Indian Oil Corporation Ltd vs Artson Engineering Ltd
2016 Latest Caselaw 560 Bom

     suresh                                                     9-APPL-31.2016.odt

              IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                                
                  ORDINARY ORIGINAL CIVIL JURISDICTION
                        APPEAL {L} NO.31 OF 2016




                                                        
                                   IN
                  ARBITRATION PETITION NO.408 OF 2005




                                                       
     Indian Oil Corporation Ltd.,
     A Company Incorporated under the
     provisions of the Companies Act, 1956 
     having office at Gujarat Refinery,




                                           
     P.O. Javaharnagar, Vadodra-391320.                          ....  Appellant

              - Versus -
                             
     Artson Engineering Ltd.,
                            
     Plot No.426, M.L. Agarwal Building,
     1st Floor, Waman Tukaram Patil
     Marg, Opp: Satabdi Hospital,
     Chembur, Mumbai-400 071.                                    ....  Respondent
      
   



     Mr. Manish Bhatt, Senior Advocate i/by Mr. Kalpesh
     Joshi Associates for the Appellant.
     Mr. Sharan Jagtiani with Mr. Mutahhar Khan i/by 





     M/s. Mulla & Mulla & CB & Caroe for the Respondent.


                                         CORAM: ANOOP V. MOHTA AND
                                                 S.C. GUPTE, JJ.

DATED: MARCH 14, 2016

ORAL JUDGMENT (Per ANOOP V. MOHTA, J):

1. Admit. The parties have filed short synopsis and

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written notes of submissions. The appeal is taken up for final

hearing, by consent.

2. The appellant/original respondent has preferred this

appeal under Section 37 of the Arbitration and Conciliation Act,

1996 (for short, "the Act") against Judgment and Order

pronounced by a learned single Judge of this Court on

30-10-2015, whereby the Arbitration Petition under Section 34

of the Act is partly allowed and maintained the other claims in

the following words:

"133. I, therefore, pass the following order:-

(a) The impugned award dated 30th June, 2005 is set aside insofar as claim nos.(d) and (g) are concerned.

(b) Interest awarded on the security deposit is set aside.

(c) Interest at the rate of 18% per annum awarded

by the learned arbitrator is reduced to 12% per annum which shall be payable for the period as awarded by the learned arbitrator.

(d) Interest awarded on claim nos.(d) and (g) is set aside.

(e) Rest of the award is upheld."

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3. The basic events are as under:-

The contract between the appellant-Indian Oil

Corporation Limited (IOCL) and the respondent-Artson

Engineering Limited was executed on 11-4-1998 after accepting

the bid submitted for Crude Distribution System Project. The

contract was governed by the General Conditions of Contract

(GCC) and Special Conditions of Contract (SCC). Time was the

essence of the contract. Various meetings took place between

the parties as the work was constantly changing for want of

complete information to the respondent/claimant/contractor.

Monthly progress reports were submitted. There were delays in

providing various information as well as instructions. Delay was

also caused even while approving various drawings. The

respondent/claimant requested for release of payments from

time to time. Request was also made for extension of time to

complete the contract for the reasons attributable to the IOCL

and M/s. Daelim. No timely payments were made, including

towards increased quantities in the electrical, civil and structural

works. The respondent/claimant even addressed letters

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recording non-availability of various items and materials which

were necessary to complete the work. The IOCL conveyed about

the change in the scheme and installation of the work to be done

in respect of the pipelines. The revised details were provided to

the respondent/claimant on 9-7-1999. The respondent/claimant

completed the work under the two Crude Distribution Systems

on 6-9-2000. The IOCL issued its completion certificate

accordingly. On 3-10-2000 the respondent/claimant submitted

the final bill. The Bank Guarantee was extended accordingly

from time to time. As the final bill payment was not received,

the respondent/claimant made representations again and again,

apart from holding regular meetings. Request was also made by

IOCL to Artson to depute an officer for negotiations and

finalisation of the final bill on 12-11-2001. The

respondent/claimant refused to accept the lowest rate, as

suggested.

4. A petition under Section 9 was filed on 10-1-2002 by

the respondent/claimant for preventing encashment of the Bank

Guarantee by IOCL. Ultimately, on 1-4-2002 Artson and IOCL

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filed Consent Terms to resolve the disputes within eight months

and accordingly an Arbitrator was appointed. The matter

proceeded before the Arbitral Tribunal. Extension was also

sought to complete the arbitration. Another Arbitrator was

appointed on 7-7-2003. Ultimately, the learned Arbitrator

passed the Award on 30-6-2005, allowing the claims under

heads "A" to "D" and "G". The Arbitrator rejected the claim

under heads "E" and "F", and also rejected the counter-claims.

5. Heard learned counsel appearing for the parties.

The learned Arbitrator has passed the Award after taking note of

rival contentions as well as the documents so placed on record

and after appreciating the submissions made by the counsel for

the parties and recorded as under:-

"150. Respondent will has to pay to the claimant in respect

of various claims set out in the claim statements below with interest at 18% per annum from the dates mentioned against in the respective heads.

Claim A - Rs.82,19,114/- with effect from 01.11.2000 Claim B - Rs.1,40,00,000/- with effect from 01.11.2000 Claim C - Rs.16,58,574/- with effect from 01.11.2000 Claim D - Rs.13,96,756/- with effect from 01.12.2000 Claim E - Nil as claim is rejected

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Claim F - Nil as claim is rejected

Claim G - Rs.61,00,000/- with effect from 01.11.2000

On the claims A, B, C, D, and G, to the extent of claim awarded respondent will have to pay interest at 18% per annum with effect from 1.11.2000 till the date of award and at the same rate of 18% per annum till realization of award at

the same rate of 18% per annum and from the date of award on the principle amount of Rs.13,96,756/-. The respondent will also pay cost of Rs.10 lacs to the claimant and bear the entire costs as incurred for the arbitration proceedings. Hence the final award. No interest is awarded on costs of

Rs.10,00,000/- (Rupees ten lacs).

ig AWARD

The Respondent do pay Rs.3,12,74,444/- (Rupees

Three Crores Twelve Lacs Seventy Four Thousand Four Hundred Forty Four Only) with interest to the claimant. The respondent do pay simple interest @ 18% per annum on Rs.2,99,77,688/- (Rupees Two Crores Ninety Nine Lacs

Seventy Seven Thousand Six Hundred Eighty Eight only) with effect from 1.11.2000 till realization. Respondent do pay

simple interest @ 18% per annum on Rs.13,96,756/- (Rupees Thirteen Lacs Ninety Six Thousand Seven Hundred Fifty Six only) with effect from 1st February 2002 till realization.

Respondent do pay Rs.10,00,000/- (Rupees ten lacs only) as arbitration costs to the claimant and bear its own costs as incurred."

6. The appellant filed an arbitration petition under

Section 34 of the Act for setting aside the said Award on

9-11-2006. The said petition was allowed by the High Court and

the entire Award was set aside. The appellant, therefore,

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preferred an appeal. On 9-1-2015 the appeal came to be allowed

on the ground that the Award was severable and need not be set

aside in toto and Claim "D" was arbitrable.

7. Ultimately, the learned single Judge on 7-9-2015

allowed Claims "A", "B" and "C", as recorded above, and

awarded interest at the rate of 12% per annum, and

Rs.10,00,000/- towards the arbitration costs.

8. Claims "A" to "D" and "G", allowed by the learned

Arbitrator are reproduced below:-

"(A) Claim on account of ** items in SOR amount to Rs.82,19,114/- with interest of 18% per annum with effect from 3-10-2000.

(B) Claim for Rs.1.40 crore withheld on account of liquidated damages with interest at 18% per annum with effect from 3-10-2000.

(C) Claim on account of amounts appropriated on the ground of other recoveries amounting to Rs.16,58,574/- with interest at 18% per annum from 3-10-2000.

(D) Claim of Rs.26,97,759/- being the cost incurred in keeping the Bank Guarantees in force beyond the period required in contract with interest at 18% per annum till the date of payment.

      suresh                                                     9-APPL-31.2016.odt

                               ......




                                                                                

(G) Claim of Rs.61,00,000/- on account of extra work

with interest thereon."

9. The appellant is basically aggrieved by the order

passed by the learned Judge referring to Claims "A", "B" and "C"

and also by rejection of the counter-claims (Claims "E" and "F").

The respondent has not raised challenge insofar as rejection of

Claims "D" and "G" are concerned.

10. Heard the learned counsel appearing for the parties

and also gone through the written submissions as well as the

documents so referred and relied upon with regard to the

respective claims, specifically Claims A, B and C and the interest

so awarded.

11. Learned counsel appearing for the respondent, at the

outset, submitted proposal dated 26-2-2016, the relevant

portion whereof is reproduced hereunder:-

"As this acceptance to the final amount is based upon the above clear understanding, and on the basis that prompt payment being the very essence of this offer, we clarify

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that our offer is valid only in the amount of Rs.498

Lakhs (Rupees Four Hundred Ninety Eight Lakhs only) is paid & realized in the accounts by AEL within four weeks

from today or latest by 31st March 2016 (which is more than a month from today), the time being of essence.

If the payment is delayed beyond 31st March 2016, AEL

would have all rights under the law for recourse to the next step and this offer shall lapse.

For the above purpose we have no objection to the Award of the Ld. Sole Arbitrator as partly being upheld by the

Hon'ble Single Judge, being modified to the above extent.

We clarify and state that upon our receiving the above amount of Rs.498 Lakhs, we shall have no further claim against IOCL arising out of the above referred contract as

also the subject Award and further proceedings thereto.

We may however clarify that the above proposal is strictly without prejudice to any of our rights available in

Law."

12. So far as Claim "A" is concerned, the learned

Arbitrator as well as the learned Judge rightly held that the

present contract was item rate contract. The quantity was

fixed by IOCL. The quantity, however, was fixed on estimate

basis. Correspondence exchanged between the parties was

referred by the learned Arbitrator while allowing the claim for

increase in quantity. The payments were asked accordingly

from time to time. The oral evidence of Mr. Chopde, witness of

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the claimant, was recorded to determine the extent of quantity.

The learned Arbitrator rightly held that the respondent cannot

complain regarding rates which have already been settled

through several negotiations and specifically when the case is

not one of escalation. The application of IOCL to pay the dues

under the contract and failure to make the payment, is rightly

held to be a breach of the terms of the contract. The learned

Judge has also upheld the said finding by further noting that

additional quantities executed by the respondent/claimant were

to the extent of 400%, 500% and 12500%. There was no

objection of any kind by the appellant during the progress of the

work. The issue was never finalized. Reliance, therefore, on the

internal note by the learned Arbitrator could not be faulted with.

The supporting evidence of the claimant proves the quantity.

The learned Arbitrator as well as the learned Judge considered

the evidence and the material, including the correspondence

exchanged between the parties and therefore awarded the claim

with interest at 18% on items purchased in excess of the

quantities described in the Work Order.

suresh 9-APPL-31.2016.odt

13. So far as Claim "B" is concerned, the amount was

wrongly withheld though IOCL failed to perform their part of

reciprocal obligation in time. The claimant's contractual

obligations were depending upon the fulfilment of the IOCL's

obligations. They failed to provide the information or data in

time, including the designs and drawings. The essential

certificate was not issued in time in providing approval for

drawings submitted by the claimant in time. Various issues

relating to work front where the other contractor M/s. Daelim

was operating were not resolved at the relevant time. They even

failed to supply various material for the work. The IOCL

substantially altered and changed the scope of the work,

including the Electrical Heat Tracer (EHT).

14. There was no clarification issued, though asked for

from time to time, including about the laying of cables. No

progress schedule was approved and/or agreed upon at the

relevant time. The learned Arbitrator and the learned Judge also

took note of the various clauses of the GCC, whereby reciprocal

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obligations are provided, including timely performance and

action by the IOCL, as time was the essence. Various documents,

including meetings, discussions and exchange of correspondence

between the parties for the above purposes were noted but

which also shows inaction and/or delay on the part of the IOCL.

The learned Arbitrator as well as the learned Judge after

considering the above gave a clear finding with regard to the

delay on the part of the IOCL. The learned Arbitrator, therefore,

based upon the same including the conditions and clauses which

were agreed upon by and between the parties concluded that

IOCL was responsible for the various delays. The work also

could not be proceeded by the respondent/claimant for want of

knowledge of engineering from M/s. Daelim. The learned

Arbitrator has also considered the delay on account of EHT,

which is also a subject of Claim "G". The learned Arbitrator even

considered the delay on account of non-supply of materials prior

to and after the Contract Completion Date. The learned

Arbitrator by recording reasons considered the above

background and passed the Award. The learned single Judge

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also confirmed the said decision by a reasoned order and

therefore the finding given for want of no specific clause of

liquidated damage by the appellant/IOCL and as the delay is

attributable to the appellant, there was no reason for the IOCL

to deduct the said amount as price reduction. Therefore, the

deduction so made after one year from the preparation of the

final bill is recorded to be an after-thought and therefore was

not accepted. We see no case is made out by the appellant in this

regard and there is no perversity in the findings recorded by the

learned Arbitrator as well as by the learned Judge.

15. So far as Claim "C" is concerned, after going through

the submissions and the documents so placed on record, we also

noted that for want of particulars and no evidence, the two

deductions of 10% with 18% interest from 3-10-2000 were

wrong. There was no justification for such recoveries. The IOCL

failed to discharge its obligation by not leading even the

evidence in support of its claim. The amount, therefore, so

deducted wrongly was rightly deprecated by the learned

Arbitrator as well as by the learned Judge. The finding given

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therefore by both the learned Arbitrator as well as by the

learned Judge, in no way can be said to be perverse and/or bad

in law.

16. The learned counsel appearing for the appellant has

made submissions revolving around the rejection of their

counter-claims with regard to the awarding of costs of

Rs.10,00,000/-. Considering the reasons so recorded by the

learned Arbitrator and the learned Judge and for the reasons so

recorded, in our view, no case is made out for interference with

the awarding of costs so fixed.

17. The Apex Court in the case of M/s. Chebrolu

Enterprises Vs. Andhra Pradesh Backward Class Cooperative

Finance Corporation Ltd., reported in 2015 (12) Scale 207,

recently reiterated and reinforced the principle that unless case

of perversity and/or error on the face of the record and/or any

issue of jurisdiction is raised which goes to the root of the matter

and/or any Award and/or order is contrary to the agreed terms

and conditions, no interference is called for by the learned Judge

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as well as the Appellate Court in the finding of facts. In para 20

of the Judgment, the Apex Court has observed thus:

"20. .... This Court or even the Appellate Court would not look into the finding of facts unless they are perverse."

18. The rejection of the counter-claims on the ground of

limitation and the counter-claims not being arbitrable as no

claim was raised immediately after receipt, as it was never even

quantified at appropriate time to make the claim of amount,

calls for no interference. The learned Judge has also upheld the

said Award. There was no counter-claim raised before the earlier

Arbitrator. The correspondences in the case, cannot read to

mean extension of limitation specifically when it was in the

nature of damages. The work was completed on 6-9-2000. The

counter-claims were filed on 6-11-2003. The arbitration clause

invoked for the same was in time. The observations of the

learned Judge in paragraphs 120 to 124 need no interference.

19. Insofar as the interest is concerned, the learned

Arbitrator has awarded 18% per annum, as recorded above,

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from the respective dates so mentioned. The learned Judge

considering the rival contentions has restricted the same to 12%

per annum instead of 18% per annum and the same shall be

payable for the period as awarded by the learned Arbitrator. The

Award and the interest on Claims "D" and "G" are set aside. Rest

of the Award is upheld. Therefore, for the reasons so recorded

above, we see no case is made out by the appellant to interfere

with the said reasons, the Award as well as the modified order

passed by the learned single Judge, so also the awarding of

costs.

20. However, even at the conclusion of the hearing,

learned counsel for the respondent resubmitted that the

proposal submitted by the respondent on 26-2-2016 should be

treated as a with prejudice offer of the respondent so that if the

amount of Rs.4,98,00,000/- is paid by the appellant, latest by

31-3-2016, such payment shall be treated as full and final

settlement of the respondent's claim under the Award on the

aforesaid modified terms. If the amount of Rs.4,98,00,000/- is

not paid by 31-3-2016, the impugned Award as modified by the

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impugned order passed by the learned single Judge shall be

executable. However, if the amount of Rs.4,98,00,000/- is paid

by 31-3-2016, the Award shall stand modified and satisfied.

21. For the reasons so recorded above, we dismiss the

the appeal accordingly. No costs.

                                       
       (S.C. GUPTE, J.) 
                              ig                    (ANOOP V. MOHTA, J.)