The Municipal Corporation Of ... vs Angerlehner Structural And Civil ...
2021 Latest Caselaw 12860 Bom

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

      COMMERCIAL APPEAL NO. 31 OF 2021
                      IN
 COMMERCIAL ARBITRATION PETITION NO. 20 OF 2015

Municipal Corporation of Greater Bombay,
constituted under the provisions of
Mumbai Municipal Corporation Act, 1888
having its office at Mahapalika Marg,
Fort, Mumbai- 400 001.                          ...        Appellant.

       V/s.

Angerlehner Structural and Civil Engineering
Company incorporated under the laws of
Austria, having its registered office at
A-4055, Pucking Obere Landstrasse 19
and its project office at 2078, B Wing,
Oberoi Gardens, Chandivali Studio
Compound, Saki Vihar Road, Sakinaka,
Andheri (East), Mumbai- 400 072.                ...        Respondents.




Mr.A.Y.Sakhare, Senior Advocate with Mr.Sagar Patil, Ms.Yamuna
Parekh i/b. Aruna Savla for the Appellant.

Mr.Javed Gaya with Ms.Vidya Chaudhari and Mona Malavade i/b.
Chambers of Javed Gaya for the Respondent.


              CORAM :        NITIN JAMDAR AND
                             G.A. SANAP, JJ.

              DATE :         8 September 2021.
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JUDGMENT:         (Per Nitin Jamdar, J.)

The sole Arbitrator rendered an award against the Appellant- Municipal Corporation. The challenge to the award made by the Appellant by filing an arbitration petition before the learned Single Judge was not successful. Hence, the Appellant is before us with this Appeal.

2. Before the facts are narrated, a brief reference to the work over which the disputes has arisen is necessary. The Appellant- Corporation proposed to rehabilitate eleven sewer line stretches in Mumbai by lining and coating method. The rehabilitation work consisted of various components such as grouting of annular space between the host sewer and the lines. The parties showed us the photographs and explained the work of grouting. The underground drainage pipes placed inside the tunnels, by the passage of time, become abraded, and the gap between the lining inside the tunnel and the exterior of the pipe has to be filled in by the grouting material. This would be in the case where the pipes can not be replaced, but existing pipes are made secure. We are informed that one had to enter the tunnels after stopping the flow of sewage for grouting work. The grouting work is the subject matter of dispute.

3. Pursuant to the tender issued by the Appellant, the Respondent submitted the bid on 11 November 1999 for USD 67,78,995.9. The Appellant found the Respondent's bid to be skn 3 COMAP-31.2021.doc

substantially responsive. The time of performance of the contract was for 24 months which was extended to 29 months commencing from 11 January 2001 to 31 May 2003. The work order was issued on 11 April 2001. A representative of the Chief Engineer was appointed. During the execution of the work, the parties exchanged letters. The Respondent claimed that about 1260.15 cubic meters of grouting material were used, for which the Appellant did not make payment. The Appellant informed the Respondent that the quantities over and above the quantities mentioned in the Bill of Quantities were due to the Respondent's construction methodology and designing, and, therefore, the claim will not be entertained. The matter was referred to the Dispute Review Expert, who made his recommendations on 11 October 2004. After further proceedings, a retired learned Judge of this Court was appointed as the Sole Arbitrator. Before the Arbitrator, the Respondent submitted the statements of claim. The Appellant filed the statement of defences and contested the claim. The learned Arbitrator, by a detailed reasoned award dated 23 June 2014, held that the Respondent was entitled and the Appellant was liable to pay the Respondent an amount of USD 9,00,000/-. The payment was directed to be made 65% in US dollars and 35% in Indian rupees with interest at 2.5% per annum on the US dollar component and 6% per annum on the Indian rupee component from 1 October 2014 till the date of the award.

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4. The Appellant challenged the award before the learned Single Judge by filing Commercial Arbitration Petition No.20 of 2015. The learned Single Judge, after hearing the parties, held that the view taken by the Arbitrator is reasonable and is a possible conclusion based on the material placed on record and no ground of challenge under section 34 of the Arbitration and Conciliation Act, 1996 was made out. Accordingly, by the order dated 27 February 2019, the petition was rejected. Therefore, the Appellant has filed this commercial appeal challenging the order dated 27 February 2019 under section 37 of the Act of 1996.

5. We have heard Mr. A.Y.Sakhare, learned Senior Advocate for the Appellant and Mr. Javed Gaya for the Respondent.

6. Appellant's first challenge is that the view taken by the learned Arbitrator while interpreting the contract is an impossible view. It is submitted that the terms of the contract would indicate that the tender was awarded based on the bid price submitted by the bidders. It was on the quantities mentioned in the Bill of Quantities, and it was not a Rate Contract. The Appellant submitted that it would be a perverse reading of the contract that after fixing the rate and quantity, the bidder is permitted to claim from the Appellant for extra work over and above the one specified. The Appellant submitted that various terms of the contract wherein formulas had been laid down have not been considered by the Arbitrator and the skn 5 COMAP-31.2021.doc

learned Single Judge. According to the Appellant, the general instructions to all the bidders, general conditions of the contract, and the conditions of particular application contain various clauses that show that the Bill of Quantities fixed the amount to be paid to the Respondent. The Appellant relied upon Clause-14, which refers to bid price as the whole work, and Clause-14.2, which refers that the bidder should fill in the Bill of Quantities and for all items described in the Bill of Quantities. Rate and price will be entered by the bidder. Referring to Clause-18 and Clause-31, it was contended that it was after the valuation of the bid price that the Appellant awards the contract. The definitions of Bill of Quantities and the contract price in general conditions of the contract were relied upon to contend that the contract price means the sum stated in the Letter of Acceptance based on Bill of Quantities. Clauses-8.2, 20.2 and 49.3 were referred to contend that it is for the contract to lay down the specifications, and the responsibility of loss for rectification would be entirely upon the bidder. Reference was also made to the Bill of Quantities and the phraseology used therein. The Respondent contended that the Bill of Quantities was provisional, and the record shows that the contract was not a lump sum contract as contended.

7. As we are concerned with the work of grouting in this appeal, it will have to be seen whether the Bill of Quantities as regards the grouting work be considered a lump sum or estimated. The preamble of the Bill of Quantities itself demonstrates that the skn 6 COMAP-31.2021.doc

contention of the Appellant that the Bill of Quantities is fixed and no portion of work in addition to thereof is claimed is fallacious. The preamble to the Bill of Quantities states that the quantities given in the Bill of Quantities are estimates and provisional. Basis would be actual quantities and work order already carried out as measured by the contractor and verified by the engineer. The Bill of Quantities for 11 packages for different areas is on record. Taking an example of Package-1 (Rehabilitation of sewer line running along Maulana Shaukat Ali Road), this the Bill of Quantities has 11 items, and for some of the items, the quantity is mentioned as 'lump sum', and for others, a specific quantity is mentioned. For example, for plugging of sewer line, diversion of flow, providing pumping facility and reinstatement of road surface, the quantity is specifically mentioned as 'lump sum'. The rate is mentioned, and the amount is fixed. As regards Clause-8 grouting work, the quantity is 52 cubic meters. The rate is 1,000 USD per cubic meter. Total work is 52,000 cubic meters. The grouting of each of the packages has different quantities. Therefore, wherever the item is lump sum and final, it has been mentioned.

8. The learned Arbitrator and the learned Arbitrator framed an issue regarding the lump sum contract. The parties led their evidence on this issue. The learned Arbitrator, apart from referring to the preamble, has also referred to letters dated 12 June 2001 addressed to the Respondent by the Appellant sending the skn 7 COMAP-31.2021.doc

approved breakup for each item and including grouting work. The learned Arbitrator also referred to Clauses-51.1, 56.1 and 60.1 of the general conditions of the Contract. The learned Arbitrator observed that the bills of quantities item-1 grouting work is a re-measurement item and not a lump sum item for fixed length, and the Respondent was entitled to the actual quantity of grout used for filling of the annular space between the liner and the host sewer. Therefore, a possible interpretation emerges looking at the nature of work which we have referred to above that the quantity mentioned in the Bill of Quantities regarding the grouting work was provisional and an estimate.

9. Furthermore, the Respondent pointed out that in one more contract, in respect of joint venture identical to the present contract, this Court has specifically taken a view interpreting similar bills of quantities. The Respondent has placed on record judgment passed by the learned Single Judge of this Court in the case of Municipal Corporation of Gr. Mumbai v. M/s.Joint Venture

This matter arose in the case of joint venture Angerlehner Michel Bau GMBH, which was a sister concern of the Respondent where an identical contractual provision and same controversy regarding payment for grouting was raised. In the said case also, the arbitrator had concluded that the grouting work was not a lump sum contract. Challenging this finding, the Municipal Corporation had filed an arbitration petition. The learned 1 Arbitration Petition No.340/2007 was decided on 5 March 2011.

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Single Judge analyzed the contract and considered the argument whether the contract was a lump sum contract or whether the measured items were subject to variation under the variation clause. The learned Single Judge observed that the view taken by the Arbitrator that the work quantity was estimated was correct. The learned Single Judge observed that under some of the items, no quantity is mentioned, and lump sum value is quoted, and that would mean that these are the items not to be measured and paid based on quantity. However, where quantities are mentioned, the unit of measurement is given, per unit rate is quoted, the value of the work item is to be worked out by multiplying with the quantity of the work with the rate and, therefore, it was not a lump sum contract. The Division Bench of this Court dismissed an appeal against this order. The Respondent pointed out that the challenge was not taken further by the Municipal Corporation, and the amount was paid to that contractor.

10. The second ground of challenge is that the Arbitrator had no jurisdiction to decide the quantum of the amount, and the only dispute was regarding the entitlement of the Respondent and the quantification was beyond the scope of the reference. The Appellant contended that with reference to the recommendation and conclusion of Dispute Review Expert, what was referred was only the contractor's entitlement to payment and not quantification. According to the Appellant, all that the learned Arbitrator could skn 9 COMAP-31.2021.doc

have done was to declare the entitlement and leave the quantification to the Appellant to calculate. According to the Appellant, since the Arbitrator exceeded the scope of jurisdiction, the award is without jurisdiction and, therefore, the challenge under section 34 of the Act of 1996 is available. The Respondent contends this issue was never raised before the learned Single Judge, and even otherwise, it has no merit. Reliance is placed on the observation in the order passed by the learned Single Judge in Arbitration Petition of Joint Venture Angerlhner wherein this contention of the Appellant in identical circumstances negatived.

11. In paragraph-5 of the impugned order, the learned Single Judge has recorded that though the award has been challenged on various grounds, the Appellant has restricted its challenge to the challenge on account of an impossible view of the contract. However, the Counsel for the Appellant submits the contention - as the contract stands the Arbitrator's view on the nature of contract and payment due is impossible- would include a challenge to the jurisdiction as well. We do not agree. That the Arbitrator did not have jurisdiction to decide a particular issue is a distinct ground than an argument on merits of the finding. It is clear that the Appellant had not urged this challenge before the learned Single Judge, and it was expressly given up.

12. Even otherwise, as per the terms of the contract, the skn 10 COMAP-31.2021.doc

procedure to be followed by the Dispute Resolution Expert is set out. Clause-67 of the Conditions of the Particular Applications deals with the procedure for settlement of the dispute. The Dispute Resolution Expert makes a recommendation, and the arbitration is provided under Clause-67.3. The joint reading of Clauses 67.1 and 67.3 is that the arbitral tribunal has the power to open up, review, or revise any decision, determination, or valuation of the Engineer and recommendation of the expert relating to the dispute. This is also a view taken by the learned Single Judge in the judgment rendered in Joint Venture Angerlhner. There is, therefore, no merit in the contention regarding the jurisdiction of the Arbitrator, even assuming that the Appellant could raise it in appeal.

13. The third contention of the Appellant is that the learned Arbitrator committed perversity in arriving at quantification by adopting an ad hoc methodology. According to the Appellant, there was no verifiable material to come to the figure of 900 cubic meters and then apply the rate of 1000 USD per cubic meter. The finding of the Arbitrator in paragraph-36.25 of the award was criticized as being based on presumption. According to the Appellant, the learned Arbitrator has mentioned two figures, 1063.617 and 1572.597, then there is a reference of deletion of 50.959 cubic meters and then the conclusion of 900 cubic meters. The Appellant contends that the Appellant had not signed the joint measurements and, therefore, there was no verified material before the Arbitrator, and the award passed without evidence is perverse. The Appellant skn 11 COMAP-31.2021.doc

also contended that the conduct of the Appellant as a public authority is commented upon, which is not relevant as the dispute is contractual. The Respondent contends that there was material on record to arrive at this conclusion, and if the Appellant refused to sign the measurements despite the recommendation of the Dispute Resolution Expert, they would have to suffer the consequences, and the Arbitrator still has not granted the entire claim. Respondent contended that against the very basic understanding of the contract and for no reason, the Appellant stopped countersigning the measurements and, therefore, had to face the consequences when the Respondent proved the documents regarding the work undertaken.

14. The preamble to the Bill of Quantities makes a reference to the joint measurements of the work by the Appellant and the Respondent and verification by the engineer. Before the learned Arbitrator, the factum of the engineer instructing to stop verifying and quantifying the measurements is accepted. The basis for this action is that the contract is of lump-sum nature. The witness examined by the Appellant did not refer to the quantification. In the cross-examination, he was asked on what basis annular space is to be filled. He replied that it is on a cubic meter basis. Then the question was whether payment on a cubic meter basis would involve measurement by the Engineer, to which he replied affirmatively. From the answers given, it is clear that the main stand on quantification was only that the contract was for lump sum amount as per Bill of Quantities. It is to be noted that the Dispute Review skn 12 COMAP-31.2021.doc

Expert recommended getting the measurement for effective resolution of the dispute. Therefore, the learned Arbitrator was right in taking exception to the conduct of the Appellant in unilaterally stopping to verify the measurements. Even if the reference to the public body is kept aside, such conduct would have consequences even in a contractual dispute. The Respondent examined the witness and proved the measurements that were brought on record. The learned Arbitrator excluded those measurements of which originals were not proved. The learned Arbitrator has discussed the material on record in detail in the award and after that has rendered the finding regarding 900 cubic meters. Therefore, it cannot be said that the finding of the learned Arbitrator is based on no evidence.

15. The learned Single Judge has rightly concluded that no case under section 34 of the Act of 1996 was made out.

16. The Commercial Appeal is dismissed with costs quantified at Rs.50000/- (fifty thousand only). Costs shall be paid to the Respondent within six weeks from today, failing which it will carry interest at the rate of six per cent per annum.

       (G.A. SANAP, J.)                  (NITIN JAMDAR, J.)


          Digitally
          signed by
          SANJAY
SANJAY    KASHINATH
KASHINATH NANOSKAR
NANOSKAR Date:
          2021.09.17
          17:16:27
          +0530