Municipal Corpn.Of Greater ... vs Bharat Construction Co.& Anr
2017 Latest Caselaw 2340 Bom

                                        1             APPEAL NO.804 of 99

         IN THE HIGH COURT OF JUDICATURE AT BOMBAY
             ORDINARY ORIGINAL CIVIL JURISDICTION


                      APPEAL NO. 804 OF 1999
                               IN
                ARBITRATION PETITION NO.77 OF 1994

           MUNICIPAL CORPORATION OF
           GREATER BOMBAY, a Statutory
           Corporation, constituted under
           the provisions of Bombay Municipal
           Corporation Act, 1988 having
           their office at Mahapalika Building,
           Mahapalika Marg, Mumbai 400 001.           ...APPELLANT/
                                                   Orig. Petitioners
                   VERSUS

  1.       Bharat Construction,
           a Registered firm, carrying on
           their business at D/2-92, Bharat
           Nagar, Grant Road,
           Mumbai - 400 007.

  2.       D.V. Deshpande, Indian Inhabitant
           residing at 11, Vishwak Artek
           apartment, Bandra (East),
           Mumbai - 400 051.

  3.       Bharat Infrastructure & Engineering
           Pvt. Ltd., a private Limited Company
           having its registered office at 601,
           Shree Amba Shanti Chambers,
           Off. Church Road, Opp. Hotel Leela,
           Andheri-Kurla Road, Andheri (E),
           Mumbai - 400 059.                    ...RESPONDENTS/


                                  ...

  Mr. Kevic Setalwad, Sr. Adv. a/w. Mr. Ameya Kulkarni i/b.
  Sandeep Patil for Appellant.
  Mr. M.M. Vashi, Sr. Adv. a/w. Ms. Panthi Desai, i/b. M.P. Vashi
  & Associates for Respondents.
                               ...




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                                              2                   APPEAL NO.804 of 99

                                  CORAM:           ANOOP V. MOHTA AND
                                                   P.R. BORA, JJ.

...

DATE OF RESERVING THE JUDGMENT : 02.02.2017 DATE OF PRONOUNCING THE JUDGMENT : 05.05.2017 ...

JUDGMENT: (Per P.R.Bora, J.)

1. This is an appeal against the order of the learned

Single Judge dismissing the appellants petition under Section

30 of the Arbitration Act, 1940 for setting aside an award dated

22.06.1993 passed by the sole Arbitrator.

2. In May 1989, the appellant-corporation had invited

tenders for the work of re-construction of Zakariya Bunder road

from Sewree gate no.8 to Cotton Green Station (Part 2) in

cement concrete. In response to the tenders so invited, the

respondent no.1 submitted its percentage rate tender on

12.05.1989. The appellant-corporation accepted the tender

submitted by the respondent no.1 on 23.09.1989 and directed

the respondent no.1 to make preliminary arrangements, so as

to commence the work in right direction earnest from

11.10.1989, which date was to be taken as the date of

commencement of the said work and from which date the

contract period of eight months was to be reckoned.

3. Some delay was caused in commencing the tender

work. According to the contractor lack of due co-operation

from the officers of Municipal Corporation was the reason that

the work could not be commenced on the stipulated date and

also did not progress further in the manner and proportion it

ought to have been. Differences went on increasing which

ultimately resulted in stoppage of work.

4. Since, disputes and differences arose between the

appellant-corporation and the respondent no.1, the same were

referred to the sole Arbitration of respondent no.2 under

Clause-97 of the General Conditions of Contract for Civil Works,

which runs as under:

"97. Arbitration:

All disputes or differences whatsoever which shall at any time arise between the parties hereto touching or concerning the works or the execution or maintenance thereof or this contract or the construction, execution, or maintenance thereof or this contract of the construction meaning operation or effect thereof or, to the rights or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after determination, foreclosure or breach of the contract (other than those in respect of which, the decision of any person is by the contract expressed to be final and binding) shall after written notice by either party to the contract to the other of them specify the nature of such dispute or difference and call for the point or points at issue to be referred to the arbitration...........

The Arbitrator shall give a separate award in respect of each dispute or difference referred to him.

5. The learned Arbitrator vide award passed on

22.06.1993 determined an aggregate sum of Rs. 30,51,565/- to

be paid by the appellant-corporation to respondent no.1.

6. The award so passed was challenged by the

appellant-corporation by filing Arbitration Petition No. 77 of

1994, before the learned Single Judge. It was the contention of

the appellant-corporation before the learned Single Judge that,

by virtue of Claus-94 of the General Conditions of the Contract,

respondent no.1 was not entitled to claim any amount towards

the compensation for losses suffered on account of over head

expenses or idle labour and machinery and/or reduced

productivity. It was also the contention of the appellant-

corporation that, the learned Arbitrator was not having any

authority to adjudicate the claims raised by the respondent

no.1 as they were beyond the scope of reference. As against it,

it was the contention of the respondent no.1 that, Clause-94 of

the General Conditions of Contract was not applicable in the

case and the disputes were referred to arbitration under

Clause-96 and 97 and, as such, the Arbitrator was having every

authority to adjudicate the said claims.

7. The learned Single Judge after having considered

the submissions advanced before her dismissed the petition

filed by the appellant-corporation and passed a decree in terms

of the award with further interest @ 18% per annum from the

date of decree till the payment/realisation. Aggrieved by, the

appellant-corporation has preferred the present appeal.

8. Shri Kevic Setalwad, the learned senior counsel

appearing for the appellant-corporation, assailed the impugned

judgment on several grounds. The learned senior counsel

submitted that, the learned Single Judge failed to appreciate

that, under Clause-94 of the General Conditions of Contract

there was a prohibition for making or awarding any claim for

profit or compensation. According to the learned senior

counsel, claim nos. 1 and 2 were, therefore, not arbitrable. The

learned senior counsel further submitted that, the Arbitrator

had exceeded his jurisdiction and had travelled beyond the

scope of contract by entertaining such claims. The learned

senior counsel submitted that, the learned Single Judge failed in

appreciating that, claim nos. 1 and 2 were even otherwise

overlapping claims and damages could not have been awarded

twice under Section 73 of the Contract Act, as held by the

Hon'ble Supreme Court in the case of Union of India V/s.

Jain Associates reported in 1994 (4) SCC 665. The learned

senior counsel further submitted that, the judgment delivered

by Justice K.G. Shah in Arbitration Petition No. 151 of 1994 was

not binding, since it was per incuriam. The learned senior

counsel submitted that, the judgment of the Hon'ble Apex Court

in the case of Union of India V/s. Jain Associates cited

(supra) was not brought to the notice of Justice K.G. Shah.

The learned senior counsel further submitted that, the learned

Single Judge failed to appreciate that, the Arbitrator was bound

to give speaking award, in view of the fact that, a public body

like the appellant-corporation was a party to the arbitration

proceedings. The learned senior counsel further submitted

that, when a specific objection was raised by the appellant-

corporation in respect of arbitrability, the Arbitrator was duty

bound to decide the said issue, whereas, the Abirtrator without

deciding the said issue passed a non-speaking award. The

learned senior counsel submitted that, the learned Single Judge

on this ground alone ought to have set aside the arbitration

award. For the aforesaid reasons, the learned senior counsel,

prayed for setting aside the order passed by the learned Single

Judge and consequently the award passed by the Arbitrator.

9. Shri M.M. Vashi, the learned senior counsel

appearing for respondent no.1 resisted the contentions raised

on behalf of the appellant-corporation. The learned senior

counsel submitted that, having regard to the facts involved in

the present case, Clause-94 of the General Conditions of the

Contract, is not attracted and there was no impediment for

passing of an award by the Arbitrator for loss of profit and

overhead expenses etc. The learned senior counsel submitted

that, the claims raised by the contractor and awarded by the

Arbitrator were well within the scope of arbitration clause. The

learned senior counsel submitted that, the award which has

been passed after considering voluminous documentary

evidence, cannot be faulted with. The learned senior counsel

further submitted that, the learned Single Judge has rightly

dismissed the arbitration petition filed by the appellant-

corporation. The learned senior counsel, therefore, prayed for

dismissal of the appeal.

10. We have carefully considered the submissions made

on behalf of the learned senior counsel appearing for the

respective parties. We have also perused the award passed by

the Arbitrator and the order passed by the learned Single Judge

in the arbitration petition. The award passed by the Arbitrator

is mainly challenged on the ground that, when the appellant-

corporation had foreclosed the subject work under Clause-94 of

the General Conditions of Contract for Civil Works, the

Arbitrator could not have entertained the claims raised by the

Contractor not falling within the scope of the said clause. Since

the controversy revolves around Clause-94. We deem it

appropriate to re-produce the said cause which reads thus:

94. Foreclosure of contract in full or in part.

If at any time after acceptance of the tender the Commissioner shall decide to abandon or reduce the scope of the works for any reasons whatsoever and hence not require the whole or any part of the works to be carried out, he shall inform the contractor in writing to that effect and the contractor shall have no claim to any payment or compensation or otherwise whatsoever, on account of any profit or advantage which he might have derived from the execution of the works in full but which he did not derive in consequence of the foreclosure of the whole or part of the works.

The contractor shall be paid at the contract rates full amount for works executed at site, and in addition, reasonable amount as certified by the Engineer for the value of such material (which material thereupon become the property of the Corporation) and also such further allowances as the Engineer may think reasonable and fair in respect of (a) any expenditure incurred by the contractor towards preliminary works etc. and (b) other reasonable and proper engagement the contractor may have entered into for carrying out the work. (c) such compensation as considered equitable under the circumstances.

11. Now it has to be seen, as to who has foreclosed the

work, whether the Commissioner of the appellant-corporation

or respondent no.1. As has been argued by the learned senior

counsel appearing for the appellant-corporation, the corporation

foreclosed the work. Respondent No.1 has disputed this fact.

It is the contention of respondent no.1 that, because of the

adamant and non co-operative approach adopted by the

appellant-corporation the contract work stood foreclosed.

12. The record of the case shows that vide order passed

on 19.07.2007, the present appeal was dismissed by the

Division Bench, as in its opinion the controversy was covered by

an earlier decision of this Court in Appeal No. 1148 of 1997

given on 27.01.2005 (Municipal Corporation of Greater

Bombay V/s. Atul Raj Builders Pvt. Ltd.). The appellant-

corporation filed an appeal before the Hon'ble Apex Court

against the aforesaid judgment and the Hon'ble Apex Court has

set aside the said order in Civil Appeal No. 5168 of 2009 arising

out of (SLP (C) No. 16133 of 2007) decided on 07.08.2009.

Perusal of the order passed by the Hon'ble Apex Court in the

aforesaid appeal reveals that, a submission was made before

the Hon'ble Apex Court by the appellant-corporation that, it

foreclosed the contract and contractor was accordingly

intimated that, the corporation will not make any payment for

any loss suffered on account of inability on the part of the

contractor to complete the contract within the stipulated time.

In view of the submission so made on behalf of the appellant

Corporation, the Honourable Supreme Court held that the

matter needs to be re-examined by the Division Bench afresh.

The Honourable Apex Court has, therefore, remitted the matter

back by keeping all the contentions of the parties open, to be

agitated before this Court. Accordingly, the matter was heard

afresh.

13. After having considered the submissions made on

behalf of the learned Counsel appearing for the respective

parties and on perusal of the material on record, we find it

difficult to accept the contention raised by the appellant

corporation that it foreclosed the subject work by invoking

clause 94 of the General Conditions of Contract for Civil Works.

14. In the proceedings before the Arbitrator appellant

Corporation had submitted its written statement. In paragraph

nos.5 (b) and 5 (c) of the said written statement, the appellant

Corporation has averred thus:

"5 (b) Under the terms and conditions of the contract incorporated in the above documents, the Claimants contractor were required to carry out the work in a phased manner including completion of certain pre-limineties as required under the Special Directions / Special Conditions of the Contract before commencement of the work. The sequential work was not carried out by the Claimants, as a result of which there has been delay in completing the work within the stipulated period of time. The Claimants were thereafter given an option to complete the work after the monsoon of 1990 on the same terms and conditions of foreclose the contract and the CLAIMANTS HAVE OPTED TO foreclose the contract as they refused to complete the work on the same terms and conditions and therefore, asked for 30% rise in the contract amount which is clearly impermissible as the contract postulates no escalation whatsoever.

(c) In these circumstances, the contract stood foreclosed under the terms and conditions of the contract. In view of the provisions of Clause 94 of the General Conditions of Contract it is clear that for any reason whatsoever if the work is abandoned or foreclosed, the contractor shall have no claim whatsoever to any payment or compensation or otherwise on account of any profit or advantage which he might have derived from the exclusion of the work in full but which he did not derive in consequence of the foreclosure of the whole or part of the work. From the above clause 94 of the General Conditions of Contract is clear that the Claimants' claim is clearly impermissible. "

15. The contentions raised by the appellant corporation

in paragraph Nos. 50, 52 and 57 also have some bearing on the

plea raised by the appellant Corporation as about application of

clause 94. We, therefore, deem it appropriate to reproduce

hereinbelow the said portion in the written statement of the

Corporation:

"50. With reference to paragraph 45 these respondents state that the respondents offered an opportunity to all the agencies working, including claimants to show their willingness to continue the work after monsoon on same rates, terms and conditions or foreclose the same. Many agencies opted to work on the same rates, terms and conditions and other, opted foreclosure. However, the Claimant opted to demand the increased rates (30%), which were not acceptable to Respondent and, therefore, that request was rejected.

52. With reference to paragraph 47 these respondents state that the claimants refused to work with the same terms and conditions after monsoon and therefore contract stood foreclosed.

57. With reference to paragraph 52 these respondents state that the claimant's statement is not correct. The work, left incomplete by the claimant, was awarded to the other contractors by following the regular procedure of inviting tenders. Further, if the work would have been completed by the Claimants, within the contract period, the question of granting the incomplete work to other agency would not have arisen at all. In fact, due to fault on part of the claimants, the Respondent is put to loss and the claimant do not deserve any compensation and, instead, are liable for penalty and make up the loss to the Respondents. "

16. Considering the contentions raised and the plea

taken by the appellant Corporation in its written statement as

reproduced herein-above, we are unable to accept the

contention raised on behalf of the appellant Corporation that it

abandoned the subject work or foreclosed the said work by

invoking clause 94. What transpired from the pleadings of

the appellant Corporation is the fact that the circumstances so

arose that the subject work stood foreclosed. From the

averments in paragraph No.5(b) of the written statement,

reproduced herein above, it is quite evident that it was the case

pleaded by the appellant Corporation before the Arbitrator that

the contractor opted to foreclose the contract by refusing to

complete the work on the same terms and conditions. Neither

in paragraph No.5(b) nor in paragraph No.5(c) any such

unambiguous and concrete case is made out by the Corporation

that the Commissioner of the Corporation abandoned or

foreclosed the subject work by invoking clause 94. It is

nowhere asserted by the appellant Corporation that the

Commissioner of the appellant corporation took conscious

decision to foreclose the subject work and communicated the

said decision to the contractor i.e. respondent no.1.

17. The averments in paragraph no.57 of the written

statement leave no doubt that there was no abandonment of

the subject work by the appellant Corporation as contemplated

under clause 94 of the General Conditions of Contract and Civil

Works. On the contrary, in the Arbitration Petition

No.77/1994, in paragraph no.9(g), it is the contention of the

appellant Corporation that the contractor abandoned the work.

We deem it appropriate to reproduce hereinbelow the

contention so raised in the said paragraph No.9(g) which reads

thus:

" ..... .... In fact, it has been established beyond a shadow of doubt that because of shortfall of labour and machinery, the work was not completed on time and respondent no.1 abandoned the work. "

18. It is further significant to note that in the present

appeal also it is the case put forth by the appellant Corporation

that both the parties i.e. the Corporation and the contractor

agreed to foreclose the contract under clause 94 of the General

Conditions of Contract. Ground `l' in the memo of appeal in

that regard reads thus:

"(l) The learned Single Judge ought to have appreciated that since there was no progress on the part of respondent No.1 in completing the work both the parties agreed to foreclose the contract under Clause 94 of the General Conditions of Contract. The appellants thereafter invited a fresh tender and awarded the work to a new contractor. The proposal of the respondent No.1 was conditional and was not acceptable to the appellants."

19. The contractor i.e. respondent no.1 has denied that

he had agreed to foreclose the contract under clause 94 as has

been canvassed by the appellant Corporation.

20. It was sought to be canvassed by the learned

counsel appearing for the appellant Corporation that the

contractor has not disputed the fact that the appellant

Corporation foreclosed the contract. Our attention was invited

by the learned Senior Counsel to paragraph No.47 of the

statement of claim submitted by the contractor and more

particularly to the first sentence of the said paragraph to the

effect that, "The respondent finally foreclosed the contract". To

establish that the foreclosure of the subject work falls within

the purview of clause 94, the primary burden was on the

appellant Corporation to prove the said fact with reasonable

certainty. However, as noted by us herein-above, the

Corporation has not come out with any such concrete case or it

is nowhere asserted by the appellant Corporation that the work

was foreclosed or abandoned by the decision of the

Commissioner of the appellant Corporation. As is revealing

from the material on record, an offer was given by the

appellant Corporation to respondent no.1 contractor to

complete the work on the same terms and conditions after the

period of Monsoon expires or to foreclose the contract. From

the offer so given also it is clear that the option to foreclose the

contract was given to the contractor. The material on record

further reveals that the contractor did not accept the said offer

and as has been contended by the appellant Corporation in

paragraph No.5(b) of its written statement reproduced herein-

above, "the claimants i.e. respondent no.1 contractor opted to

foreclose the contract".

21. From the facts as aforesaid, it is quite clear that the

option to foreclose the contract was not exercised by the

appellant Corporation. For invoking clause 94 mere

abandonment or foreclosure of the work is not enough; it has to

be further established that the abandonment or foreclosure of

the work was by the appellant Corporation. Though an attempt

has been made to suggest that respondent no.1 had agreed to

foreclose the contract under clause 94 of the General Conditions

of the Contract, respondent no.1 has flatly denied the said fact.

22. The appellant Corporation has thus failed in

establishing that it had abandoned or foreclosed the subject

work by invoking clause 94. As noted earlier, clause 94 would

come into operation only if the foreclosure of the work is by the

Commissioner of Municipal Corporation.

23. Thus, though before the Honourable Apex Court a

case was put forth by the appellant Corporation that it

foreclosed the contract and the contractor was intimated that

the Corporation will not make any payment towards loss

suffered by the contractor on account of the inability on the

part of the contractor to complete the contract within the

stipulated time, the Appellant corporation has utterly failed in

substantiating the said fact. In the circumstances, obviously,

clause 94 of the General Conditions of the Contract would not

have any application. The learned Single Judge has rightly

rejected such contention raised by the appellant Corporation.

We do not see any reason to cause any interference in the

finding so recorded by the learned Single Judge.

24. In view of the finding recorded by us that clause 94

would not be applicable in the present case, the other objection

pressed on behalf of the appellant Corporation that the

Arbitrator did not decide arbitrability of the claim as set up by

the contractor and disputed by the appellant Corporation loses

its significance.

25. Another objection raised by the appellant

Corporation is that the learned Single Judge has failed in

appreciating that though the amount claimed by respondent

no.1 vide claim no.2 is, in fact, covered in claim no.1, the

Arbitrator has awarded the claim under both the heads and,

thus, for one claim, amount has been awarded twice. Learned

Counsel submitted that in view of the provisions under Section

73 of the Contract Act, such course is impermissible. The

submission so made, of course, has been denied by respondent

no.1.

26. In the statement of claim filed before the Arbitrator

respondent no.1 has claimed an amount of Rs.60,87,435/-

towards compensation for losses on account of overheads and

profits. As per the particulars provided in paragraph no.61 of

the statement of claim, the contract sum is shown as

Rs.2,89,83,931/-. Respondent no.1 has calculated his profit at

25 per cent which comes to Rs.72,45,995/-. The value of the

work executed during the stipulated period, is shown to the

tune of Rs.46,34,160/-. The profit, which could have been

derived from the value of the works so executed is shown as

Rs.11,58,540/-. It is calculated at the rate of 25 per cent of

the work executed. Deducting the said amount from the total

estimated profit, the total loss on account of overheads and

profits is shown to be Rs.60,87,435/- (Rs.72,45,995/- (minus)

Rs.11,58,540/- = 60,87,435/-). Towards claim no.1, the

Arbitrator has awarded the amount of Rs.17,10, 903/-.

27. In paragraph no.62 of the statement of claim

submitted by respondent no.1 before the arbitrator, he has

provided the particulars in regard to claim no.2 towards the

losses suffered on account of the labour and machinery and / or

reduced productivity. In the particulars so provided, cost of

the work put up to tender is the same i.e. Rs.2,89,83,981/-.

Below the said amount, the sum of Rs.40,00,000/- is shown by

way of provision made for machinery and equipment. Value of

the work done during the stipulated period is again the same

i.e. Rs.46,34,160/-. Then the pro rate payment received is

shown to the tune of Rs.6,48,776.80 and the net loss suffered

on account of the labour and machinery and reduced

productivity is shown to the tune of Rs.33,51,224/-. The

Arbitrator has awarded a sum of Rs.10,35,166/- towards the

said claim.

28. Though neither in the statement of claim nor in the

award passed by the Arbitrator it is clarified as to in what

manner the loss was assessed for claim no.2, it appears that

respondent no.1 had made the provision of Rs.40,00,000/- for

machinery and equipments and from out of the work executed

by him in the stipulated period to the extent of Rs.46,34,120/-,

the proportionate profit or return was shown by respondent

no.1 to the tune of Rs.6,48,776.80 and thus, the net loss for

the labour, machinery and reduced productivity was claimed to

the tune of Rs. 33,51,224/-. In fact, some explanation and

some more particulars must have been provided by the learned

Arbitrator while allowing the respective claims and passing the

award in that regard. Admittedly, no such reasons are

assigned and the award passed is a non speaking award. No

doubt, this Court has certain limitations while examining a non

speaking award, however, as held by the Honourable Apex

Court in the case of State of J & K and another Vs.

Devdatta Pandit ( (1999) 7 SCC 339), there is no complete

bar in examining whether the award is in terms of the

Reference or in terms of the contract.

29. As is revealing from the material on record,

respondent no.1 contractor was supposed to keep engaged the

required number of labours and machinery exclusively for the

contract work. In the circumstances, even if the contract was

not allowed to be performed fully, and respondent no.1 had to

keep his machinery and labour idle in the relevant period, the

losses suffered on account of the idle labour and machinery

which are claimed under claim no.2 could not have been

awarded separately for the reason that all these claims are

obviously covered by claim no.1. It appears to us that when

the estimated loss in profit was claimed by respondent no.1

vide claim no.1, it was not open for respondent no.1 to again

claim the losses suffered on account of the idle labour and

machinery separately under claim no.2. Even otherwise, had

the work been not abandoned, the respondent contractor must

have utilized the said labour as well as machinery since

according to his own case, the same was earmarked specifically

for the subject work. In the circumstances, the claim awarded

towards claim no.2 by the Arbitrator cannot be sustained.

Learned Single Judge has failed in appreciating this aspect and

has wrongly held that claim no.1 and claim no.2 were

independent of each other. We set aside the finding recorded

by the learned Single Judge.

30. One more objection has been raised by the

appellant Corporation which relates to grant of interest as

awarded by the Arbitrator at the rate of 18 per cent per annum

which has been confirmed by the learned Single Judge. We find

substance in the objection so raised. Having regard to the fact

that the award is passed against a local body and the project

which was the subject matter of the contract was not a profit

making project, we deem it appropriate to award the interest at

the rate of 10 per cent per annum instead of Rs.18 per cent

per annum as awarded by the learned Single Judge. We are,

therefore, inclined to partly allow the present appeal. Hence,

the following order:

ORDER

i) The Appeal is partly allowed.

ii) The Award dated 22nd June, 1993, so far as it

relates to claim no.2, stands quashed and set aside.

iii) We hold respondent no.1 entitled to receive the

amount awarded by the learned Arbitrator towards

claim nos. 1, 4 and 6 with interest thereon at the

rate of 10 per cent per annum from the date of

award till its realization.

iv) The Appeal stands allowed in the aforesaid terms.

                   ( P.R.BORA)                   (ANOOP V.MOHTA)
                      JUDGE                           JUDGE


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