme Court in the cases of Mohinder Singh
Gill and Anr. Vs. Chief Election Commissioner New Delhi and Ors.,
reported in AIR 1978 SC 85 and Maharashtra State Board of
Secondary and Higher Secondary Education Vs. K.S. Gandhi,
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reported in (1991) 2 SCC 716 (paragraphs 20 and 21) in support of
his submission that the requirement of giving of reasons in the arbitration
award forms part of fundamental policy of Indian law and any breach
thereof would amount to in conflict with the most basics notions of
morality and justice.
239. Mr.Khambatta, learned senior counsel for the respondent in
sur-rejoinder reiterated his submission in respect of various findings of
facts rendered by the learned arbitrator in respect of the alleged delay
and breaches on the part of the petitioner and heavily placed reliance
on the Law Commission Report No.246 observing that the scope of
reviewing an arbitral award by the Court on the ground of public policy
had been limited and cannot be re-opened on merits. He submits that
the applicability of the Wednesbury test which is based on an
examination of facts and merits of a matter, has been removed from the
purview of the Court under the amended Section 34 of the Arbitration
and Conciliation Act, 1996. Learned senior counsel once against placed
reliance on the judgment of this Court M/s.Rendezvous Sports World
Vs. The Board of Control for Cricket in India (supra) and would
submit that the amended provisions of the Arbitration Act would apply
to the post arbitral proceedings pending as on 23 rd October 2015
including this arbitration petition.
240. It is submitted by the learned senior counsel that the
petitioner had not denied the existence and receipt of Daily Shift
Reports and the Jack up Registers which formed an integral part of the
contemporaneous records but had merely disputed the correctness and
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contents thereof. He submits that strict rules of evidence do not apply
to the arbitral proceedings. The veracity of the contents of the documents
pertains to their probative value, the estimation of which is within the
sole purview of the sole arbitrator. The learned arbitrator was empowered
to rely upon such contemporaneous records in order to assess and
determine the extension of time for delay in terms of Clause 53.4 of
the General Conditions of Contract.
241. Learned senior counsel for the respondent once again
placed reliance on various findings of facts recorded by the learned
arbitrator holding that the details furnished by the respondent were
relevant parameters for determining the claims made by the respondent.
242. Learned senior counsel for the respondent distinguishes the
judgment of the Supreme Court in the case of Union of India Vs. H.P.
Chothia, reported in (1978) 2 SCC 586) and Mohinder Singh Gill and
Anr. (supra) on the ground that the respondent was not attempting to
supply reasons to the award that were not already contained in the
award. Learned senior counsel also distinguishes the judgment of the
Supreme Court in the case of Maharashtra State Board of Secondary
and Higher Secondary Education (supra) and the judgment of this
Court in the case of M/s.J.N. Construction (supra) on the ground that the
learned arbitrator in this case has provided reasons for awarding the
claim of compensation after considering and applying his mind to the
material and evidence placed before him.
243. Learned senior counsel also distinguished the judgment of
this Court in the case of Bombay Intelligence Security (India) Ltd. Vs.
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Oil & Natural Gas Corporation Limited decided on 21st August 2015
in Arbitration Petition No.822 of 2012 and in particular paragraph 67
thereof and would submit that the said judgment of this Court would not
apply to the facts of this case. He submits that the respondent has referred
only to the material that was placed before the learned arbitrator and
also considered by the learned arbitrator.
244. Learned senior counsel for the respondent also dealt with the
judgment of this Court in the case of Indian Oil Corporation Ltd. Vs.
Artson Engineering Ltd. decided on 30th October 2015 in Arbitration
Petition No.408 of 2005 and would submit that in the said judgment,
the party had sought to supplant the reasons rendered by the learned
arbitrator which material had not been dealt with by him in the
impugned award at all. He submits that the respondent has not made any
such attempt in this case.
245. It is submitted that the learned senior counsel for the
petitioner could not distinguish the judgments relied upon by the
respondent which judgments squarely apply to the facts of this case
and to the findings of this Court.
REASONS AND CONCLUSIONS IN RESPECT OF
CLAIMS FOR COMPENSATION UNDER SEVENT HEADS
246. The learned arbitrator has decided these seven claims while
discussing issue nos. III to VIII. The learned arbitrator has granted
extension of 1437 days to complete the work. The learned arbitrator has
thereafter proceeded to decide the quantum of these seven claims made
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by the respondent. The respondent had claimed an amount of
Rs.52,73,92,129/- under those seven heads viz., equipment cost,
manpower cost, overhead cost, compensation for price hike of steel, loss
of account of additional financing cost, loss of opportunity cost,
reimbursement on price adjustment Rs.21,07,655/-.
247. The learned arbitrator discussed the quantification of these
claims in paragraphs 1.17 to 1.20 and in paragraphs 76 to 79. It is held
by the learned arbitrator that in view of the respondent herein having
established the delay on the part of the petitioner as well as on account of
hindrances as claimed by the respondent and discussed at the relevant
portion of the award, the learned arbitrator was required to consider the
entitlement of the respondent to the costs of Rs.52,73,92,129/-. The
respondent had made claim of an amount of Rs.8,34,68,833/- in the
written submissions filed before the learned arbitrator towards the claim
of loss of opportunity.
248. In so far as the said claim of loss of opportunity is
concerned, the learned arbitrator held that the respondent would be
entitled to an amount of Rs.8,32,68,833/- arrived at by multiplying 10%
of Rs.4.51 crores into 18 months which period was considered as the
extended period by the learned arbitrator.
249. In so far as the claim for reimbursement of price adjustment
of Rs.21,07,655/- is concerned, the learned arbitrator held that the
respondent would be entitled to increment in labour wages on account of
alleged failure of the petitioner or their engineer to comply with the
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contractual obligations and/or for the reasons beyond the control of the
respondent. The learned arbitrator placed reliance on clause 70.1 of the
Conditions of Particular Application and computed the said claim on the
basis of the formula set out in clause 70.1 and awarded a sum of
Rs.21,07,655/- on account of increase and decrease in cost of labour
wages. The learned arbitrator however in paragraph 79 of the impugned
award held that in view of the findings in respect of the individual claims
alleged to have been rendered in the earlier paragraphs, the respondent
would be entitled to an amount of Rs.52,73,91,129/-.
250.
The learned arbitrator has awarded interest @ 12% p.a. In
so far as the counter claim made by the petitioner in the sum of
Rs.45,31,67,181/- is concerned, the petitioner had already deducted an
amount of Rs.4,31,74,152/- by way of liquidated damages from the
running account bills of the respondent. The petitioner had further
deducted a sum of Rs.58,25,909.43 by way of liquidated damages
totalling to Rs.4,33,46,047.76. The petitioner had demanded the balance
amount of Rs.40,98,21,133.24 as damages and sought permission to
withdraw a sum of Rs.2,83,65,888/- which were deposited by the
petitioner in this Court pursuant to the orders dated 30th June, 2004 and
19th July, 2004 in the earlier proceedings filed by the parties against each
other in this court. In paragraph 120 of the impugned award, the learned
arbitrator held that the petitioner had failed to comply with their
obligations under the contract. The respondent had faced several
hindrances while carrying on work which could not be attributed to the
respondent. The respondent thus could not be faulted for completion of
work beyond the stipulated contractual period.
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251. It is held that the petitioner thus would not be entitled to
deduct any amount as liquidated damages. The learned arbitrator
accordingly rejected the counter claim made by the petitioner. The
learned arbitrator in the concluding paragraph has awarded a sum of
Rs.64,91,31,635/- with interest @ 12% p.a. from the date of notice
invoking arbitration agreement until the date of payment and further
directed both the parties to pay further sum of Rs.7,50,000/-for the
preparation and declaration of the award and further sum of Rs.1,25,000/-
by way of secretarial charges and other expenses.
252.
A perusal of the record indicates that both the parties had
relied upon the oral and documentary evidence in respect of the claim
for compensation. One of the issue raised by the petitioner while
challenging the impugned award, in so far as the claim for compensation
is concerned, is that the evidence of Mr.Sanath Kumar who was examined
one of the witnesses by the respondent as regards Serial Nos.1, 3, 5, 14,
36, 38 and 47 of Issue Nos.3, 4, 5 and 8 could not have been relied upon
by the learned arbitrator in view of admitted fact that the said Mr.Sanath
Kumar was not available for cross-examination and had left his evidence
midway.
253. The said Mr.Sanath Kumar was examined to prove the
existence and contents of various documents by the respondent on
various issues. A perusal of the affidavit in lieu of the examination-in-
chief of Mr.Sanath Kumar clearly indicates that he has examined as
regards Serial Nos.1, 3, 5, 14, 36, 38 and 47 of Issue Nos.3, 4, 5 and 8.
There is no dispute between the parties that the said Mr.Sanath Kumar
was not available for cross-examination and had left his evidence
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midway. A perusal of the minutes of one of the meetings of the learned
arbitrator indicates that he had given a ruling that the said Mr.Sanath
Kumar could not remain present for the entire cross-examination and his
evidence would not be considered. A perusal of the impugned award
indicates that though such ruling was given by the learned arbitrator, a
substantial part of the evidence of Mr.Sanath Kumar had been considered
by the learned arbitrator in the impugned award while allowing the claim
for compensation though the said witness was not available for the
purpose of cross-examination and contrary to the ruling given by the
learned arbitrator.
254. Mr.Sanath Kumar had also given his evidence on the issue
of piling and also in support of the allegations of delay of 53 days
made by the respondent before the learned arbitrator which was one of
the alleged incidence of delay under Issue No.3. Similarly, the said
witness was examined in respect of extension of 34 days. The learned
arbitrator has considered various documents and more particularly
Jackup reports which was sought to be proved by the respondent through
the said witness Mr.Sanath Kumar. A perusal of the record indicates that
the said witness was also sought to be examined by the respondent to
prove the alleged Daily Shift Reports/Daily Survey Reports/Daily
Progress Reports through the said witness Mr.Sanath Kumar.
255. In my view, the learned arbitrator could not have relied
upon the evidence of the said witness and more particularly the
deposition made in the affidavit in lieu of examination-in-chief in the
impugned award since the said witness was not made available for
cross-examination. The evidence in examination-in-chief of a party
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without an opportunity to cross-examine to the other party cannot be
considered as evidence and cannot be relied upon in a Court of law or
in arbitration against the other party. The impugned award based on such
evidence of Mr.Sanath Kumar allowing the claim for compensation thus
deserves to be set aside. In so far as the submission of the learned senior
counsel for the respondent that the impugned award is not based only on
the evidence of Mr.Sanath kumar has no merit.
256. I shall now discuss the claims for compensation awarded
by the learned arbitrator in favour of the respondent and the rejection of
the counter claim made by the petitioner.
257. There is no dispute that the respondent had applied for
extension of 7711 days under various heads before the Engineer. The
Engineer, however, had granted extension of 177 days only which did
not include a period of 36 days extension which was never brought for
consideration of the Engineer. It is not in dispute that the respondent
claimed extension of 1805 days only in their statement of claim filed
before the learned arbitrator. A perusal of the impugned award indicates
that the learned arbitrator, however, granted extension of 1437 days in
favour of the respondent in the impugned award.
258. Learned senior counsel appearing for the parties have made
detailed submissions also on the issue as to whether the learned arbitrator
was justified in granting extension of 1437 days in favour of the
respondent or not and placed reliance on the correspondence exchanged
between the parties and various averments made in the pleadings filed
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by the parties. My attention is also invited to some portions of the oral
evidence led by the parties and recorded by the learned arbitrator.
259. A perusal of the award indicates that the learned arbitrator
has referred to and relied upon the Daily Shift Reports/Daily Survey
Reports/Daily Progress Reports in the impugned award which were
sought to be proved by the respondent through Mr.Sanath Kumar which
reports were disputed by the petitioner. The respondent could not prove
the existence and contents of the documentary evidence sought to be
relied upon before the learned arbitrator though examined the witnesses.
From bare perusal of the award, it is not possible to discern the good
portion of the award with the bad portion of the award and more
particularly to segregate the part of the claim allowed by the learned
arbitrator relying upon the oral evidence of Mr.Sanath Kumar who was
not made available for cross-examination.
260. A perusal of the award indicates that the claim for
compensation made by the respondent was not supported by any
contemporaneous documents as contemplated under Clause 53.4 read
with Clauses 53.3 and 53.2 of Section 2 of the Conditions of Contract,
Part-I of the General Conditions of Contract. The respondent had made a
claim for compensation in the sum of Rs.52,73,92,129.01 in the
statement of claim under various heads.
261. A perusal of the award clearly indicates that though the
learned arbitrator in various paragraphs of the award which are on
pages 192 to 198 of the arbitration petition had recorded submissions of
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both the parties, the learned arbitrator has, however, not dealt with those
submissions and more particularly the submissions made by the petitioner
in the impugned award.
262. There is no dispute that the petitioner has disputed the
existence and contents of the certificate alleged to have been issued by
the Chartered Accountant and by the Surveyor appointed by the
respondent.
263. In so far as the claim for loss of opportunity is concerned,
the learned arbitrator has allowed the said claim for loss of opportunity
@ 10% of the average turnover of the respondent which turnover was
referred in the alleged certificate issued by the Chartered Accountant
which was disputed by the petitioner. Admittedly, the respondent did not
examine the said Chartered Accountant to prove the existence and
contents of the said certificate. In my view, merely on the basis of the
said alleged certificate and without any proof of quantification of the
said claim by the respondent, the learned arbitrator could not have
allowed the said claim merely on the basis of the said alleged certificate.
264. In my view, the learned arbitrator has allowed the claim
based on a disputed document which was not proved and the impugned
award is thus in violation of the principles of natural justice. Though the
arbitral tribunal is not bound by the provisions of the Evidence Act in
view of Section 19 of the Arbitration and Conciliation Act, 1996, the
principles of Evidence Act applies to the arbitration proceedings. The
arbitral tribunal cannot rely upon an unproved document as a piece of
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evidence. This part of the award thus deserves to be set aside on this
ground also.
265. The respondent had relied upon the alleged letter dated 3 rd
December 2004 addressed by M/s.Universal Surveyors and Adjustors
Pvt. Ltd. inter alia showing the depreciation written down value and
the alleged deployment of machinery by the respondent. The respondent
had also relied upon the purported break up of manpower cost upto 16 th
January 2003 issued by Mr.J.C. Bhatt, Chartered Accountant vide his
letter dated 12th April 2005. Though the learned arbitrator recorded in the
impugned award that these documents were disputed by the petitioner, the
learned arbitrator still heavily placed reliance on those disputed
documents while allowing the huge claim made by the respondent. In
my view, none of the documents while allowing the aggregate claim of
Rs.52,73,92,129.01 made by the respondent was supported by any
evidence or proof. In my view, the claim made by the respondent was
also in violation of and without complying with the mandatory provisions
of Clauses 53.2 and 53.3 of Section 2 of the Conditions or Contract,
Part-II of the General Conditions of Contract.
266. In so far as the claim "on account of Reimbursement of
Equipment Cost- Rs.25,06,56,010/-" awarded by the learned arbitrator is
concerned, a perusal of the record indicates that neither any evidence
was produced by the respondent in support of this claim nor any finding
is recorded by the learned arbitrator while allowing the said claim in the
aggregate amount of compensation of Rs.52,73,92,129/-. The respondent
had only placed reliance on the alleged break up of the claim contained
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in their letter dated 4th January 2005 and on the written submissions
containing calculations for monthly hire charges which were not based
on the actual amount alleged to have been spent by the respondent but
based on assumptions and without any supporting proof.
267. The respondent had failed to produce any alleged
contemporaneous record before the learned arbitrator in support of the
huge claim for compensation. It is not in dispute that the said Surveyor
namely M/s.Universal Surveyors and Adjustors Pvt. Ltd. whose
alleged certificate was relied upon by the learned arbitrator was not
examined as a witness to prove the existence and contents of the said
alleged certificate though the existence and contents thereof were
disputed by the petitioner. The respondent did not produce any proof of
actual deployment of the machinery and equipment and date of
purchase before the learned arbitrator. It is not in dispute that in the
impugned award and more particularly on page 195 of the arbitration
petition, the objection of the petitioner regarding the evidentiary value
of the said certificate was disputed by the petitioner.
268. In so far as the claim made by the respondent "on account
of Reimbursement of Manpower Cost-Rs.1,52,68,804/-" is concerned,
the respondent did not lead any documentary or oral evidence or examine
any concerned person with regard to actual deployment of manpower
during the extended period of contract before the learned arbitrator nor
produce any contemporaneous record before the learned arbitrator in
support of this claim. The impugned award allowing this claim is also
based on no evidence and is ex facie perverse.
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269. In so far as the claim "on account of Reimbursement of
Overhead Cost-Rs.11,53,63,161/-" is concerned, no finding is arrived
at by the learned arbitrator as to whether this claim was proved by the
respondent or not. A perusal of the record indicates that there is no
discussion on this claim made by the learned arbitrator in the impugned
award at all and the conclusion drawn by the learned arbitrator in
respect of this claim is without any basis and discloses patent illegality
on the face of the award.
270. In so far as the claim "on account of Compensation for
hike in steel price hike-Rs.4,89,19,973/-" is concerned, a perusal of
the record indicates that in respect of this claim also, the learned
arbitrator has not recorded any finding or has not discussed this claim
on merits at all. Learned arbitrator has also not disclosed as to how and
why this claim came to be allowed by the learned arbitrator. It is not in
dispute that the respondent was already paid the escalation cost
aggregating to Rs.9,78,30,634/- by the petitioner for the work done by
the respondent upto 30th October 2004. In my view, this claim allowed
by the learned arbitrator is not only based on no evidence but also
overlooking the amount of escalation already paid by the petitioner. The
said amount of Rs.9,78,30,634/- which was admittedly paid to the
respondent was inclusive of escalation in respect of the items comprising
of steel.
271. In so far as the claim "on account of Compensation for
Financial Cost-Rs.1,16,07,691/-" is concerned, a perusal of the record
indicates that the learned arbitrator has not discussed this claim and has
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not disclosed the reasons as to how and why this claim came to be
allowed by the learned arbitrator. No finding recorded by the learned
arbitrator in respect of this claim which was part of the huge claim of
Rs.52,73,92,129/-.
272. A perusal of the record indicates that the impugned award
allowing the claim for compensation is passed mechanically and without
application of mind. The learned arbitrator was bound to disclose the
reasons as to how and why and on the basis of what evidence the learned
arbitrator had allowed the claim for compensation. The award discloses
no reasons in respect of some of the claims referred to aforesaid in
addition to the award being based on no evidence.
273. In so far as the claim "on account of Compensation for
Loss of Opportunity-Rs.8,34,68,833/-" is concerned, a perusal of the
record and also the impugned award indicates that the learned arbitrator
has allowed this claim without any evidence on record and in violation
of Clauses 53.2, 53.3 and 53.4 of Section 2 of the Conditions of
Contract. The respondent did not produce any contemporaneous record
or any other evidence in support of this claim before the learned
arbitrator. The award is based on the alleged certificate issued by the
Chartered Accountant which was not proved.
274. In so far as the claim "on account of Reimbursement of
Price Adjustment-Rs.21,07,655/-" is concerned, a perusal of the record
indicates that this claim was also based on no evidence. This part of the
claim in respect of the increment in labour charges was contrary to
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clause 70.1 of the Conditions of Particular Application. The learned
arbitrator has decided contrary to the terms of the contract and this part
of the award thus deserves to be set aside.
275. Supreme Court in the case of Associate Builders Vs. Delhi
Development Authority (supra) has held that if the award shows patent
illegality and perversity, such arbitral award can be set aside by the
Court under Section 34 of the Arbitration and Conciliation Act, 1996.
Division Bench of this Court in an unreported judgment in the case of
M/s.J.N. Construction Vs.M/s.Shah Jagshi Jethabhai (supra) has held
that the award of compensation rendered by the learned arbitrator
without entering to the finding to the effect that the present Hudson's
formula was an appropriate formula to be adopted came to be set aside. It
is held that if the learned arbitrator had proceeded to divide the period of
delay and to apportion it equally between the parties thereto without
any evidence being adduced, the award deserves to be set aside on the
ground that the award was founded on no evidence at all. In my view,
the judgment of the Supreme Court in the case of Associate Builders
Vs. Delhi Development Authority (supra) and an unreported judgment
in the case of M/s.J.N. Construction Vs.M/s.Shah Jagshi Jethabhai
(supra) squarely apply to the facts of this case.
276. A perusal of the award indicates that though the learned
arbitrator has summarized the part of the submissions made by both the
parties in the impugned award, the learned arbitrator has not dealt with
those submissions and has straight away made a conclusion by allowing
the claim made by the respondent. In my view, the judgment of the
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Delhi High Court in the case of Avi Coach Builders Vs. Union of India
(supra) would apply to the facts of this case. I am in respectful agreement
with the views expressed by the Delhi High Court in the case of Avi
Coach Builders Vs. Union of India (supra). The judgment of the Delhi
High Court in the case of Delhi Development Authority Vs.Sunderlal
Kothari and Sons (supra) also applies to the facts of this case. I am in
respectful agreement with the views expressed by the Delhi High Court
in the case of Delhi Development Authority Vs.Sunderlal Kothari and
Sons (supra).
277.
In so far as the judgment of the Supreme Court in the case
of Ravindra Kumar Gupta and Company Vs. Union of India (supra)
is concerned, Supreme Court has held that the Court cannot re-
appreciate the evidence led by the parties before the learned arbitrator
when the same had been duly scrutinized and evaluated by the learned
arbitrator is concerned. There is no dispute about this proposition of law
laid down by the Supreme Court. In my view, this Court has not made
any attempt to re-appreciate the evidence led by the parties but has set
aside this arbitral award which is based on no evidence. The judgment
of the Supreme Court in the case of Ravindra Kumar Gupta and
Company Vs. Union of India (supra) thus would not assist the case of
the respondent. I am not inclined to accept the submission of the
learned senior counsel for the respondent that there is no perversity in
the impugned award.
278. Supreme Court in the case of ONGC Vs. Western GECO
International Ltd. (supra) had taken a similar view and had applied
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Wednesbury principles while considering the validity of the arbitral
award under Section 34 of the Arbitration and Conciliation Act, 1996.
279. Mr.Khambatta, learned senior counsel for the respondent
tries to distinguish the judgment of the Supreme Court in the case of
ONGC Vs. Western GECO International Ltd. (supra) on the ground that
in view of the amended Section 34 of the Arbitration and Conciliation
Act, 1996, the principles laid down by the Supreme Court in the case of
ONGC Vs. Western GECO International Ltd. (supra) thereby extending
the principles of Wednesbury principles
ig under Section 34 of the
Arbitration and Conciliation Act, 1996 would not apply. It is submitted
by the learned senior counsel that the amended permissible grounds
under Section 34 of the Arbitration and Conciliation Act, 1996 only can
be applied to the present proceedings and not the Wednesbury principles.
280. In so far as the submission of the learned senior counsel that
the respondent had already submitted Daily Shift Reports/Daily Survey
Reports/Daily Progress Reports before the learned arbitrator and those
documents were not sought to be proved through Mr.Sanath Kumar who
was examined as one of the witnesses by the respondent is concerned, in
my view, there is no merit in this submission of the learned senior
counsel. The learned senior counsel is not right in his submission that the
petitioner had not disputed these reports in toto.
281. In so far as the submission of the learned senior counsel for
the respondent that the Weekly reports for the period from 14th November
2000 to 20th December 2004 produced before the learned arbitrator by the
respondent were maintained in ordinary course of business is concerned,
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in my view, there is no substance in this submission of the learned senior
counsel. Those reports could not be considered as contemporaneous
record required to be maintained by the respondent under clause 53.4
read with clause 53.2 of the General Conditions of Contract. The
authenticity and contents of those reports were not proved.
282. In so far as the submission of the learned senior counsel for
the respondent that since the entire claim for compensation awarded by
the learned arbitrator is not based on evidence of Mr.Sanath Kumar
alone and it is not possible to discern any part of the award allowing the
claim based on such evidence of Mr.Sanath Kumar, no part of the
award shall be set aside is concerned, in my view, there is no merit in
this submission of the learned senior counsel. Since the learned arbitrator
has considered the evidence of Mr.Sanath Kumar who was not made
available for cross-examination and since it is not possible to discern the
good portion of the award with the bad portion of the award, in my view,
the entire award deserves to be set aside.
283. In so far as the submission of the learned senior counsel for
the respondent that the learned arbitrator had considered the letter dated
4th January 2005 while allowing the claim for equipment cost by which
the respondent alleged to have submitted detailed break up of the said
claim is concerned, a perusal of the record indicates that the learned
arbitrator has allowed the said claim on the basis of the alleged
assessment report of the Surveyor which was a disputed document and
not proved. Mere reference to the alleged break up of the amount in a
document could not have been considered the alleged details mentioned
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as proved by the learned arbitrator which were disputed by the
petitioner and were not proved. In my view, there is no merit in the
submission of the learned senior counsel that the claim for actual
manpower cost was supported by salary and wage register. The entire
award is based on disputed documents, certificates/letters alleged to have
been issued by the Chartered Accountant and by the Surveyor which
were not proved. The particulars of claim in the statement of claim
could not have been considered as evidence by the learned arbitrator
which were disputed by the petitioner.
284.
In so far as the judgments of the Supreme Court in the
cases of Municipal Corporation of Delhi Vs. Jagan Nath Ashok
Kumar (supra), Sudarsan Trading Co. Vs. Government of Kerala
(supra) and the judgment of the Delhi High Court in the case of Delhi
Development Authority Vs. Harbans Singh & Sons (supra) relied
upon by the learned senior counsel for the respondent in support of the
submission that the learned arbitrator was the sole Judge of the quality
and quantity of the evidence and was not required to give details of his
computation is concerned, there is not dispute about the proposition that
the learned arbitrator is the sole Judge of the quality and quantity of the
evidence. The learned arbitrator, however, is bound to decide in
accordance with the contract entered into between the parties and also in
accordance with the provisions of the Arbitration and Conciliation Act,
1996 and principles of Evidence Act which are applicable to the
arbitration proceedings. Since the award is based on no evidence, the
Court herein under Section 34 of the Arbitration and Conciliation Act,
1996 has ample power to set aside such award.
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285. In so far as the judgment of this Court in the case of Union
of Indian Vs. Sagar Construction Company(supra) is concerned, it is
held that the Court must see an award in totality and some lacuna or
lack of details is not reason enough to treat an award as unreasoned or
interfere with it. In my view, since the award rendered by the learned
arbitrator is based on no evidence and does not disclose the basis
reasons, the principles laid down in the case of Union of Indian Vs.
Sagar Construction Company(supra) would not apply to the facts of
this case and is clearly distinguishable.
286.
In so far as the submission of the learned senior counsel for
the respondent that the finding of the learned arbitrator accepting the
Surveyor's report has to be read with the general finding rendered by the
learned arbitrator in respect of the claim is concerned, in my view, there
is no merit in this submission of the learned senior counsel for the
respondent. The entire award allowing the huge claim is based on such
alleged certificates issued by the Chartered Accountant and by the
Surveyor. Quantification of the claim based on unproved and disputed
documents thus deserves to be set aside. Quantification of the claim by
the learned arbitrator is not based on any proved documents as sought to
be canvassed by the learned senior counsel for the respondent.
287. Supreme Court in case of Kailash Nath Associates Vs.
Delhi Development Authority & Anr., reported in (2015) 4 SCC 136 has
laid down the principles to be followed by the court or by the arbitrator
while considering the claim for compensation under sections 73 and 74 of
the Contract Act, 1872. It is held that where it is possible to prove actual
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damage or loss, such proof is not dispensed with. It is held that
compensation can only be given for damage or loss suffered. If damage
or loss is not suffered, the law does not provide for a windfall.
288. This court in case of Ajay Singh (Sunny Deol) Vs.Suneel
Darshan in Arbitration Petition No.819 of 2011 and other connected
matters after adverting to the judgment of Supreme Court in case of
Kailash Nath Associates (supra), judgment of this court in case of
Maharashtra State Electricity Board vs. Sterlite Industries (India) Ltd.,
reported in 2000(3) Bom.C.R. 347 and an unreported judgment of the
Division Bench of this Court delivered on 3rd January 2013 in Appeal
No.11 of 2012 in the case of Edifice Developers and Project Engineers
Ltd. Vs. M/s.Essar Projects(India) Ltd. has held that if a party has not
suffered any losses, even if the respondent has committed breaches, such
party cannot be awarded any compensation under section 73 of the
Contract Act. When loss in terms of money is prayed, the party claiming
compensation has to prove such loss or damages suffered by him. It is
held that unless and until the damages or loss was actually suffered,
damages cannot be awarded, otherwise section 73 of the Contract Act
would become nugatory and the party would be penalized though the
other party suffered no loss. In my view the party who has not suffered
any loss or damages cannot be awarded any compensation or damages,
otherwise it would amount to unjust enrichment in favour of such party.
289. In so far as the submission of the learned senior counsel for
the respondent that in this case, grounds available under the amended
Section 34 of the Arbitration and Conciliation Act, 1996 only would be
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attracted is concerned, a perusal of the arbitration agreement recorded
in clauses 67.1 to 67.4 of the General Conditions of Contract does not
indicate that the parties have agreed that the parties would be governed
by the provisions of any statutory amendment to the provisions of the
Arbitration and Conciliation Act, 1996. Admittedly in this case, the
notice invoking arbitration agreement was issued much prior to 23 rd
October 2015. In my view, the provisions of the amended Section 34
brought into effect with effect from 23rd October 2015 thus would not
be applicable to the facts of this case. The judgment of this Court in the
case of M/s.Rendezvous Sports World Vs. The Board of Control for
Cricket in India (supra) thus would not assist the case of the respondent.
Be that as it may, in my view, even if the amended provision of Section
34 of the Arbitration Act is applied, the petitioner has made out a case for
setting aside the award even under those provisions.
290. During the course of the arguments, learned senior counsel
for the respondent invited my attention to various documents forming
part of the record before the learned arbitrator including the alleged
details and break up of the claim for compensation in support of the
submission that the learned arbitrator must have considered those
documents and break up of the claim while allowing the claim for
compensation.
291. Per contra, it was submitted by the learned senior counsel
for the petitioner that though there were various correspondence and
written submissions on record filed by both the parties before the learned
arbitrator, the learned arbitrator has not dealt with the entire record
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made available by both the parties in the impugned award while allowing
the claim for compensation and more particularly sought to be relied
upon by the respondent before this Court to supplant the reasons given
by the learned arbitrator in the impugned award.
292. This Court in the case of Bombay Intelligence Security
(India) Ltd. Vs. Oil & Natural Gas Corporation Limited (supra) has
held that this Court cannot probe into the mind of the arbitral tribunal
and come to the conclusion that by considering the evidence produced by
the parties which were though on record before the arbitral tribunal but
were not referred and considered by the arbitral tribunal by drawing an
inference that such evidence must have been considered by the arbitral
tribunal while allowing or rejecting the claim while deciding the petition
under Section 34 of the Arbitration and Conciliation Act, 1996. In my
view, the said judgment of this Court would squarely apply to the facts
of this case. I am respectfully bound by the said judgment.
293. In my view, the judgments of the Supreme Court in the
cases of Mohinder Singh Gill and Anr. Vs. Chief Election
Commissioner New Delhi and Ors.(supra) and Maharashtra State
Board of Secondary and Higher Secondary Education Vs. K.S.
Gandhi (supra) would assist the case of the petitioner in support of the
submission that requirement of giving of a reason in the arbitral award
forms part of mandatory duty under Section 31(3) of the Arbitration
and Conciliation Act, 1996.
294. I am thus not inclined to take into consideration the
correspondence and other documents though were filed by the parties
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before the learned arbitrator and were not marked as exhibits or in any
case were not considered by the learned arbitrator in the impugned
award while allowing the claim for compensation and to draw any
inference that those documents must have been considered by the
learned arbitrator while allowing the claim for compensation. In my
view, the award itself shall indicate the evidence referred to, relied upon
and considered by the learned arbitrator while allowing or rejecting the
claim made by the parties. I am thus not inclined to consider those
documents for the first time in these proceedings and to supplant the
reasons in the impugned award which were not recorded by the learned
arbitrator based on these documents which were not considered or
relied upon or referred by the learned arbitrator in the impugned award.
295. The submission made by the learned senior counsel for the
petitioner that the learned arbitrator has recorded various findings of
facts on the issue of alleged delay on the part of the petitioner without
considering the documents on record is concerned, a perusal of the
award indicates that the learned arbitrator has rendered findings of facts
on the issue of delay which findings of facts being not perverse cannot
be interferred with by this Court in so far as these findings of delay are
rendered attributable on the part of the petitioner. I am also not inclined
to interfere with the impugned award in so far as rejection of counter
claim made by the petitioner in the impugned award is concerned.
Learned senior counsel for the petitioner could not demonstrate before
this Court as to how the impugned award in so far as the counter claim
made by the petitioner is concerned is perverse and shows patent
illegality. The petitioner also did not produce any evidence in support
of their counter claim. The impugned award thus rejecting the counter
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claim made by the petitioner is upheld and does not warrant any
interference.
296. In so far as the claim for interest awarded by the learned
arbitrator on the claims allowed in favour of the respondent is concerned,
in my view, since the award made by the learned arbitrator in respect of
the principal amount itself is patently illegal and shows perversity, the
claim for interest awarded by the learned arbitrator on the principal
amount also deserves to be set aside and it is ordered accordingly.
297.
In my view, since the entire award is set aside in so far as
the claim for principal amount and interest is concerned, the impugned
award in so far as the payment of arbitration costs as directed in
paragraph 121 of the impugned award also deserves to be set aside.
298. I therefore pass the following order :-
(i) The impugned award dated 26th November 2011 passed by the
learned arbitrator allowing the claims made by the respondent is
set aside.
(ii) The impugned award rejecting the counter claim made by the pe-
titioner is upheld.
(iii) Arbitration Petition No.868 of 2012 is disposed of in aforesaid
terms.
(iv) There shall be no order as to costs.
R.D. DHANUKA, J.
