Indian Oil Corporation Limited vs M/S Sps Engineering Limited
2009 Latest Caselaw 5066 Del

*                   IN THE HIGH COURT OF DELHI AT NEW DELHI
+                           A.A. No.288/2009
                                                           8th December, 2009

INDIAN OIL CORPORATION LIMITED                                    ...Petitioner

                                 Through:        Mr. Rakesh Sawhney and
                                                 Mr. Munindra Dvivedi, Advs.
          VERSUS
M/S SPS ENGINEERING LIMITED                                     ....Respondent
                       Through:                  Mr. Arvind Minocha, Adv.

CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

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

     2. To be referred to the Reporter or not?

     3. Whether the judgment should be reported in the Digest?
    %                          JUDGMENT (ORAL)

VALIMIKI J. MEHTA, J.

1. This is a petition under Section 11 of the Arbitration and Conciliation

Act, 1996 for reference of the disputes between the parties arising out of the

work awarded by the petitioner to the respondent for infrastructure works of

supply and installation of the Construction Water system and Drinking

Water system for petitioner's Paradip Refinery Project, at Paradip (Orissa).

2. The admitted facts are that the petitioner terminated the subject

contract on account of stated breach/non-performance by the respondent

vide its letter dated 29/10/02. The respondent thereafter invoked the

arbitration clause and filed a petition in this Court for the appointment of an

Arbitrator under Section 11 and the disputes between the parties were

referred to Arbitration and Justice P.K. Bahri (Retd.) was appointed as an

Arbitrator by the order dated 17/03/03.

3. In the aforesaid arbitration, an Award came to be rendered by the sole

arbitrator Justice P.K. Bahri (retired) and which Award is dated 27/10/08. It

is not in dispute that the present petitioner had in fact made a counter claim

with respect to the higher cost of the balance work which was not done by

the present respondent and for which balance work the present

petitioner/counter claimant in the earlier arbitration proceedings had filed a

claim with respect to a Risk Purchase tender issued by it to one M/s Deepak

Construction Company. The counter claim for this risk purchase cost was

decided by the arbitrator and which counter claim was dismissed observing

as under:-

"The contract was terminated in October, 2002 and till date the balance work of the contract has not been executed. Such damage could have been allowed to the respondent if in reasonable period after termination of the contract, the respondent had executed the

balance work at the risk and costs of the claimant. In case the costs actually incurred have been more than the costs which were required to be incurred under the contract, then the difference between the two costs could have been awarded as damages to the respondent. There is no proper evidence on the record to show that what could have been the costs of the balance work if it had been executed within the reasonable period after the termination of the contract. Such damage cannot be awarded on mere opinion of any particular person or on hypothetical basis. Under clause 7.0.9.0 of General Conditions of the Contract, the respondent was entitled at the risk and expenses of the contractor to get completed the balance work and recover the costs from the claimant. This clause further contemplates that on the amount actually expended by the owner for the completion of the work 5% to be added as supervision charges. The same would have become recoverable from the claimant. In the present case, no such cost has been incurred till date. Thus, for these reasons, I reject this counter claim."

4. It is, therefore, quite clear that it is for this very issue for which

reference is being sought for determination of the disputes through

arbitration, was very much an issue in the earlier arbitration proceedings and

with respect to which claim a counter claim was filed and was specifically

rejected. The counter claim was rejected on merits, inter alia, on the ground

that there is no proper evidence on record to show what would have been the

cost of the balance work if it had been executed within a reasonable period

after termination of the contract. Therefore, the arbitrator has held that the

present petitioner was not entitled to succeed in its counter claim in the

earlier arbitration proceedings because awarding of the work by risk

purchase to M/s Deepak Construction Company was considerably delayed

and not within a reasonable period of time of termination of the contract

with the present respondent. The Arbitrator has therefore, and in my opinion

rightly, held that such damages/loss on the basis of risk purchase tender

would have been allowed to the present petitioner/counter claimant only if

the risk purchase tender was issued within a reasonable period after

termination of the contract and which was not done. A reference to the

petition filed in the present case does not show as to what was the date on

which the said M/s Deepak Construction Company was awarded the

contract, with respect to the balance work not performed by the present

respondent. Not only this, reference to the notice dated 22/1/09 issued by

the petitioner to the respondent is a cause of action for filing this petition

shows that M/s Deepak Construction Company had in fact completed the

work way back on 29/12/07,i.e., well before the passing of the Award dated

27/10/08 by Justice P.K.Bahri (Retd.).

5. In my opinion, not only the aforesaid para 102 in the Award dated

27.10.08 operates as res judicata against the present petitioner, I find that the

present petition is mis-conceived and malafide because, if the present

petitioner is correct in saying, and which I doubt it is, that its limitation/right

would only begin after the work is completed by M/s Deepak Construction

Company when the amount of the higher cost is known, even then, the work

was completed by the M/s Deepak Construction Company admittedly on

29/12/07, and thus the present petitioner, could well have proved its counter

claim in the earlier proceedings and could have crystallized the amount in

the said earlier arbitration proceedings. If necessary it could have even

amended its pleadings as regards the counter claim. On a further query by

the Court to the counsel for the petitioner with respect to the statement in the

notice dated 22/01/09 sent by the petitioner to the respondent which states

that "M/s Deepak Construction Company has completed the work on

29/12/07 and its final bill has now been settled" that when was the Bill of

M/s Deepak Construction Company settled, the counsel for petitioner states

that for the present no such information is at all available whether in the

form of any assertion in the present petition or in any document in support

thereof.

6. A conspectus of the aforesaid facts show that firstly in the earlier

arbitration proceedings, the counter claim of the present petitioner on this

very subject matter was specifically dismissed by holding and observing that

the risk purchase tender awarded to M/s. Deepak Construction Company

was not given within a reasonable period of time after termination of the

work of the present respondent. Secondly, it has further become clear that

the work was completed by M/s. Deepak Construction Company admittedly

as per the case of the petitioner on 29/12/07 and the earlier arbitration

proceedings came to an end later by passing of the Award on 27/10/08 and,

therefore, the claim with respect to any cost of the total materials for the

substitute contract for the risk purchase could very well have been

crystallized and claimed in the earlier arbitration proceedings. Thirdly,

admittedly there is no challenge to the Award dated 27/10/08 by the present

petitioner whereby its counter claim was rejected. Fourthly, I am of the

view that once a risk and cost tender is issued at the risk and cost of a

person, then, the amount which is to be claimed from the person who is

guilty of breach of contract and against whom risk and cost is tendered,

becomes crystallized when the risk purchase tender at a higher cost is

awarded. Once a higher cost of work is known as compared to the cost of

the work for the earlier work for which the earlier contract was there and

with respect to which the earlier contractor was in breach, then, not only the

amount becomes crystallized but limitation also commences for filing of the

legal proceedings against the person in breach of obligations under the

earlier contract. It cannot be that limitation and a right continues indefinitely

to be extended till the performance is completed under a subsequent risk

purchase contract. This would give complete uncertainty to the period of

limitation striking at the very root of one of the principles of the Limitation

Act and which is that evidence is lost by passage of time and which will

cause grave prejudice to the person against whom a stale claim is filed.

7. In view of the aforesaid, I find that the present petition is wholly mis-

conceived and an abuse of the process of law because it seeks to get over a

direct finding of dismissal of the counter claim of the present petitioner on

the very same subject matter which was decided upon and hence res judicata

by virtue of Award dated 27/10/08 of Justice P.K. Bahri (Retd.).

Accordingly, this petition is dismissed with costs of Rs. 50,000/-.

DECEMBER 08, 2009                                     VALMIKI J. MEHTA, J.
mr