National Highways Authority Of ... vs M/S Itd Cementation India Ltd ...
2009 Latest Caselaw 3037 Del

          THE HIGH COURT OF DELHI AT NEW DELHI

%                                  Judgment delivered on: 07.08.2009


+             OMP 23/2007


NATIONAL HIGHWAYS AUTHORITY
OF INDIA                    ... Petitioner


                                   - versus -


M/S ITD CEMENTATION INDIA LTD ... Respondent/ Claimant

(Formerly M/s Skanska Cementation India Ltd)

Advocates who appeared in this case:

For the Petitioner : Mr Chetan Sharma, Sr Advocate with Mr Vikas Goel and Mr R. N. Sharma For the Respondent : Mr George Thomas with Mr G. K. Jose and K. J. Joseph

CORAM:-

HON'BLE MR JUSTICE BADAR DURREZ AHMED

1. Whether Reporters of local papers may be allowed to see the judgment? YES

2. To be referred to the Reporter or not? YES

3. Whether the judgment should be reported in Digest? YES

BADAR DURREZ AHMED, J

1. Through this petition under Section 34 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as the ‗said Act'), the

petitioner is seeking the setting aside of the Award dated 11.10.2006

made by the Arbitral Tribunal comprising of Sh. K. K. Madan

(Presiding Arbitrator), Lt. Gen. A. K. Puri (retired) and Justice A. B.

Rohtagi (Retired) in the matter of arbitration for the work of widening

of four lane and rehabilitation of existing two lane carriageway of NH-

4, Pune-Satara stretch from Satara (Km 725) to Wathar (Km 760),

Package-I. The respondent herein had preferred six claims. The

petitioner herein is aggrieved by the decision of the Arbitral Tribunal in

respect of the claim Nos. 1-5.

2. As indicated in the impugned Award a contract bearing

agreement No. NHAI/13011/17/97-P1/182 dated 10.05.2001 had been

entered into between the petitioner and the respondent for the execution

of the work of widening the existing two lane highway to four lanes as

well as rehabilitation of the existing two lane carriageway of National

Highway-4 in the Pune-Satara stretch. The contract was in respect of

the portion of the road between Satara (Km 725) and Wathar (Km 760)

which, in other words, implied a stretch of 35 Km. The contract value

was Rs 95,97,02,707/-. It may be pointed out that initially the contract

was between the National Highway Authority of India (employer)

(hereinafter referred to as the ‗NHAI') and M/s Skanska Cementation

India Limited (contractor), whose name was subsequently changed to

the present name -- ITD Cementation India Limited (hereinafter

referred to as ‗ITD Cementation').

3. The scope of the works involved the widening of the existing

two lane stretch of 35 km between Pune-Satara, constructing new

bridges and flyovers, widening and repairing existing bridges,

constructing toll plaza, junctions and intersections including service

roads and all road appurtenances and miscellaneous works. The date of

commencement of the work was agreed to be 01.07.2001 and the date

of completion, as per the contract, was 31.12.2003, which meant a

period of 30 months for completing the work. The work was actually

completed on 30.03.2004, that is, in 33 months. Disputes had arisen

between the parties and, therefore, the respondent/ claimant invoked

arbitration by its letter dated 29.06.2004 and simultaneously nominated

Justice A. B. Rohtagi (retired) as an arbitrator. In response to the said

invocation of the arbitration clause, the petitioner nominated Mr A. K.

Puri as an arbitrator and the two arbitrators appointed Mr K. K. Madan

as the Presiding Arbitrator. The following claims were made by the

respondent / claimant:-

(1) Claim No.1: Amounts payable by NHAI for varied work done by

claimant (ITD Cementation) and payment due under price

adjustment on the basis of rebate offered in the tender.

The modified claim under claim No.1 was of

Rs 9,14,71,312/-. As against this, the Arbitral Tribunal awarded

an amount of Rs 2,34,23,656/-.

(2) Claim No. 2: Payment due on account of redesigning of

pavement layers.

This claim was split into four parts being claim Nos. 2(a), (b), (c)

and (d). Claim No. 2(a) related to the effect of deletion of CTSG

(cement treated sub-grade). The amount awarded by the Arbitral

Tribunal was a sum of Rs 41,57,025/- in respect of the claim 2(a)

as against a modified claim of Rs 1,05,49,494/-. Claim No. 2(b)

was in respect of the effect of deletion of CTUSB (cement treated

upper sub-base). The Arbitral Tribunal awarded an amount of

Rs 32,73,618/- under this head as against the modified claim of

Rs 1,27,49,618/-. Claim No. 2(c), which pertained to under

utilization of key plants and equipments and quarry infrastructure

was withdrawn by the NHAI by their letter dated 29.03.2006.

Claim 2(d) pertained to additional cost of borrow material. The

Arbitral Tribunal awarded an amount of Rs 51,41,202/- to the

claimant (ITD Cementation) on account of additional cost

incurred towards additional borrow material against the modified

claim of Rs 1,48,79,786/-.

(3) Claim No.3: Payments due on account of change in the

thickness of DBM (Dense Bitumen Macadem) layer of 100 mm

for new carriageway (NCW) from one layer into two layers of 65

mm each and due to reduction of thickness of DBM for existing

carriageway (ECW) from 100 mm to 80 mm. This claim

comprises of two parts. The first part pertains to the new

carriageway (NCW) and the second part pertains to the existing

carriageway (ECW). Insofar as the claim pertaining to NCW was

concerned, the Arbitral Tribunal awarded an amount of

Rs 91,11,070/- as against the original claim of Rs 2,34,69,654/-.

The second part of the claim pertaining to ECW was rejected by

the Arbitral Tribunal.

(4) Claim No. 4: Reimbursement of increase in royalty charges.

The Arbitral Tribunal awarded an amount of Rs 68,66,175/- on

account of increase in royalty charges consequent upon the

notification dated 28.10.2002 issued by the Government of

Maharashtra.

(5) Claim No. 5: Interest.

The Arbitral Tribunal awarded interest at the rate of 12% per

annum compounded monthly in respect of the pre-reference

period, pendente lite interest as well as future interest on the

amount awarded under claims 1-4.

(6) Claim No. 6: Costs of arbitration, which the claimant (ITD

Cementation) claimed at Rs 10 lacs.

This claim was rejected and the Arbitral Tribunal directed that

the cost of arbitration be shared equally. The summary of the

Award in respect of claim Nos. 1-4 and 6 as given in the

impugned Award itself is set out herein below:-

       Claim          Brief description          Amount          Amount
        No:                                    Claimed (Rs)      Awarded
                                                                   (Rs)
           1.    a) Varied work Quantities     6,74,02,347     1,07,90,139
                 b) Additional Structures      1,26,33,517     1,26,33,517
                 c) Price Adjustment           1,14,35,448         Nil
                 Total                         9,14,71,312     2,34,23,656
           2.    a) Loss of overhead and       1,05,49,494     41,57,025
                 profits due to deletion of
                 cement stabilized upper
                 sub grade
                 b) Loss of overhead and       1,27,49,618     32,73,618
                 profit due to deletion of
                 cement treated upper sub
                 base
                 c) Under utilization of Key   1,15,24,775           Nil
                 Plants and Equipments and     (withdrawn
                 Quarry structures             subsequently)
                 d) Additional cost of         1,48,79,786     51,41,202
                 borrow material
                 Total                         3,81,78,898     1,25,71,845

      3.         a) Change in thickness of 2,34,69,654         91,11,070
                 DBM layer, 100 mm to
                 two layers of 65 mm each
                 in NCW
                 b) Change in thickness of 30,25,260                 Nil
                 DBM layer 100 mm to 80
                 mm on ECW
                 Total                     2,64,94,914         91,11,070

      4.         Reimbursement of increase 68,66,175           68,66,175
                 in royalty charges
      6.         Cost of Arbitration       10,00,000                 Nil

                 Grand Total of Claims 1 16,40,11,299          5,19,72,746
                 to 4 and 6

4. I shall take up the objections to the Award claim-wise.

Claim No. 1: Amounts payable by NHAI for varied work done by claimant (ITD Cementation) and payment due under price adjustment on the basis of rebate offered in the tender.

5. In the summary of bill of quantities, which is Annexure P-2

to the impugned Award, as against the total bid amount of

Rs 115,07,22,670/-, the respondent (ITD Cementation) had offered a

rebate of 16.6% on all items and, therefore, the final bid amount, after

rebate, was indicated as Rs 95,97,02,707/-. The issue that arises under

claim No. 1 is whether the rebate of 16.6% would be applicable only to

the bill of quantities (BOQ) or it would also extend to any variations

and/ or additional work. According to the claimant (ITD Cementation),

it gave a rebate of 16.6% on the BOQ items only and the rebate did not

extend to variations. Furthermore, the rebate definitely did not extend

to additional structures. Since the petitioner (NHAI) had made

payment to the respondent (ITD Cementation) on the basis of 16.6%

rebate not only on the BOQ items but also on variations and additional

structures, the respondent (ITD Cementation) was seeking a refund of

such rebate on the variations and additional structures.

6. It is the case of the petitioner (NHAI) that the rebate of

16.6% offered by the respondent (ITD Cementation) applied to all

work including variations and additional structures. According to the

petitioner the whole contract was an item rate contract and, therefore,

the rate of the rebate could not have a separate existence.

7. The Arbitral Tribunal, while considering the issue of

variations, interpreted clauses 51.1, 51.2, 52.1 and 52.2 of the General

Conditions being part of the Conditions of Contract for Works of Civil

Engineering Construction issued by the Federation Internationale Des

Ingenieurs- Counseils (FIDIC). The said provisions read as under:-

Alterations, Additions and Omissions

Variations 51.1 The engineer shall make any variation of the form, quality or quantity of the works or any part thereof that may, in his opinion, be necessary and for that purpose, or if for any other reason it shall, in his opinion, be appropriate, he shall have the authority to instruct the contractor to do and the contractor shall do any of the following:

(a) increase or decrease the quantity of any work included in the contract,

(b) omit any such work (but not if the omitted work is to be carried out by the employer or by another contractor),

(c) change the character or quality or kind of any such work,

(d) change the levels, lines, position and dimensions of any part of the works,

(e) execute additional work of any kind necessary for the completion of the works, or

(f) change any specified sequence or timing of construction of any part of the works.

No such variation shall in any way vitiate or invalidate the contract, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to vary the works is necessitated by some default of or

breach of contract by the contractor or for which he is responsible, any additional cost attributable to such default shall be borne by the contractor.

Instructions 51.2 The contractor shall not make any such for variations variation without an instruction of the engineer. Provided that no instruction shall be required for increase or decrease in the quantity of any work where such increase or decrease is not the result of an instruction given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.

Valuation of 52.1 All variations referred to in Clause 51 and any variations additions to the contract price which are required to be determined in accordance with Clause 52 (for the purposes of this Clause referred to as ―varied work‖), shall be valued at the rates and prices set out in the contract if, in the opinion of the engineer, the same shall be applicable. ―If the contract does not contain any rates or prices applicable to the varied work, the rates and prices in the contract shall be used as the basis for valuation so far as may be reasonable, failing which, after due consultation by the engineer with the employer and the contractor, suitable rates or prices shall be agreed upon between the engineer and the contractor.‖ In the event of disagreement the engineer shall fix such rates or prices as are, in his opinion, appropriate and shall notify the contractor accordingly, with a copy to the employer. Until such time as rates or prices are agreed or fixed, the engineer shall determine provisional rates or prices to enable on-account payments to be included in certificates issued in accordance with Clause 60.

Power of 52.2 Provided that if the nature or amount of any engineer to varied work relative to the nature or amount of fix rates the whole of the works or to any part thereof, is such that, in the opinion of the engineer, the rate or price contained in the contract for any item of the works is, by reason of such varied

work, rendered inappropriate or inapplicable, then, after due consultation by the engineer with the employer and the contractor, a suitable rate or price shall be agreed upon between the engineer and the contractor. In the event of disagreement the engineer shall fix such other rate or price as is, in his opinion, appropriate and shall notify the contractor accordingly, with a copy to the employer. Until such time as rates or prices are agreed or fixed, the engineer shall determine provisional rates or prices to enable on-account payments to be included in certificates issued in accordance with Clause 60.

Provided also that no varied work instructed to be done by the engineer pursuant to Clause 51 shall be valued under sub-clause 52.1 or under this sub-Clause unless, within 14 days of the date of such instruction and, other than in the case of omitted work, before the commencement of the varied work, notice shall have been given either:

(a) by the contractor to the engineer of his intention to claim extra payment or a varied rate or price, or

(b) by the engineer to the contractor of his intention to vary a rate or price.

According to the Arbitral Tribunal the basic difference between the

points of view of the parties appears to arise from different

interpretation and meaning of the term rebate given by the respondent

(ITD Cementation) in the tender and the BOQ rates. The basis of the

respondent's stand is that the rebate and unit rates are two distinctly

separate and independent terms as defined in the contract documents.

The unit rates and prices for the items are to be used for arriving at the

bid price while the discount/ rebate is to be used to arrive at a contract

price. Thus, as per the respondent, the rebate offered did not amount to

change in the quoted unit rate and price but was a discount offered in

the BOQ items and was applicable for BOQ quantities of various items

and not for items executed under Clause 51 of the General Conditions

of Contract for which the relevant contract provisions would apply. On

the other hand, it was the contention of the petitioner that the rebate

was a reduction in the unit rates of each BOQ item and the rate was the

net rate after reducing the unit rate by the percentage of rebate offered.

As per the petitioner, the rebate applied to all BOQ quantities as well as

deviated quantities. As per the Arbitral Tribunal, there are two kinds of

variations. The first is the automatic increase or decrease in the

quantity of any work included in the work as indicated in Clause

51.1 (a). Similar is the position, with the variation indicated in Clause

51.1(c), (d) and (e). Referring to Clause 51.2 the Arbitral Tribunal

observed that all variations which are to be made by the Contractor

under Clause 51.1 are to be made only upon instructions of the

engineer. The proviso to Clause 51.2 indicates that no instruction

would be required for increase or decrease in the quantity of any work

where such increase or decrease is not the result of an instruction given

under the said clause, but is the result of the quantities exceeding or

being less than those stated in the bill of quantities. On the basis of

this, the Arbitral Tribunal was of the view that there were two kinds of

variations. One, which was on the basis of instructions and, therefore,

could be regarded as instructed variations and, two, variations for

which no instruction was necessary and was merely the result of the

quantities exceeding or being less than those stated in the bill of

quantities. The latter kind of variation was regarded by the Arbitral

Tribunal as automatic.

8. The Arbitral Tribunal took the view that the automatic

changes in quantities which resulted from any inaccuracy in the bills of

quantities did not constitute a variation inasmuch as the employer had

at the very beginning in the preamble to the BOQ in Clause 2 made it

clear that ―the quantities given in the BOQ are estimated and

provisional and are given to provide a common basis for bidding‖.

Further reference was made to the clause to indicate that the basis of

payment will be the actual quantities of work ordered and carried out,

as measured by the contractor and verified by the engineer and valued

at the rates and prices bid in the priced BOQ, where applicable, and

otherwise at such rates and prices that the engineer may fix in terms of

the contract.

9. In view of the line of reasoning adopted by the Arbitral

Tribunal, it came to the conclusion that it is only the increased

quantities ordered by the engineer in writing which constituted varied

work and such variation must be paid at the rates and prices set in the

contract without deduction of rebate. The automatic increase or

decrease as a result of inaccuracy in the BOQ cannot be considered as

varied work and in respect of such changes, the rebate of 16.6% would

apply. Thus, the Arbitral Tribunal drew a clear distinction between

instructed variations, which, according to it, constituted varied work

and automatic changes which did not constitute varied work. The

Arbitral Tribunal came to the conclusion that it is only for the varied

work that the BOQ rates without rebate would apply ―because the

contractor did not promise rebate on varied works as defined above‖.

Consequently, as against the claim of Rs 6,74,02,347/- under the head

of variations, the Arbitral Tribunal awarded an amount of

Rs 1,07,90,139/-.

10. Considering the arguments advanced by the counsel for the

parties on both sides which were reiterations of their stands before the

Arbitral Tribunal, I am of the view that the Arbitral Tribunal has come

to the aforesaid conclusion on the basis of a particular interpretation of

the relevant clauses of the contract. It is well settled that the

interpretation of a contract is within the domain of the arbitrator. Even

if the Court does not agree with the interpretation given by the Arbitral

Tribunal, the Award cannot be set aside if the interpretation employed

by the Arbitral Tribunal is a plausible one and is not absurd [see: (i)

McDermott International Inc. v. Burn Standar Co. Ltd: 2006(2)

Arb.L.R. 498 (SC); (ii) Pure Helium India (P) Ltd v. ONGC: 2003(8)

SC 593; (iii) Himachal Pradesh State Electricity Board v. R. J. Shah

& Co.:JT 1999(3) SC 151; (iv) Union of India v. Suchita Steels:

2005(4) RAJ 378 (Delhi); and (v) Sudershan Trading Co. v. Govt. of

Kerala: AIR 1989 SC 890]. It is also a well settled principle that the

Court while examining a petition under Section 34 of the said Act does

not sit as a Court of appeal over the findings of fact or law of the

Arbitral Tribunal. The Court is not required and, in fact, does not

reappraise the evidence. The interpretation of a contract or the terms

thereof is also within the jurisdiction of the Arbitral Tribunal [see:

State of UP v. Allied Constructions: 2003(7) SCC 396]. Of course, if

the interpretation or construction given to a particular clause of a

contract by the Arbitral Tribunal is absolutely implausible or absurd,

the same can be interfered with by the Court under Section 34 of the

said Act. Furthermore, if a particular clause of the contract admits of

only one interpretation and if the Arbitral Tribunal chooses to ignore

the only plausible interpretation and comes up with an interpretation

which does not appear plausible, the Court is not obliged to accept that

interpretation [see: Wee Aar Constructive Builders v. DDA & Ors:

2001(2) Arb. L. R. 71 (Delhi)]. Also, the arbitrator is not a conciliator

and cannot ignore the law or misapply it in order to do what he thinks

is just and reasonable. The Arbitral Tribunal is selected by the parties

to decide their disputes according to law and if it does not, its Award

can be set right by the Court [see: Continental Construction Co. Ltd. v.

State of M.P: AIR 1988 SC 1166]. It is clear that an arbitrator being a

creature of the agreement between the parties, has to operate within the

four concerns of the agreement and if he ignores the specific terms of

the contract, it would be a question of jurisdictional error on the face of

the Award and the same could be corrected by the Court [see: Food

Corporation of India v. Chandu Construction and Another: (2007) 4

SCC 697].

11. These principles, which have been culled out from the

decisions cited by the counsel for the parties on both sides, are clear.

The sum and substance is that the Arbitral Tribunal cannot ignore terms

of the contract or go contrary to the same. But, where the Arbitral

Tribunal arrives at one of the plausible interpretations of the terms of a

contract, the Court does not interfere under Section 34 of the said Act.

The Court also does not interfere with findings of fact unless and until

there is perversity writ large in the impugned Award.

12. In the present case the Arbitral Tribunal has examined

clauses 51.1, 51.2, 52.1 and 52.2 and has, upon such examination,

gleaned a distinction between an instructed variation and an increase or

decrease in the quantity of any work which is not a result of an

instruction given by the engineer but is the result of the quantities

exceeding or being less than those stated in the bill of quantities.

Clause 51.1 indicates that any variation in the work, as indicated

therein, will not, in any way, vitiate or invalidate the contract but the

effect, if any, of all such variations are to be valued in accordance with

Clause 52. Clause 52.1 deals with valuation of variations. It specifically

provides that all variations referred to in Clause 51 shall be valued at

the rates and prices set out in the contract if, in the opinion of the

engineer, the same shall be applicable. According to the Arbitral

Tribunal, the expression ―rates and prices set out in the contract‖

referred to the unit prices mentioned in the BOQ prior to the

application of rebate of 16.6%. Interpreting the clauses in such

manner, the Arbitral Tribunal came to the conclusion that the

respondent (ITD Cementation ) was entitled to a refund of the rebate

only in respect of instructed variations which fell within the expression

―varied work‖ as appearing in Clause 52.1 of the GCC. The Arbitral

Tribunal, therefore, rejected the respondent's claim of refund of rebate

in respect of the increase in the quantity of work which was not

consequent upon any instruction issued by the engineer, but was the

result of quantities exceeding those stated in the bill of quantities.

According to the Arbitral Tribunal, such increase was to be expected as

was apparent from the preamble of the bid document and, therefore,

when the contractor (ITD Cementation) made the bid it was aware that

the 16.6% rebate would apply to such increase or decrease in

quantities.

13. I feel that the interpretation given by the Arbitral Tribunal to

the relevant clauses of the contract between the parties is certainly a

plausible interpretation. Once I come to this conclusion, there is no

scope for any further challenge on this aspect of the matter.

Consequently, the finding of the Arbitral Tribunal with regard to the

refund of the rebate on variations does not call for any interference.

14. The conclusion of the Arbitral Tribunal with regard to

additional structures also does not call for any interference. The

Arbitral Tribunal held:-

―3.1.33 The AT is of the view that for prices set out in the contract to be applicable to varied work, it is essential that it must be similar work executed under similar conditions. If time and sequence show that the additional work was ordered to be executed months after the commencement of the original work and after the contractor has made all arrangements for completion and demobilization then in that case time, sequence and changed conditions as a whole, will have to be taken into account in fixing the price for varied work. To apply rebate to altered and additional work executed under changed conditions as explained above, when prices had increased, is to misapply it, since the claimants had offered the rebate in 2001, when tenders were invited, while varied work was ordered much later after considerable progress has been made.

3.1.34 In this case six underpasses were architecturally sufficient as originally designed and conceived. But additional eight structures were ordered as per demand of the local population, which were not provided in the contract as these were not originally designed, planed or conceived. Therefore the AT holds that these structures cannot be strictly covered under clause 51.1(e) of GCC i.e. necessary for completion of the work.

3.1.35 AT is, further of the view that the rebate was given on original contract work and to extend it to varied work in all circumstances and condition, favourable and unfavourable, is not justified. If we do so, the result will be that under the guise of ―additional work‖, the employer can get any amount of work executed at the rebated rate. Therefore in case of varied work, its nature, extent, timing and sequence must be seen in each case, before applying the rebated rate. In changed conditions and in changed circumstances, additional work will certainly call for fixing a rate on a reasonable basis.

3.1.36 AT therefore holds that the rebate given on overall contract price and grossed up by the contractor while tendering has no application to additional work in the facts of this case and awards an amount of Rs 1,26,33,517 to the claimants on account of rebate deducted on additional structures as per his modified claim (vide Annexure-2 of written arguments on pg. 73), against original claim Rs 2,14,53,873 as per SOC.‖

The reasoning adopted by the Arbitral Tribunal is plausible.

Consequently, no interference is called for.

Claim No. 2: Payment due on account of re-designing of pavement layer.

15. There was a change in the pavement design. This is

indicated by the diagram indicated below:-

From the above diagram, it is apparent that two items have been

omitted from the original pavement design. Those two items are

150 mm CTUSB (cement treated upper sub base) and 150 mm CTSG

(cement treated sub grade). According to the respondent/ claimant

(ITD Cementation), the omission of these items resulted in loss of

profits/ overheads. As noted in the impugned Award in paragraph

3.2.4, there is no dispute between the parties to the change in the design

of the road crust and the consequent omission of the items. The

claimant / respondent valued the effect of the deletion of the two items

due to loss of overheads and profits by considering the same as

analogous to existing BOQ items 2.06(a) and 3.01(a), respectively, and

claimed the rate difference between the two. On the other hand, the

petitioner contended that the BOQ items 2.06 (a) and (b) as also items

3.01(a) and (b) were not analogous and thus the effect of variations

claimed by the respondent / claimant was not correct. According to the

petitioner, the Arbitral Tribunal has given no reasons for treating the

said items as analogous items. However, in paragraph 3.2.10 of the

impugned Award, it is clearly indicated that the items were treated or

considered to be analogous because the only different was the cement

content. Items 2.06 (a) and (b) and items 3.01 (a) and (b) are as under:-

 Item                                 Description

 2.06           Construction of subgrade /shoulder with approved

materials from borrow pits complete as per Technical Specification Clause 305 with all leads and lifts and as directed by the Engineer:

(a) Lower Subgrade of 450 mm thickness

(b) Cement Treated Upper Subgrade of 150 mm thickness (with 2% cement content) 3.01 Constructing Granular Subbase full width or part width with approved materials:

(a) Lower Granular Subbase (GSB) as per Technical Specification Clause 401 conforming to Grading-I of Table 400-1.

(b) Cement Treated Upper Subbase with 4% cement content as per Technical Specification Clause 403 conforming to Grading as shown in Table 400-4 and as directed by the Engineer.

16. An examination of the above BOQ items clearly shows that

the Arbitral Tribunal has not taken an unreasonable view in treating

items 2.06 (a) and (b) as analogous as also items 3.01 (a) and (b) as

analogous. The only different being the absence or presence of cement.

Consequently, I do not see any reason to interfere with the finding of

the Arbitral Tribunal that the said items are to be considered analogous

for working out the loss of overheads and profits. The claims 2(a) and

2(b) to the extent awarded by the Arbitral Tribunal are, therefore,

upheld. Similarly, I see no reason to interfere with the award of the

amount of Rs 51,41,202/- to the respondent on account of additional

cost incurred towards additional borrow material.

Claim No. 3: Payment due on account of change in the thickness of DBM layer of 100 mm for new carriageway from one layer into two layers of 65 mm each and due to reduction of thickness of DBM for existing carriageway (ECW) from 100 mm to 80 mm.

17. In the present petition I am not concerned with the claim in

respect of the existing carriageway inasmuch as the same has not been

granted by the Arbitral Tribunal and the respondent has not made any

grievance in respect of this. I am concerned with the change in the

thickness of DBM in respect of the new carriageway (NCW). As can

be seen from the diagram given earlier in this judgment with regard to

the change in the pavement design, the original pavement design

indicated a thickness of 100 mm for the DBM. This has been increased

to 130 mm in the new pavement design. As per the applicable

technical specifications, it is only permissible to lay a single layer of

DBM up to 100 mm thickness. Since the new pavement design

required the DBM to be of 130 mm, it could not be executed by laying

a single layer and consequently, had to be executed by laying two

layers of 65 mm each. As per the claimant / respondent (ITD

Cementation), the BOQ rate for DBM in the contract was quoted for

laying of 100 mm thickness DBM in a single layer. Due to reduction in

the thickness of the layers of DBM to be laid in two layers of 65 mm

each, the efforts and resources required per cubic meter of the finished

DBM layer had increased. On the other hand, the petitioner contended

that the rate quoted in the BOQ had to be adhered to inasmuch as it was

on the basis of per cubic meter of DBM, irrespective of the thickness of

the DBM. It may be pointed out that the engineer acknowledged the

fact that additional efforts would be required as a result of the increase

of the thickness of the DBM from 100 mm to 130 mm and he allowed

an additional payment of Rs 78 per cubic meter which was

subsequently revised to Rs 82 per cubic meter in respect of the DBM

for the new carriageway. This was, however, not acceptable to the

respondent / claimant, who claimed a much higher amount. The

respondent had claimed an additional amount at the rate of Rs 407 per

cubic meter. The Arbitral Tribunal noted that insofar as the question of

laying the second layer of DBM was concerned, it entailed further

operations. There was a need to return for laying of the second layer of

DBM over the previously laid surface after every 48 hours, inasmuch

as prior to laying the second layer several operations such as cooling of

the first layer, taking core from the first layer and getting test result of

the core taken also needed to be completed before the second layer

could be put in place. Computing the figures, as noted in the impugned

Award, the Arbitral Tribunal held:-

―3.2.8 In this analysis, AT has considered as reasonable the overall loss of efficiency for laying the DBM into two layers as 25% for each layer and accordingly the incremental rate works out to be Rs 158 per cum. Based on the above A/R the amount payable to the Claimant is Rs 91,11,070/- against the original claim of Rs 2,34,69,654.‖

The incremental rate which was computed on the basis of the analysis

taken by the Arbitral Tribunal was Rs 240/- per cubic meter. It is to be

noted that the increment recommended by the engineer and which had

already been paid by the petitioner to the respondent was Rs 82/- per

cubic meter. The difference in the incremental rate, therefore, worked

out to Rs 158/- per cubic meter (Rs 240 - Rs 82). Consequently, the

amount payable to the claimant/ respondent was worked out at

Rs 91,11,070/-.

18. The learned counsel for the petitioner referred to the above

conclusion arrived at by the Arbitral Tribunal and submitted that the

computation was erroneous. He further submitted that in any event the

Arbitral Tribunal has considered the loss of efficiency for laying the

DBM in two layers ―to be 25% for each layer‖. It was contended that

there could not have been a loss of efficiency in respect of the first

layer and it is only in respect of the second layer that such a

computation could have been done. The overall logic adopted by the

Arbitral Tribunal with regard to the loss having been occasioned to the

respondent/ claimant on account of two layers having to be laid rather

than one cannot be found to be faulty. However, I do agree with the

submission of the learned counsel for the petitioner that the loss of

efficiency of 25% would only be in respect of the second layer and not

in respect of the first because, the first layer would have to be laid in

either eventuality, whether it was the original design or the new design.

It is only because the new design required two layers to be laid rather

than one that there has been a loss of efficiency. Thus, the 25% loss of

efficiency would not be in respect of each layer but only in respect of

the second layer. Consequently, the amount of Rs 91,11,070/- would

have to be halved and the awarded amount under this claim would

stand reduced to Rs 45,55,535/-.

Claim No. 4: Reimbursement of increase in royalty charges.

19. The claim under this head was based upon the notification of

the Government of Maharashtra under Section 15 of the Mines and

Minerals Act, 1957 which took effect from 28.10.2002 whereby royalty

charges on stone, sand and earth were increased. The respondent/

claimant (ITD Cementation) had requested for price adjustment

consequent to the increase in the rates of royalty. It may be pointed out

that the engineer had certified payments for increased royalty and the

employer (the petitioner herein) had made payment for about one year

as certified by the engineer. In October, 2003 the engineer reversed his

decision and directed recovery of the amounts already paid to be

claimant on the ground that this increase in royalty charges could not

be paid separately as the same was covered under the price variation

sub clause 70.3(B), for general materials. Upon an interpretation of the

relevant clause of the contract between the parties, the Arbitral

Tribunal held the claim of Rs 68,66,175/- on account of increase in

royalty charges consequent upon the said notification issued by the

Government of Maharashtra with effect from 28.10.2002 to be justified

and accordingly awarded the same to the respondent/ claimant.

20. A similar conclusion had been arrived at in the case of

another contract between the same parties by the Arbitral Tribunal in

that case. However, after arriving at such a conclusion, namely, that

the claimant was entitled to be compensated for the increase in the

royalty charges, the Arbitral Tribunal in that case had left the amount to

be quantified by the National Highway Authority of India. That Award

became the subject matter of OMP 432/2006 which was dismissed by a

learned Single Judge of this Court vide his judgment dated 14.05.2007.

The same was made the subject matter of an appeal being

FAO(OS) 216/2007 before a Division Bench of this Court. The issues

which arose before the Division Bench were essentially two in number.

One issue touched upon the interpretation of the terms of the contract

and the other related to the quantification of the extra cost allegedly

incurred by the claimant therein. By a judgment delivered on

30.11.2007 [NHAI v. ITD Cementation India Ltd: 2008 (100) DRJ

431 (DB)], the Division Bench was of the view that insofar as the first

issue was concerned, no interference was called for in respect of the

decision on the interpretation placed by the Arbitral Tribunal. The

Division Bench specifically noted that it had been well settled by a long

line of decisions rendered by the Supreme Court that a Court dealing

with a petition under Section 34 of the said Act does not sit in appeal

over the Arbitral Tribunal. After noting the decision of the Supreme

Court in the case of ONGC v. Saw Pipes Ltd: AIR 2003 SC 262, the

Division Bench concluded that there was no reason for it to take a view

different from the one taken by the learned Single Judge that the Award

made by the arbitrators could not be interfered with simply on the

ground that another interpretation of the terms of the contract, no

matter equally plausible, was possible. However, on the issue of

quantification, since the same had been left to the one of the parties to

the dispute, the Division Bench set aside the order passed by the

learned Single Judge as also that part of the impugned Award. The

Division Bench observed that it was incumbent upon the Tribunal to

have quantified the amount payable as revised seigniorage fee and the

Tribunal could not have permitted one of the parties to the dispute to

determine that issue. Consequently, the Division Bench set aside the

Award on the question of quantification of the amount and remitted the

matter to the Arbitral Tribunal for deciding the issue.

21. From this discussion it is apparent that the issue with regard

to reimbursement on account of the increase in royalty charges is no

longer open to debate. In the present case, unlike in the earlier case

reported in 2008(100) DRJ 431 (DB), the Arbitral Tribunal has not left

the issue of quantification open but has arrived at a specific figure of

Rs 68,66,175/- and, therefore, even that lacuna is not there in the

present Award. Consequently, the conclusion of the Arbitral Tribunal

in respect of claim No. 4 cannot be interfered with.

Claim No. 5: Claim for interest.

22. The plea of the petitioner with regard to claim No. 5, which

pertains to the rate of interest to be computed, also does not call for any

interference. It is within the domain of the Arbitral Tribunal to fix the

rate of interest within reasonable bounds and as permissible under the

contract. The Arbitral Tribunal noted that as per Section 37(7) of the

said Act, it had the power to award interest from the date of the cause

of action till the date of actual payment. It also noted that as per

provision made in the appendix to the bid of the contract and sub-

clause 60.8 of the contract agreement, the rate of interest payable on

unpaid sums was 1/30th of 1 % per calendar day, which worked out to

12% per annum compounded monthly. According to the petitioner, the

stipulated amount of interest was only in respect of undisputed sums

certified by the engineer and did not extend to the amounts ultimately

awarded by the Arbitral Tribunal. However, I agree with the

submission made by the learned counsel for the respondent that in

terms of the contract, the parties could have easily envisaged that if an

amount was found to be due the compensation for the delay in making

the payment cannot be computed at 12% per annum compounded

monthly. Furthermore, there is no reason to distinguish between the

undisputed sums certified by the engineer and uncertified payments as

a result of succeeding in a claim before an Arbitral Tribunal. The

learned counsel for the respondent submitted that the interest awarded

at the rate of 12% per annum to be computed monthly would

approximately equivalent to 14% simple interest. He submitted that

even Section 31(7)(b) of the said Act contemplated interest at the rate

of 18% per annum. In view of these submissions, I agree with the

submissions made by the learned counsel for the respondent that the

interest awarded was not unreasonable and not beyond the

contemplation of the parties at the time they entered into the contract.

Consequently, there is no reason to interfere with this part of the Award

either.

23. As a result of the aforesaid discussion, the impugned Award

is upheld except in respect of claim No. 3 where the awarded amount is

reduced from Rs 91,11,070/- to Rs 45,55,535/-. To this extent only, the

petition is allowed. All the other objections raised by the petitioner in

respect of the impugned Award are rejected. The petition stands

disposed of accordingly. There shall be no order as to costs.

BADAR DURREZ AHMED (JUDGE) August 07, 2009 SR