N.P.C.C. Ltd. vs Jyoti Sarup Mittal Engineers, ...
2006 Latest Caselaw 2186 Del

JUDGMENT

Pradeep Nandrajog, J.

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1. NPCC's objections to the award dated 23.3.2002 (corrected on 19.4.2002) published by Sh. M.M. Kapoor, sole arbitrator are being decided by and under the present order.

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2. Before dealing with the objections, a few relevant facts pertaining to the contract, nature of the dispute and finding returned by the learned arbitrator may be noted. This would help in appreciating the objections raised by the petitioner.

3. Construction work whereunder 37 dwelling units in different categories and a trainee hostel having 120 rooms was awarded by NPCC to Jyoti Swaroop Mittal, the contractor.

4. As per the contract, date of commencement of work was 22.5.1990. Completion period was 18 months. Thus, stipulated date of completion was 21.11.1991. The project was actually completed on 31.12.92 i.e. with a delay of approximately 13 months.

5. The works were awarded at a total cost of Rs. 1,96,82,410.92/-, though the estimated costs notified in the tender were Rs. 123.7 lacs was for civil works and Rs. 11.3 lacs for electrical works.

6. As usual, the first and foremost thing which had to be decided by the learned arbitrator was, who was responsible for delay in execution of the works.

7. Learned arbitrator has dealt with the issue of delay under the caption "Time Extension" commencing from page 11 and running up to page 15 of the award.

8. Learned arbitrator has noted the correspondence exchanged between the parties during the relevant period and has noted 5 principle reasons which delayed the due completion of the works.

9. The first reason noted by the learned arbitrator is late receipt of drawings as also amendments to the drawings. Learned arbitrator has noted that within time, foundation drawings were made available for only 3 categories of quarters and for the remaining 3, the same were supplied belatedly. Pertaining to the hostel building, learned arbitrator has noted that the foundation details were furnished in the first week of August 1990. Noting that amendments to the foundation drawings were made when works were under progress, learned arbitrator has opined that 6 months delay would be attributable to the petitioner on said account.

10. Second reason for delay noted by the arbitrator is a decision taken to change the specifications of the bricks. However, on facts, learned arbitrator has held that due to overlapping of the said period with delay occasioned due to late supply of drawings, it had no effect.

11. The third reason for delay noted by the learned arbitrator and for which benefit of 7 1/2 months has been granted to the contractor is hindrance at the site where hostel block had to be constructed inasmuch as a HT line was passing through the site and due to the provisions of the Electricity Rules, work could not proceed beyond ground level till HT lines were shifted.

12. The 4th reason for delay noted by the learned arbitrator is the increase in scope of work. Noting the proportionate increase in work, learned arbitrator has opined that contractor ought to have been granted extension of time on said account by 2 months and 18 days.

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13. The 5th reason for delay is non-release of payment within time. However, learned arbitrator has held that no effect on the progress of work was resulting due to delay in payment.

14. Thus, the benefit of delay worked out by the learned arbitrator was 6 months + 7 1/2 months + 2 months and 18 days equal to 16 months and 3 days.

15. But noting that the actual delay was 13 months and 10 days, learned arbitrator held that the entire delay would be attributable to the petitioner.

16. With the aforesaid back drop of the facts, it would not be adventurous on my part to venture upon the inquiry which I am supposed to conduct i.e. discuss the objections to the award.

17. The first and foremost objection urged is that no proper opportunity of hearing was granted to the petitioner and petitioner was denied a right to cross examine Sh. H.K. Mittal who had filed an affidavit by way of evidence on behalf of the contractor.

18. It is urged that vide order dated 2.7.2001, 30th and 31st July 200 were notified for cross examination of Sh. H.K. Mittal. That without permitting cross examination of Sh. H.K. Mittal, learned arbitrator proceeded to hear arguments.

19. The objection taken is without merit for the reason record of arbitration shows that no proceedings were conducted on 30th and 31st July 2001. After 2.7.2001, the next date on which proceedings were held was 2.8.2001. Order records that the petitioner who was the respondent before the arbitrator informed that the petitioner was not interested in producing any oral witnesses. The order shows that no request was made for cross examination of Sh. H.K. Mittal. Thereafter, proceedings were held on 10.9.91, 27.9.1991, 27.11.2001 and 7.1.2002. On said dates, arguments were heard. Petitioner did not raise any grievance pertaining to H.K. Mittal not being tendered for cross examination. Order dated 7.1.2002 shows that petitioner, who was the respondent before the arbitrator, through it's counsel stated that the petitioner has concluded arguments and had nothing more to supplement.

20. It is settled law that an arbitrator is not bound by the technical rules of evidence. An arbitrator can waive formal proof of letters and drawings relied upon by the parties where the dispute relates to works contract.

21. This is what has happened in the instant case.

22. The conduct of the arbitration proceedings, evidenced by the various orders which have been passed by the learned arbitrator, and as noted above, shows that the parties proceeded to argue their respective stands by treating the documents filed by each other as proved. Formal proof of the relied upon documents was waived.

23. Apart from the contract agreement, drawings and letters exchanged between the parties during the period when work was in progress were the documents relied upon. As would be evident, as I proceed to discuss the objections filed to the award, it was just a matter of inferring the true and Page 0147 correct facts emerging from the letters which were exchanged between the parties and the drawings filed.

24. I find no merit in the first objection and accordingly over rule the same.

25. The second objection urged is that material documents filed by the petitioner have been ignored.

26. Learned Counsel for the petitioner contended that contractor's letters dated 28.11.1990 and 6.12.90 have been ignored by the learned arbitrator. Counsel urges that specifications were changed at the request of the contractor.

27. The two letters are at pages CP-88 and CP-92.

28. Both letters pertained to suggestions of the contractor to effect change in specifications of bricks in the facia.

29. I fail to understand as to what is the relevance of this objection for the reason, learned arbitrator has noted delay on account of change in specifications in the bricks, but has found the period of delay overlapping with delay occasioned due to late furnishing of foundation drawings.

30. Notwithstanding that in the award, learned arbitrator has held delay attributable on this account on the shoulders of NPCC, a finding which is belied from the contractor's two letters, but due to the fact that this period overlapped with the longer delay attributable to late furnishing of foundation drawings, the erroneous finding of the arbitrator is of no consequences. As noted above, delay on said count has been ignored by the arbitrator.

31. Learned Counsel contended that delay on account of HT wires, encumbering the site where hostel block had to be constructed could not be attributable to NPCC inasmuch as terms of the tender clearly notified to the prospective bidders that they should go and inspect the site.

32. Clause 6 has been relied upon.

33. No doubt, Clause 6 which has been relied upon by NPCC in the objections mandates that it would be presumed that the prospective bidders have acquainted themselves with the site. But, while replying to the statement of claim filed by the contractor while raising the claim before the arbitrator, I find that NPCC has not predicated a stand on Clause 6 of the tender.

34. In the reply filed, NPCC has pleaded as under:

8. The overhead high tension electric line has not caused any hindrance to the progress of work as alleged by the claimant. The progress of the work has not hampered by the so called hindrance.

35. If NPCC has not taken a defense under a particular clause before the learned arbitrator, it would be impermissible for NPCC to urge an objection based on said clause.

36. defense taken by NPCC was that the overhead high tension line was not a hindrance. Contractor alleged to the contrary. Learned arbitrator has return a finding of fact that the existence of HT electric line was a hindrance.

37. Objection to the award under this head is without any merit.

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38. Learned Counsel for the petitioner sought to urge that under the contract it was permissible for NPCC's engineer to order additional works.

39. I fail to understand the logic of the said arguments inasmuch as issue was, how much extra time should be allowed to the contractor due to additional works being ordered.

40. That takes me to the heart of the matter. Claim No. 1 of the contractor.

41. The claim was on account of sum payable under the contract. Claim was in sum of Rs. 21,93,854/-. Learned arbitrator has awarded Rs. 11,35,074/-.

42. Finalization of claim No. 1 had various sub heads.

43. All and sundry objections have been raised, without specifying the exact nature of the objection.

44. However, during arguments, learned Counsel urged that Clause 2.1 of the contract required inspection and examination of the site. Clause 11 and 12 showed that time was of the essence of the contract. Clause 9.3 debarred payment of interest and Clause 10.1 stipulated that the engineer could order additional works or could substitute the existing works. Clause 14(b)(5) provided for recovery at twice the issue raise for cement and Clause 2.9 provided for compensation for delay. Counsel further urged that Clause 42 provided for measurements.

45. I just fail to understand the applicability of said clauses save and except pertaining to recovery rate of cement in the context of the findings of the learned arbitrator pertaining to claim No. 1.

46. Learned arbitrator had noted that in relation to the last running bill, proceeding the disputed bill, additional works were admittedly carried out. Learned arbitrator has noted completion certificate issued by the engineer to NPCC which showed that the work was completed. Learned arbitrator has noted that parties were not at variance on the quantum of work done but were at variance in respect of the recoveries which had to be effected. Referring to the 31st running bill wherein Rs. 4 lacs was withheld on account of alleged excess use of cement and Rs. 6 lacs was withheld for delay in completion of work and Rs. 2 lacs withheld for completion of the hostel block, learned arbitrator noted that said insertions were made at a later stage after bill was passed for a much larger sum i.e. 30,06,291/-. Learned arbitrator noted that recoveries in sum of Rs. 60,891.33/- from civil works and Rs. 11,618/- on account of electrical works were correctly recorded. Learned arbitrator has thereafter noted that claim under the final bill for Rs. 4,57,879/- on account of sales tax was not justified, holding that the department had correctly deducted the same as law required deduction of sales tax on turn over. On account of deduction in sum of Rs. 917/- for steel chain and lock, learned arbitrator has held that the deduction was unacceptable as no notice was served. Declining deduction on account of cement being wasted in sum of Rs. 4,11,120/- learned arbitrator has noted that the quantity of cement consumed was justified. Learned arbitrator has noted that NPCC failed to establish that excess cement was consumed.

47. As noted above, as against claim in sum of Rs. 21,93,854/-, sum allowed under claim No. 1 is Rs. 11,35,074/-.

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48. Extent of work done is a question of fact. Learned arbitrator has discussed the issue from page 16 to page No. 21 of the award. All relevant evidence has been considered.

49. I find no merits in the objections raised pertaining to claim No. 1.

50. Claim No. 2 was for interest on claim No. 1. Holding that the works was certified as completed on 31.12.92 learned arbitrator has held that 9 months was a sufficiently long period for making payments. Thus, on the sum awarded under claim No. 1 interest @ 10% per annum has been awarded with effect from 1.10.93.

51. Except for arguing that interest could not be awarded, learned Counsel failed to justify how the interest could not be granted.

52. He who retains money without authority of law deprives the beneficiary the use of legitimate money and must make good the loss. Interest is a mode of recompensing loss.

53. Only objection predicated to claim No. 3 was the interest awarded under claim No. 4.

54. On the security deposit held refundable under claim No. 3, interest has been awarded under claim No. 4.

55. Learned Counsel urged that Clause 9.3 of the contract prohibited grant of interest on security deposit. Clause 9.3 reads as under:

No interest shall be payable to the contractor against the security deposit furnished/recovered from the contractor by the corporation.

56. But, that would not mean that NPCC can hold to the security deposit indefinitely.

57. What the clause means is that for the authorized period during which security deposit can be retained by NPCC, no interest would be payable.

58. Noting that interest on security deposit has been directed to be paid with effect from 1.1.94 i.e. after defect liability period was over and no defects were notified, meaning thereby security deposit became refundable, I find no merits in the objection. I note that interest awarded on the security deposit illegally retained from 1.1.94 is @ 10% per annum.

59. The second count on which objection has been urged pertaining to claim No. 4 is by urging that the arbitrator erred in recompensing the contractor @ 3% for the bank guarantee furnished by the contractor.

60. Noting that banks charge a commission on a percentage, learned arbitrator has recompensed the contractor bank charges @ 3% on the bank guarantee which was illegally got extended beyond 31.12.92.

61. In view of the fact that works were certified as completed on 31.12.92 and defect liability period was 1 year. I find no error committed by the learned arbitrator in recompensing the contractor the expenses incurred by the contractor in keeping alive the bank guarantee at the wrong insistence of NPCC.

62. No objections have been raised to claim No. 4. I need not deal with the issue at all.

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63. Objections have been raised to claim No. 5. Claim No. 5 was on account of escalation under Clause 45 of the contract. Arbitrator has held that since time extension stands granted to the claimant the escalation is also payable to contractor under Clause 45 of the contract.

64. The petitioner had relied on Clause 45, the relevant part of which reads as under:

...Such compensation for escalation in prices shall be available only for work done during the stipulated period of the contract including such period for which the contract's validity extended under the provisions of Clause 12.4. of the contract without any action under Clause 29 and also subject to the condition that no such compensation shall be payable for a work for which the stipulated period of completion is 6 months or less....

65. According to petitioner no compensation could be awarded for escalation beyond the stipulated period of contract.

66. I fail to find any merit in this objection of the petitioner. As time extension was granted to the claimant the Arbitrator was justified in awarding compensation for escalation to the petitioner. In any case delay has been held attributable to the petitioner and said finding has been upheld by me.

67. Under Claim No. 9 Arbitrator has awarded an amount of Rs. 7,94,025/- towards interest @ 10% on the amount awarded under claim No. 5. I note that the Arbitrator has awarded interest @ 10% on the amount awarded under claim No. 5.

68. Petitioner had also raised 11 counter claims before the Arbitrator. All the counter claims were rejected by the Arbitrator. No objection with respect to counter claim is raised by the petitioner in the present petition.

69. The award dated 23.3.2002 published by Shri M.M. Kapoor, Sole Arbitrator is upheld.

70. No costs.