M/S. M.L. Dalmiya & Co. Ltd. vs International Airport Authority ...
1994 Latest Caselaw 682 Del

JUDGMENT

P. K. Bahri, J.

1. In a petition filed under Section 14 of the Arbitration Act by the petitioner, notice was given to the Umpire/respondent No. 2 in response to which he had filed the award and the proceedings in this court. Notice of filing of the award was given to both the parties. Both the parties have filed objections to the award.

Following issues were framed :

(1) Whether the award is liable to be set aside or modified in view of the objections filed by the parties ?

(2) Relief.

2. It was agreed by the counsel for the parties, as mentioned in order dated 25th January, 1993, that the question of grant of pendente lite interest which has not been decided by the Umpire be decided by this court instead of remitting the award to the Umpire for the decision on this question.

3. Facts leading to the giving of the award, in brief, are that in and about December 1977, a global tender was invited by the Government of Maldives to upgrade the existing airport of Hulule Island. The project was to be founded by Quwait and Saudi funds. Kocks Consult GMBH of Germany were the consulting engineers and Mr. Edwin Lutzman was the Resident Engineer.

4. Respondent No. 1 on 12th December, 1977, had given its tender and on 28th February, 1978, the Government of Maldives awarded the contract to respondent No. 1 involving the total sum of US $ 1,07,43,881.92. The site was handed over on 22nd March, 1978 and according to the terms of the contract, the first phase i.e., site installation including mobilisation of plant, machinery and material, tools, etc., and also construction of temporary structures including the residence and laboratory for the Resident Engineer were to be completed by 21st July, 1978 and the work was to be executed as per time schedule and/or Bar Chart and had to be completed on or before 21st December, 1979.

5. It is the case of the respondent No. I that on 8th March, 1978, back to back agreement was entered into by respondent No. 1 with the petitioner and as a matter of fact, the whole work was to be executed by petitioner and petitioner was to get US $ 96,82,931.92.

6. On May 2, 1979, a sum of US $ 13,43,367.39 were paid to the petitioner as mobilisation advance and a sum of US $ 1,79,500 was paid as a bridging finance to the petitioner apart from other expenses incurred by respondent No. 1 on petitioner's account totalling to US $ 15,62,062.94. It is averred that petitioner had deliberately and intentionally executed the project at a very slow speed and lagged far behind the scheduled Bar Chart and some of the main machines which were brought to the site of petitioner were old, unusable and junk and there were serious apprehensions about utilisation of the foreign exchange provided to the petitioner for the project. As such on 10th January, 1979, the respondent No. 1 terminated the agreement with the petitioner and the project was thereafter executed by respondent No. 1 and completed on 31st September, 1981 at the risk and cost of the petitioner. According to the averments made in the objections of the respondent No. 1, respondent No. 1 is stated to have spent a sum of US $ 1,51,85,699.32 incurring a loss of US $ 63,14,541.02 which the respondent No. 1 claimed from the petitioner apart from the amount of US $ 8,55,903.80 which remained outstanding with the petitioner against the advances paid to respondent No. 1 for purchase of plant and machinery.

7. According to the terms of the tender floated by the Government of Maldives, it was incumbent upon any party offering the tender to disclose the names of associates and the respondent No. 1, while giving the tender, had disclosed the names of M/s. Om Prakash Baldev Kishan Private Limited as an associate but after acceptance of the tender, the said company had backed out and the respondent No. 1 wanted a suitable replacement and without disclosing the status of the petitioner, the respondent No. 1 had entered into a back to back agreement with the petitioner for executing the said project meaning thereby that the petitioner was not only an associate for carrying out the project but the project had been completely subject to the petitioner which fact was not disclosed by the respondent No. 1 to the Government of Maldives or to the Consulting Engineers including their representative, the Resident Engineer.

8. According to the terms of the contract, the petitioner was to receive 93.11% of each running bill and final bill which the respondent No. 1 was to receive from the Government of Maldives. It is also an admitted fact that the initially the work of the construction of the terminal building was held back from the petitioner but the same was subsequently awarded to the petitioner by respondent No. 1 on August 21, 1978. As per terms of the contract, the work was to commence within 30 days from the date of the delivery of the site and time limited of completion of the project was 24 months. The site was admittedly delivered to respondent No. 1 by Government of Maldives on 22nd March, 1978 and thus the work was to be commenced on or before 21st April, 1978 and to be completed on or before 21st April, 1980. The petitioner is stated to have commenced the work within the stipulated date except the work pertaining to terminal building. According to the Bar Chart appearing at page 78 of the Contract (C-65) the item of site installation was the first item to be performed by the petitioner. The item of site installation included survey work, the construction of various types of temporary structures, mobilisation of tools, plant, machinery, instruments and equipments which were to be needed for the construction work and completion of preliminary formalities for obtaining approval of construction material, designs, etc.

9. In view of the fact that the contract was to be performed in a foreign country, the foreign exchange was needed for performing the contract, so the Government of Maldives was to pay mobilisation advance of 15% of the contract amount within three weeks from the date of letter of intent and that amount was to be handed over to the petitioner by respondent No. 1. The respondent No. 1 admittedly received the mobilisation advance from the Government of Maldives to the tune of US $ 16,11,559 on May 10, 1978 out of which US $ 11,92,801 were given to petitioner on June 2, 1978 and US $ 1,37,000 on 6th September, 1978. The respondent No. 1 was also to obtain bridging finance from the Government of Maldives which was to be given to the petitioner on or before 29th June, 1978. The respondent No. 1 received the bridging finance of US $ 8,00,000 in between the period November 14, 1978 to November 22, 1978 but had not released this account to the petitioner. The respondent No. 1 had, however, admittedly incurred expenditure of US $ 1,99,956 on behalf of the petitioner but had not released any sum as bridging finance to the petitioner at any time directly.

10. The first item of the contract which was to be completed before 1st July, 1978 come to be completed on 31st October, 1978 by the petitioner except for mobilisation of few items of machinery. The ease of the petitioner was that delay of 72 days was caused by respondent No. 1 in not releasing the mobilisation advance in time. It was the case set up before the Umpire as well as the arbitrators by respondent No. 1 that delay occurred in releasing the mobilisation advance to the petitioner on account of petitioner's inability to obtain ECGC cover as was required by the terms of the contract whereas the case of the petitioner has been that according to Article 9(4) of the contract entered into between the parties, the respondent No. 1 was required to obtain ECGC cover in a manner that the advantage of same could be taken by the petitioner to obtain the necessary guarantee and in breach of the terms of Article 9(4) of the contract, respondent No. 1 did not obtain any ECGC cover for the benefit of the petitioner and required the petitioner arrange for ECGC cover independently. So, it was pleaded by the petitioner that no delay could be attributed to the petitioner in executing the contract.

11. It is the case of the petitioner that the sample of the material for concrete work was to be supplied by the petitioner six weeks before the starting of concrete work and the final approval was to be conveyed to the petitioner regarding design mix at least 15 days before the scheduled date of commencement of the concrete work. The petitioner had supplied the samples in April 1978 but necessary approval was conveyed to the petitioner by respondent No. 1 only on 11th October, 1978 and approval for Bichumen was not even given up to January 10, 1979 i.e., the date when the contract was terminated by respondent No. 1.

12. One of the terms of the contract entered into was that a dredging channel was to be provided by Government of Maldives go that the ships could easily come up to the shore and the machinery and other items which were to be brought by the ships for completing the project could be off-loaded. The dredging channel was required because of low depth of the water near the shores of Maldives. In negotiation, which took place on February 6, 1978, the representatives of the Government of Maldives had expressed some difficulty in providing a dragging channel and the respondent No. 1 and clarified at that time that the cost of providing such channel was not calculated for giving the tender offer. The Government of Maldives then, in the agreement dated 29th March, 1978, allowed the use of a cause-way already constructed instead of a dredging channel. This was an alternate berthing facility but unfortunately the said cause-way was admittedly washed away even before June 1978.

13. It is undisputed that heavy machinery and equipments and the building material were to be imported from India and other places and same could be carried to Maldives by ships. The Government of Maldives had given assurance that the cause-way which had been damaged would be again set right but till the termination of the contract, such a cause-way was not provided. In order to carry on with the project, the petitioner, on the decision being taken by respondent No. 1, engaged the ships for carrying the cargo to Maldives but the ship; had to be anchored five miles away from the shore and the cargo used to be unloaded from the ships in dhonies and rafts which could carry only a small quantity of cargo per trip from the ship to the shore using the existing passenger jetty. So, the first ship reached the shores of Male brought by the petitioner on 27th July, 1978. It is not indeed disputed that for lack of proper berthing facility, as contemplated by the terms of the contract entered into between the Government of Maldives and the respondent No. 1, there occurred difficulty in transporting the machinery and material from ships to the said islands and the same seriously affected the progress of the work. Respondent No. I had itself written letter dated 30th May, 1978 to the Government of Maldives highlighting these facts and it is only after the contract of petitioner had been terminated that the respondent No. 1 succeeded in, getting a dredging channel constructed by the Government of Maldives, though of a smaller size. Admittedly, the petitioner had brought five ship-loads of various material and machinery to the site. The re was some anxiety being exhibited by respondent No. 1 for the delay occurring due to all these reasons in starting the project and apprehending that main contract may not be cancelled by the Government of Maldives, the respondent No. 1 arranged, at the instance of the petitioner, to airlift some machinery and material and 12 air sorties were carried out in this respect.

14. It is also almost not disputed that the work on the runway which was to be taken up in three phases could not progress much till the termination of the contract as the resident engineer had not furnished the revised design although the petitioner had completed the work of trial construction pits on which the several tests were conducted by the resident engineer but ultimately it was discovered that soil did not reach the required strength of 600 KP/SQM.

15. The first phase regarding runway was cleared only on 16th August, 1978 after the resident engineer had made changes and thereafter the trial construction pits were constructed by the petitioner.

16. On termination of the contract the claims of the petitioner and the counter claims of the respondent No. 1 were taken up for arbitration by the two arbitrators, one appointed by the petitioner and the other appointed by respondent No. 1 in presence of the Umpire appointed by the two arbitrators before entering upon the reference. The two arbitrators had given contradictory awards and thus the matter was taken up by the Umpire who, after holding the proceedings and hearing the arguments in detail had given the award dated April 15, 1991. The award is a detailed one giving reasons also in some detail for various findings given by the Umpire.

17. The first and foremost question which needed to be decided by the Umpire was whether the contract of the petitioner had been validly terminated by respondent No. 1. The case of respondent No. 1 was that the petitioner had not performed the contract in consonance with the terms of the contract inasmuch as the petitioner did not keep up with the schedule fixed in the contract for completing the contract and despite many communications given to the petitioner, the progress being achieved, on the other hand by the petitioner, was slow and there was every possibility of the Government of Maldives cancelling the contract, thus the contract of the petitioner was terminated and respondent No. 1, at great loss, completed the project on its own.

18. Learned counsel for respondent No. 1 has vehemently argued that findings of the learned Umpire with regard to this particular point are unsustainable inasmuch as they have been arrived at by ignoring very material documents on the record and his findings are based on no evidence and thus, there exists an error apparent on the face of the award which should result in setting aside of the award by this court. He has placed reliance on certain judgments in support of his contentions.

19. He has referred to M/s. Alopi Parshad & Sons v. Union of India . It has been held in this judgment that the award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous. In the said case, the original agreement stood modified by supplementary agreement and in the supplementary agreement a graded scale was fixed for the establishment and the contingencies to be paid to the agents and also for the mandi charges and overhead expenses. Despite that the arbitrator proceeded to award an additional amount for establishment and contingencies. The court held that the arbitrator committed an error apparent on the face of the record in granting any additional amount to the contractor inasmuch as the contract specifically stipulated for payment of charges at rates specified therein, the arbitrator could not ignore the express covenants between the parties.

20. It is evident that if it could be shown that Umpire had committed any such error apparent on the face of the award in awarding any claim which is in voilation of any terms of the contract then it could be said that the award is liable to be set aside.

21. Reference is then made to K. P. Poulose v. State of Kerala . In the said case, there were two material documents which were absolutely necessary for giving a just and fair decision to resolve the controversy between the parties. The said material documents were not taken into consideration by the arbitrator, so it was held that the arbitrator has misconducted himself or the proceedings by ignoring the material documents. This is a question to be decided in each case whether any material documents had been ignored and not taken into consideration before it could be said that there appears an error apparent on the face of the award.

22. Counsel for respondent No. 1 has referred to Continental Construction Company Limited v. State of Madhya Pradesh . The question which arose for consideration in the said case was whether the court could look into the terms of the contract in order to ascertain the legality of the claim regarding extra cost incurred towards rise in price of material and labour. The Supreme Court held that the court was entitled to examine the contract in order to find out the legality of the claim of the appellant regarding extra cost incurred. It is apparent that if a particular finding of the arbitrator is totally against the terms of the contract, then it can be said that the award suffers from illegality and such an error is apparent from the face of the record.

23. The learned counsel for the petitioner on the other hand, has placed reliance on M/s. Sundaram Trading Co. v. Govt. of Kerala . In this case, the arbitrator had sorted out the claims and given the history of the claims and then awarded amount against each claim. The award was a non-speaking one. The Supreme Court held that reasonableness of the reasons evidence by the arbitrator is never a matter which the court questions and considers. In case the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence and the arbitrator is the sole judge of the quality as well as the quantity of the evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. The Supreme Court also held in this judgment and if the interpretation of the contract is within the ambit of the jurisdiction of the arbitrator, it has to be clarified that there is a distinction between the disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised,

24. The learned counsel for the petitioner has also cited Madan Lal Roshanlal v. Hukumchand Mills Ltd. , in which it was held that the arbitrator's award, on both fact and law, is final and court cannot review his award and correct any mistake in his adjudication unless an objection to the legality of the award is apparent on the face of it.

25. In Union of India v. Bungo Steel Furniture Private Ltd. , it was held that the award can be set aside only when in award or in documents incorporated with it, there is found some legal proposition which is basis of the award and which is erroneous.

26. In Puri Construction Pvt. Ltd. v. Union of India , it was held that the court had no jurisdiction to sit in appeal and examine the correctness of the award on merits.

27. In Gujarat Water Supply & Sewerage Board v. Unique Erectors , the Supreme Court reiterated that reasonableness as such of an award unless the award is per se preposterous or absurd is not a matter for toe court to consider and appraisement of evidence by the arbitrator is ordinarily final.

28. Hind Builders v. Union of India , the Supreme Court held that in respect of certain clauses of the contract, if two views are possible and arbitrator has taken one of the views which is a possible view, the court has no jurisdiction to set aside the award even if the court is of the view that second possible view is more appropriate.

29. In Indian Oil Corporation Ltd. v. Indian Carbon Ltd. , the Supreme Court held that the award could not be set aside on the ground that it was not a reasoned award. It is one thing to say that reasons are to be stated and another thing to state that a detailed judgment be given in support of an award. It was held that where reasons are given in the award and the view taken by the arbitrator was a possible view to take, the same would meet with the requirements of law of giving reasons.

30. In Goa Daman & Diu Housing Board v. Ramakant V. P. Darvotkar , the Constitution Bench of the Supreme Court held that where the arbitrator had considered all the specific issues raised by the parties in arbitration proceedings and came to the finding giving cogent reasons, then it cannot be said that the arbitrator has given the award without giving reasons. That was a case where the High Court had remitted the award back to the arbitrator under Section 16 of the Arbitration Act for giving more reasons. The judgment of the High Court was found to be not correct.

31. In Food Corporation of India v. Joginderpal Mohinderpal , the Supreme Court expressed the anxiety of arbitrator's following simple procedure and once the award is given by adherence to justice, equity and law award should be set aside only on the ground available under the statute. The arbitrator had given reasons for his conclusion. The court held that unless it is demonstrated to the court that such reasons are erroneous as such as propositions of law or a view which it has already taken is a view which could not possibly be sustained on any view of the matter, then the challenge to the award cannot be sustained.

32. The President, State of Orissa v. Kalinga Construction Co. (P) Ltd. , it was held that unless the finding of the arbitrator is shown to be preverse, the court cannot set aside the award even though it differs with the finding of the arbitrator.

33. In judgment referred as M/s. Hindustan Tea Company v. M/s. K. Sashikant & Co. , it was laid down, keeping in view the reasoned award given in the said case, that under the law, the arbitrator is made the final arbiter on the disputes between the parties and the award is not liable to be set aside on the ground that the arbitrator had reached a wrong conclusion or it failed to appreciate the facts.

34. Learned counsel for respondent No. 1, however, contended that this judgment is not in consonance with the law laid down by the Supreme Court by the larger benches. I fail to understand this contention because what has been laid down in this judgment is not in any manner in conflict with any other decision of the Supreme Court relied upon by the learned counsel for respondent No. 1. It is now well settled that even a reasoned award cannot be set aside on the grounds that the reasons given by the arbitrator are not reasonable and that the appraisal of the evidence by the arbitrator is not up to the mark or that the conclusion reached by the arbitrator in appreciating the evidence are questionable. The award can be set aside only if it is shown that the same has been rendered by the arbitrator on misreading the documents or ignoring any material documents or making a legal proposition a basis of the award which, on the face of it, is not in consonance with law.

35. The learned counsel for the objector had contended that if findings of the arbitrator, that M. L. Dalmiya (hereinafter referred to as M.L.D.) was not responsible for delay occurring in execution of the contract and M.L.D. has not committed any breach of the terms of the contract and the termination of the contract by the objector was not justified have been arrived at without taking into consideration various material documents and have been, in any case, arrived at by misreading and misinterpreting the documents, then award is liable to be set aside.

36. The stipulated period for completing the project was 24 months. The contract of M.L.D. was terminated only after a little over eight months. The Government of Maldives had not imposed any penalty for the delay occurring in execution of the contract rightly so because main cause of delay in executing the contract was non-providing of a dredged channel which made it difficult for the contractor to bring the machines and material by ships to the site.

37. According to the terms of the contract, the work had to be commenced within 30 days of the date of the delivery of the site. The site was delivered by the Government to the objector on 22nd March, 1978 and thus the work had to commence on or before 21st April, 1978 and had to be completed on or before 21st April, 1980. As per the Bar Chart at page 78 of the contract, the first item of site installation broadly included survey work, construction of various types of temporary structures, mobilisation of bills, plants and machineries, instruments and equipments needed for the construction work and completion of preliminary formalities for obtaining approval for construction materials, designs mix. etc. This contract was to be wholly performed in a foreign country, thus M.L.D. was to depend on the mobilisation advance to be provided by the Government which was to be in shape of foreign exchange. The contract provided for payment of mobilisation advance i.e., 15% of the contract amount by the Government within three weeks from the date of letter of intent i.e., 28th February, 1978 and said amount of mobilisation advance was to be given to M.L.D. by the objector. The mobilisation advance of US $ 16,11,559 was received by the objector from the Government on May 10, 1978 instead of on or before March 21, 1978 and the objector had passed on US $ 11,92,801 to the M.L.D. on 2nd June, 1978 and US $ 1,37,000 on 6th September, 1978. The objector had received the bridging finance of US $ 8,00,000 in three Installments i.e., on 14th November, 1978, 21st November, 1978 and 22nd November, 1978 and no amount was directly released to M.L.D. by the objector out of the said bridging finance. The objector had treated US $ 1,99,956 as the expenses incurred by the objector on account of M.L.D. The bridging finance was not being released to the M.L.D. by the objector allegedly on apprehension that M.L.D. may not utilise the foreign exchange in a proper manner and had not earlier produced any account of its utilisation. The plea taken before the Umpire by the M.L.D. was that there had occurred delay of 72 days caused by the objector in releasing the mobilisation advance. As per the Bar Chart, the concrete work was to be commenced from 1st October, 1978 and the sample of material for the concrete work was to be supplied by the M.L.D. six weeks before the date of starting the concrete work and the objector was required to convey the finally approved design mix at least 15 days before the scheduled date of commencement of the concrete work. The M.L.D. had supplied the samples in April 1978 but the approved design mix was conveyed to M.L.D. only on 11th October, 1978. The material and aggregate for Bituminous work was approved and cleared on 21st July, 1978 and approval of Bitumen had not come forth even up to 10th January, 1978. The objector could get approval of the cement for the cement concrete work from the Government of Maldives only on 1st September, 1978. The arbitrator on these facts held at the end of page 12 of the award that it is clear that there was delay in conveying the approval of design mix and for conveying approval of material for construction, all of which had contributed to the delay in performance which is not attributed to M.L.D. He also gave a finding that there was undue delay in payment of mobilisation advance and also in Realizing the bridging advance to the M.L.D. and the same had contributed to the regarding effect on the progress of the work by the M.L.D.

38. Learned counsel for the objector has contended that the mobilisation advance could not be released to the M.L.D. as M.L.D. had failed the arbitrator was not right in putting the blame on the objector for delay in releasing the mobilisation advance.

39. Learned counsel for the M.L.D. has, however, contended that for obtaining the bank guarantee, it was necessary for the objector to have arranged for E.C.G.C. guarantee and under the various clauses of the contract, particularly 5.2, 5.8 and 9.4, it was incumbent upon the objector to have obtained the E.C.G.C. cover in such a manner that same could be used by the M.L.D. for obtaining the requisite bank guarantee from its bankers. Admittedly, the objector had not obtained the E.C.G.C. cover. The learned counsel for the objector has argued that it was not a condition precedent for furnishing the bank guarantee that E.C.G.C. cover should have been obtained by the objector for the benefit of the M.L.D. The learned arbitrator has dealt with these contentions in detail and has construed the various provisions of the contract to come to the conclusion that under the contract, it was responsibility of the objector to have obtained E.C.G.C. cover which could be availed of by M.L.D. for obtaining the bank guarantee. The objector failed to obtain any such E.C.G.C. cover and belatedly asked the M.L.D. to on its own obtain the E.C.G.C. cover and procure the bank guarantee so that mobilisation advance could be released. The contract expressly provided as follows :

"The prime contractor agrees to take E.C.G.C. guarantee in a manner that the advantage of such guarantee will also be derived by construction associates. However, total cost of E.C.G.C. will be borne March, 1978 (Ex. R-9 in file No. 10 at page 213) mentioning that M.L.D. its associate, is to get 15% mobilisation advance from the Government of Maldives and requested for the approval being given for this purpose by the IDBI. M.L.D. had on 17th April, 1978 vide R-12 brought to the notice of the objector that the mobilisation advance could be released to the M.L.D. if M.L.D. was to obtain the bank guarantee on the basis of E.C.G.C. cover which was to be obtained by the objector.

41. The M.L.D. had also written letter dated 20th April, 1978, Ex. R-4 mentioning that without release of the mobilisation advance, it would not be possible for the M.L.D. to transport the material from India to Maldives and prayed that E.C.G.C. cover be sent to the M.L.D. to enable the M.L.D. to obtain the bank guarantee. Reminder was also issued in this respect. This correspondence was exchanged up to May 6, 1978 but at no point of time the objector informed the M.L.D. that E.C.G.C. cover, as mentioned in Article 9(4) of the contract would not be provided by the objector. It is only vide letter dated 8th May, 1978, Ex. C-113 that M.L.D. was informed that it should directly apply to obtain the E.C.G.C. cover, The M.L.D. then immediately applied for E.C.G.C. cover vide R-458 dated 12th May, 1978 and had correspondence exchanged with its bankers which is evident from R-462 and R-463 and thereafter the bank guarantee was obtained and furnished and in this way there took place 70 days delay in release of the mobilisation advance to the M.L.D.

42. It is no possible to countenance the submission of the learned counsel for the objector that the arbitrator has committed any illegality in giving a finding that this delay is solely attributable to the objector. In law, this court is not to sit in judgment over the award as an appellate court. Even if there are two views possible, the view taken by the Arbitrator being a probable views which could be taken, it is not possible to say that the Umpire had committed any illegality apparent on the face of the record which may vitiate its finding on this aspect of the case.

43. It was also contended that in fact M.L.D. had not obtained the E.C.G.C. cover and had obtained the bank guarantee and there was no reason for M.L.D. for not obtaining the bank guarantee straight away and avoid the delay occurring in release of the mobilisation advance to the M.L.D. Article 9(4) of the contract clearly contemplated taking of E.C.G.C. cover by the objector for the benefit of the M.L.D. and the correspondence exchanged, mentioned above, clearly indicated repeated reminders by M.L.D. to the objector for getting the necessary E.C.G C. cover and for releasing the mobilisation funds. From such documents, a reasonable inference could be drawn that M.L.D. was not to, on its own, obtain the bank guarantee without having the E.C.G.C. cover provided by the objector. The moment the objector made the M.L.D. aware vide letter mentioned above that M.L.D. has to make its own efforts for obtaining the E.C.G.C. cover and for obtaining the bank guarantee, the M.L.D. immediately took necessary steps.

44. It has been argued by learned counsel for the objector that the objector had furnished the bank guarantee to the Government of Maldives for getting released the mobilisation advance without obtaining the E.C.G.C. cover. In the minutes recorded in the meeting held on 1st and 2nd October, 1989, it is clearly mentioned that the objector had obtaining the E.C.G.C. cover on 21st December, 1978. Be as it may, the question to be decided by the arbitrator was whether the delay which has occurred in releasing the mobilisation advance to M.L.D. was occasioned by any act of any commission or omission on the part of the M.L.D. In my view, the Umpire has dealt with the matter in an lucid manner and had referred to all the material documents and has not misread any documents so that it could be said that finding of the Umpire in holding that the delay in releasing of the mobilisation advance was not due to any act of the M.L.D. is in any manner vitiated by any illegality.

45. Dealing with the finding of the Umpire regarding non-release of bridging finance which also contributed towards the retarded progress of the work by the M.L.D. the learned counsel for the objector contended that the M.L.D. has not carried out any substantial work which could cover up the mobilisation advance and thus there was no occasion for the M.L.D. to have pressed for release of bridging finance and thus the Umpire was not right in giving a finding that delay in the progress of the work occurred also on account of non-release of bridging finance.

46. Once of the pleas taken was that there was apprehension nursed by the objector that the foreign exchange released as mobilisation advance to M.L.D. was not being utilised properly and no proper accounts were being furnished. This apprehension of the objector was found to be without any basis by the Umpire. I have not been referred to any documents or any other piece of evidence available on the record of the Umpire to show that this finding of the Umpire was in any manner in contradiction with any documentary evidence.

47. There were documents produced by the M.L.D. which are R-100, R-140 and R-160 which indicated the details of the amount already spent, proposed to be spent and money left available and also the details of the money to be spent if bridging finance was to be made available. The objector had made a complaint to authorities under the FERA and FERA is stated to have raided the office of the M.L.D. but later on nothing substantial turned on it and this has been so found by the Umpire and nothing has been shown by the objector that such inferences of facts drawn by the Umpire are not possible inferences to be drawn from the evidence produced before the Umpire.

48. One of the reasons for delay occurring in execution of the contract was attributable to the Government of Maldives which in clear breach of the terms of the contract had failed to provide a dredged channel.

49. Learned counsel for the objector has contended that even before the execution of the contract documents in a meeting held on 6th February, 1978, the Government of Maldives had expressed that dredged channel was not possible to be provided and the contractor could use a cause way or jetty already existing. The original tender documents dated 12th December, 1977 contemplated that Government of Maldives will provided a dredged channel. It is contended by learned counsel for the objector that M.L.D. was aware even on 6th February, 1978 that the dredged channel was not to be provided by the Government of Maldives and thus M.L.D. now cannot have any grievance that because of non-providing of dredged channel, the M.L.D. could not maintain any sufficient progress in the execution of the work, as contemplated by the contract.

50. Learned counsel for M.L.D. has referred to Ex. C-5 which are the proceedings of the negotiation in a meeting held on 6th February, 1978 where it is recorded that the Minister said that there are certain difficulties that prevent the Government from undertaking the dredged channel and the objector has clarified that objector had not included the cost of such work in the tender offer as the tender documents did mention that a dredged channel would be provided. From such minutes of the meeting, it could be inferred that the Government of Maldives wanted the objector to use the existing jetty or a cause way for purpose of executing the contract.

51. In agreement dated 29th March, 1978, Appendix 'A', it was mentioned that the cause way constructed by the Government may be used for unloading the plant and machinery instead of transport method specified earlier. It is admitted fact that the cause way which was provided in lieu of the dredged channel had been washed away in April 1978. It has also been pointed out by the learned counsel for M.L.D. that the objector, vide letter C-107, had squarely blamed the Government of Maldives for non-provision of dredged channel and had laid a claim of US $ 16,91,634. It was quite evident from the evidence led before the Umpire which is indeed not disputed before me that not only that the dredged channel was not provided but the cause way which was contemplated to be used in lieu of dredged channel had also been washed away and even if the cause way had existed, the same was not appropriate for unloading of heavy machinery and plant and machinery as it was not structurally adequate to either sustain heavy wave action or to carry heavily loaded trucks and even a crane could not be positioned on such a cause way for unloading the machinery and material.

52. It is only on 6th July, 1978 that the Government of Maldives categorically declined to spent US $ 2.2 million for constructing the dredged channel and had given assurance to repair the cause way which was structurally damaged. It took about 11 months for the Government of Maldives to repair the said cause way and it was in third week of April, 1979 that necessary repairs were carried out but the cause way was again washed away within three weeks before it could be even used for unloading ship. Because of non-provision of dredged channel and cause way, the ships had to be anchored at mid-sea and for unloading the machinery and material barges had to be used by the M.L.D. and it was quite clear that it was a very very slow and cumbersome process. It is only after termination of the contract by the M.L.D. that the Government of Maldives provided a small channel by April, 1980 and even the objector had incurred huge expenditure for shipment of about 80,000 tonnes of material and machinery before such a channel was provided by Government of Maldives.

53. At the time of termination of the contract by the objector, it was evident that the delay which was occurring in execution of the contract by the M.L.D. was not due to any fault of the M.L.D. The Umpire has given cogent reasons based on the evidence produced before him for giving a finding that delay has occurred in execution of the contract by M.L.D. because of the fault of Government of Maldives in not providing any dredged channel or any suitable cause way which could be used for unloading the ships.

54. Learned counsel for the objector has argued that a number of letter were written to the M.L.D. pointing out the slow progress in execution of the work. He has also pointed out to the letters written by the Resident Engineer in that connection. The learned Umpire has considered those letters while coming to the finding that reason given for termination of the contract by M.L.D. was not sound or justified. Mere fact that this court may have some second opinion in reading the documents would not, in my opinion, be sufficient to hold that Umpire had committed any illegality in arriving at such finding based on interpretation of such letters and the other evidence.

55. Learned counsel for the objector has also argued that there had been no delay in grant of approval of various materials and designs by the Resident Engineer and he had referred to some documents in that connection which are Ex. C-748, C-755, C-100, C-103, C-2.7, C-2.9 & C-65. Learned counsel for the objector forgets that there were sufficient evidence before the Umpire which indicated that the approval of the Bitumen was not given till the termination of the contract. The design of apron was not finalised till 9th December, 1978 and approval of design mix and cement and aggregate was given only on 8th August, 1978, 31st August, 1978 and 11th October, 1978 respectively.

56. From these facts, the Umpire could reach a conclusion that delay which has occurred in execution of the work was not attributable to the M.L.D. It is to be also remembered that there was no provision in the contract that time was essence of the contract. In a building contract, normally time is never considered to be essence of the contract unless it is so specified in the contract itself. Even if some delay was attributable to the M.L.D. in executing the contract, that could not furnish any ground to the objector for terminating the contract.

57. The learned Umpire has, from the evidence and particularly documentary evidence, has come to the conclusion that main reason for terminating the contract of M.L.D. was that the objector was apprehensive that Government of Maldives may not cancel the main contract on the sole ground that in breach of the terms of the contract, the objector had not taken any prior approval of Government of Maldives for subletting the contract to M.L.D.

58. A back to back contract was awarded to M.L.D. and entire work was to be executed by M.L.D. and the M.L.D. was to receive 93.11% of the total payment to be received under the contract from the Government of Maldives and the objector would have been entitled to only 6.89% of the payments as its cut back. In the documents instead of showing that M.L.D. as a sub-contractor, it was shown that M.L.D. was a construction associate. If we peruse the terms of the contract, it is evident that M.L.D. was not merely a construction associate but was a sub-letter of the main contract. The contract entered into between the objector and the Government of Maldives clearly stipulated that the objector would not be entitled to sublet the contract without previous consent of the Government of Maldives, M.L.D. had started the work at the spot from April 1978 onwards and the Resident Engineer of the Germen firm of consultants employed by the Government of Maldives had not raised any objection to the contract being executed by M.L.D. till September 1978. It so happened that unfortunately the relations between the Resident Engineer and the Project Director of the objector became strained and number of letters such as Ex. R-244, R-248, R-266 and R-268 were referred before the Umpire.

59. Learned counsel for M.L.D. has referred to various documents appearing in the arbitration file which had indicated that the Resident Engineer had become very much annoyed with the Project Director of the objector on very petty matters regarding providing of some facilities stipulated by the contract to the Resident Engineer. I need not refer to the details of said facilities which have been referred by learned counsel for the petitioner which indicate that a panic button had been struck in the minds of the officers of the objector indicating that the contract is likely to be cancelled on the ground that objector had sublet the contract to M.L.D. and efforts were made to show in the invoices for purchasing the machinery and other material that those are not in name of M.L.D. At any rate, from the documentary evidence and the other material discussed by the Umpire in paras 17 to 19 and thereafter in paras 22 to 28 of the award indicate that the Umpire had thoroughly considered all the submissions and the evidence and had not ignored any evidence or documents and had not misread and documents to come to the conclusion that contract of the M.L.D. was rescinded by the objector unjustifiably and only under the apprehension that the main contract may not be cancelled by the Government of Maldives on the ground that objector had sublet the contract to M.L.D. without prior permission.

60. Learned counsel for the objector has argued that the Umpire had misconstrued the documents of reach the conclusion that the visit of the representative of the objector to Germany for having consultation with the architects was to some how whittle down the objection being raised by the Resident Engineer regarding the subletting of the contract. He has urged that the visit was not confined for this purpose only and was meant to sort out the passing of the first bill. It may be so but it cannot be indeed disputed that the said visit had one of its object to sort out this matter of subletting of the contract.

61. One of the pleas raised before me by learned counsel for the objector is that the M.L.D. had brought four major machines to the site which were practicably of no use as they were worn out and thus the M.L.D. was responsible in causing undue delay in progress of the execution of the contract. It is pertinent to mention that in case those machines were not returned to the M.L.D. even after termination of the contract and admittedly had been used by the objector in completing the contract. There is no evidence which has been ignored by the Umpire which could show that in fact those machines were not of any use. The Articles 5.5 and 5.6 of the contract C-1 entered into between the objector and M.L.D. did not provide for termination of the contract and it only stipulated that if any action were to be taken by the Government of Maldives under the penal clauses of its contract against the objector, in the said case only back to back action can he taken against M.L.D. by the objector. Solely on the ground that to some extent M.L.D. may be blamed for delay in execution of the contract could not furnish any justifiable ground for rescinding the contract unless it was to be shown that time was made essence of the contract at any time.

62. It is laid down by the Supreme Court in M/s. Hind Construction Contractors v. State of Maharashtra and State of Maharashtra v. Digambar Balwant Kulkarni , that normally time cannot be considered to be essence of the contract, particularly in a building contract.

63. In the alternative, the learned counsel for the objector has argued that the Umpire should have come to the conclusion on appreciation of evidence that in fact both the parties had committed breach of terms of the contract to some extent. I am afraid that this court is not to site in appeal and come to a different finding. The Umpire has given a categorical finding, on appreciation of evidence, that the contract has been rescinded by the objector without any justifiable reasons and no blame could be put on the M.L.D. for breach of any terms of the contract. This was a finding of fact based on evidence which is binding on the parties. This finding is not shown to have been arrived at by ignoring any material documents or by misreading and material evidence.

64. To be fair to the learned counsel for the objector, I may mention that learned counsel had referred to the work already performed by M.L.D. till the recission of the contract in support of his contention that progress of the work at the site was not quite satisfactory. It may be so, the question was whether the objector was legally right in cancelling the contract on such a ground.

65. In view of the findings arrived at by the Umpire that the termination of the contract was unjustified, wrongful and illegal, the Umpire declined the claims No. 2 and 5 of the objector which pertains to consequential damages on account of incurring more expenditure for executing the balance work. After the termination of the contract, the M.L.D. was not allowed to remove the machinery and material which belonged to the M.L.D. and in court proceedings, which took place in Calcutta High Court, inventory of all the machinery, stock, stores and raw material, etc., was prepared and the objector was allowed to utilise the said machinery and raw material for completing the execution of the contract. The objector had furnished a bank guarantee of Rs. 40 lakhs.

66. The main claims of the M.L.D. before the Umpire were pertaining to the grant of amount as its share in respect of the payments received by the objector from the Government of Maldives before the contract was rescinded and then the cost of the machinery, plants, the stock and raw material which belonged to the M.L.D. and which was utilised by the objector. Admittedly, the objector had received payment of US $ 9,35,204 on November 30, 1978 with regard to running bill No. 1. The M.L.D. claimed that after deducting 6.59%, the M.L.D. is entitled to the balance amount. This particular payment pertained to agreement item No. 1.1 which relates to item of site installations which involved mobilisation of several items of machinery, plant, equipments, instruments and construction of various types of temporary structures with facilities and services.

67. Learned counsel for the objector has argued that only 20% of the aforesaid work had been carried out by the M.L.D. This was the plea taken by the Resident Engineer who was to approve the grant of running bill but it was disputed by the objector and the objector set up the plea that in fact more than 90% of the work of item No. 1.1 had been completed. The learned counsel for the objector has argued that there is a confusion in The findings of the Umpire has to what this amount of running bill would comprise. He had argued that the plants and machinery had been brought to the site not for the purpose completing one item of the work but was to be utilised for completing the whole work and the payment of first running bill could not he split up to show that the same would cover only the initial work of agreement item 1.1. Although at one point of time a plea was taken by the objector that the first running bill would include even the total cost of the machinery, plant and equipment brought to the site by M.L.D. but later on this contention was given up.

68. The learned counsel for the objector has vehemently argued that the Umpire has proceeded on completely wrong basis is awarding different amounts under different heads. He had urged that a simple method of awarding compensation to the objector was that the Umpire should have calculated that cost of the work actually performed by the M.L.D. at the spot and could have then added the total cost of the machinery and plant brought by M.L.D. to the site. It may be that the Umpire could have adopted such a method but question which arises for consideration is whether the method adopted by the Umpire in giving the compensation to the M.L.D. is justifiable or not, the Umpire had allowed US $ 9,35,204 minus 6.89% cut back on the basis of the terms of the contract entered into between the parties. The Umpire also had kept in view that this item would not cover the total cost of the machines and plant brought to the site but it would cover the depreciated value of the plant and machinery meaning thereby that the plant and machinery which came to be used for the purpose of executing item No. 1.1 would be deemed to have been covered by the payment being received in the first running bill. This way of deciding the claim of the M.L.D. could not be considered to be absured. Thereafter, the Umpire had given the depreciated cost of the plant and machinery to the M.L.D. He has taken into consideration the documents of the objector in arriving at the rate of depreciation.

69. The claim No. 2 of the M.L.D. pertains to 15 items of furniture equipments and structures. There was no dispute about the same. The dispute was with regard to valuation as is evident from the award. The claim No. 3 was for the loss of anticipated profit on account of wrongful termination of the contract by the objector. The amount claimed was US $ 17,23,197 but the claim awarded was only US $ 10,80,294.

70. In claim No. 4 the M.L.D. had asked for mesne profits/hire purchase for the machinery tools and plant & equipments belonging to M.L.D. which were used by the objector even and the stipulated date of the completion of the contract. The M.L.D. had claimed US $ 85,29,300 but Umpire had granted US $ 4,78,467. Claim No. 5 pertains to minor equipments and survey instruments belonging to M.L.D. which was to the tune of US $ 1,04,472 but only US $ 8,453 were awarded. Claim No. 6 pertained to temporary structures which were to be dismantled on the completion of the work and Umpire allowed US $ 1,76,814. Claim No. 7 pertained to the non return of the major plants and machinery, tools and equipments, vehicles and speed boats belonging to M.L.D. on termination of the contract. The M.L.D. claimed US $ 25 lakhs as the depreciated value and interest @ 18% but M.L.D. was awarded only US $ 5,94,162.

71. It has been pointed out by learned counsel for M.L.D. from the various documents that the German consultant on getting annoyed with the Project Director on non-supply of proper items had take up the plea that only 20% of the items 1.1 was executed but that plea was challenged by the objector by pleading that 90% of the work of items 1.1 had been completed which is apparent from letter C-91. But later on, the running bill was sanctioned and there is nothing to show that running bill was sanctioned gratutiously. So, from such evidence Umpire could come to the conclusion that in terms of the contract, the M.L.D. was entitled to the said amount of running bill minus the cut back of the objector.

72. Reference was also made to Ex. C-53, C-54 and C-65 documents to show that in fact most of the machinery and equipments had been brought and the consultants were only requiring the objector to bring remaining machines of the value of US $ 7.5 lakhs which was required to be brought on the site for completion of the remaining work of the contract. Now the stipulated period for completion of the contract was two years. The only question which the Umpire was to decide was at to how much depreciation of the machinery and plant should be considered covered by the first running bill and the Umpire assessed the said depreciation at 20%.

73. Another contention raised before me by learned counsel for the objector was that there could be no occasion for allowing any mesne profits and hire charges when the Umpire had already allowed the cost of the machines and plant to the contractor. It is evident that machines and plant were the property of M.L.D. which M.L.D. was not allowed to take away on termination of the contract and the same had been used by the objector in completing the contract even beyond the stipulated period. Not only the M.L.D. was entitled to the return of the machinery and plant or its depreciated value but was also entitled to mesne profits because the objector had used the said machines and plant for executing the contract beyond the stipulated period.

74. In Smt. Purificacao Fernandes v. Dr. Hugo Vicente de Perpetuo Socorro Andrade Manezes (AIR 1985 Bom 202), it had been held that mesne profits are a sort of compensation that a person who is in wrongful possession of other's property has to pay for such wrongful occupation to the owner of the land. They are a compensation which is penal in nature and according to definition in Section 2(12) of the Civil Procedure Code, the mesne profits correspond to the profits which the person in wrongful possession is receiving or might receive with due diligence.

75. Applying this principle to the facts of the present case, it is evident that the Umpire has not committed any illegality in allowing mesne profits to the M.L.D. besides the depreciated value of the machines and equipments because the objector had utilised the properties belonging to M.L.D. without its consent for completing the remaining work of the contract and was rightly held by the Umpire that they were liable to pay mesne profits for using the said machine and equipments to M.L.D.

76. It has been then argued that although the contract contemplated for payments to be made in US $, yet in view of the restrictions placed under the FERA Act, the amounts to be awarded to the M.L.D. has to be in Indian rupees. The Umpire was not right in allowing the exchange rate prevailing at the time of the award.

77. In Forasol v. Oil & Natural Gas Commission , it has been held by the Supreme Court that any action to recover the amount payable to any foreign currency, five dates complete for selection by the court as the proper date for fixing the rate of exchange at which the foreign currency amount has to be converted into the currency of the country in which action has been commenced and decided. These dates are (i) the date when the amount became due; (ii) the date of the commencement of the amount; (iii) the date of the decree; (iv) the date when the court orders execution to issue; and (v) the date when the decretal amount is paid or realised.

78. It was also mentioned that in a case where a decree is passed by the court in terms of an award made in a foreign currency, the sixth date also enters the competition namely the date of the award. The Supreme Court held that it will be fair to both the parties for the court to take the date of passing of the decree as the proper date for fixing the rate of exchange on which the foreign currency amount should be converted. Of course, the date of decree is fixed in cases of suits being decreed but where decree is based on award, the Umpire, in my opinion, could justifiably fix the date of the award as the date for conversion of the foreign exchange into the currency of this country.

79. Same principle has been laid down by the Supreme Court in Renusagar Power Co. Ltd. v. General Electric Company .

80. Learned counsel for the objector tried to distinguish these judgments by urging that these cases pertain to the parties out of whom one was a foreign party but where both the parties are local, the court should not fix the date of the award as the date for conversion of the foreign exchange. He has argued that in the contract in question, the objector had received foreign exchange from the Government of Maldives for completing the contract only up to the year 1981 and he urged that Umpire was not right in not taking that year as the year for converting the foreign exchange into local currency. It is not understood why Umpire's decision to take the date of the award has the date for converting the foreign currency into Indian currency should not be taken as a justifiable date in view of the facts that the contract contemplated payment of money in foreign exchange and due to the protected litigation, the contractor had been deprived of the amount due to the contractor on the date the contract was rescinded for no fault of the contractor. I have no reason to interfere with the finding of the Umpire that date of the award should be treated as the date for converting the foreign exchange into the Indian currency.

81. In view of the above discussion, the objections are liable to be dismissed and award is liable to be made rule of the court. The issue is decided in favor of the M.L.D.

82. It has been agreed before me that the court may award the interest from the date of the award till realisation. Obviously, this interest which I am to award would be calculated in Indian currency because the amount of the award is to be converted into Indian currency on the date of the award. As far as award of interest pendente lite is concerned, it was decided that this question is also left open for decision by this court. I find that the parties themselves had taken protected proceedings, first before the two arbitrators and then before the Umpire, so it would not be fit case for grant of any pendente lite interest.

83. Hence, I make the award a rule of the court and grant interest @ 9% per annum from the date of the award till realisation.