Delhi Vidyut Board vs M/S. Jay Gee Construction Company ...
2009 Latest Caselaw 5345 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELH
+                      O.M.P. No.5/1999

                                                 Reserved on: December 8, 2009.

                                           Pronounced on: December 22, 2009.

DELHI VIDYUT BOARD                                         ...Petitioner


                           Through:     Mr. Gourab Banerjee, ASG with
                                        Ms.Monika Garg, Advocate and Mr.
                                        Arjun Krishan.

                                 VERSUS

M/S. JAY GEE CONSTRUCTION COMPANY PVT. LTD. & ANR.
                                         ....Respondents

Through: Mr. Naresh Markanda, Senior Advocate with Mr. Kamlesh Mahajan, Advocate.

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? Yes

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

% JUDGMENT

1. This petition is filed under Section 34 of the Arbitration and

Conciliation Act, 1996 challenging the Award dated 1.6.1998 passed by the sole

Arbitrator and as modified on 24.10.1998. The counsel for the objector at the

OMP No.5/1999 Page 1 outset had confined his objections to only two aspects, besides the rate of

interest issue, of the impugned Award. The first aspect pertains to Claim No.5

for excess lead/distance for transportation and whereunder the Arbitrator has

awarded a sum of Rs.12,18,104/- on account of a higher "lead" than as stated in

the subject contract. The second aspect pertains to Claim No.3 as per which

idling charges have been granted to the present respondent by the impugned

Award for a period of 58 days.

2. I may state that almost on similar issues so far as the first aspect is

concerned, I have on 12.11.09 passed a judgment titled as Delhi Vidyut Board

Vs. Subhash Chander & Co. in OMP No. 279/1998 between the same

petitioner and another contractor pertaining to a similar contract. While dealing

with the aspect of grant under the Award for a higher distance/lead, I have held

as under:

"3. The issue which has to be addressed by the Court is with respect to the aspect as to whether for disposal of the fly ash is there is a specified site or an approximate distance to such site, as per the contract. If a specified site or an approximate distance is found in the contract, then, the Award with respect to claim No.2 of charges towards additional distance travelled for disposal of the fly ash, would be correct. However, if the contract does not provide for any specific site or any approximate distance qua the specific site, there will not arise any claim for additional distance for carriage of the fly ash.

4. Mr. Gourav Banerjee, ASG, appearing on behalf of the petitioner has in support of his arguments with respect to the issue that there is no fixed site or even a fixed approximate distance for disposal of the fly ash has taken me through the various contractual conditions in the agreement and more particularly the terms and conditions in the S.C.C. At this stage, I may refer to clause Nos. 4 and 5 of the Special Conditions of Contract. Before I do that I may note that the

OMP No.5/1999 Page 2 special conditions of the contract specifically state that whenever there is a conflict between the general conditions of contract and the special conditions, the special conditions shall prevail. Therefore, it is clear that special conditions will prevail over general conditions. Also, it would be relevant for a decision of the subsequent issue that the terms and conditions as found in the final letter of the Award, which was acted upon by the respondent, would become the final contract document between the parties. Clauses 4 and 5 of the special conditions of contract are as under:

"4. The tentative list of sites identified by the Department for disposal of ash shall generally be indicated in the tender/letter of intent. The Department may also identify other sites for disposal of ash, during the course of execution of work. The contractor is required to dispose off the ash at the identified sites as per direction of Engineer-in-charge. However, the contractor shall have option to identify additional sites for dumping at his own end and shall get these locations approved from the Department before commencement of work. Department reserves the right to reject any/all sites so identified by the contractor without assigning any reason. Thus, rate quoted by contractor shall be valid for all leads and lifts. The sites identified by Department shall be filled first as per priorities indicated by the Engineer-in-charge and the site identified by the contractor shall be filled afterwards. In the sites thus identified by the Department, contractors shall normally fill ash upto optimum capacity of the available dumping ground unless directed otherwise. In the event of one particular site getting full, the contractor shall commence on the next dumping ground as directed by the Engineer-in-Charge. Thus, the contractor has to dispose off/dump ash at number of locations as per exigencies of work/availability of the sites and no claim whatsoever shall be entertained for change in disposal point involving different leads."

5. The rate quoted by the contractor shall cover for all leads and lifts involved for disposing off the ash in the locations as specified in para (4) above. The rate shall also cover for all operations, such as excavating fly ash from the ash disposal area, loading/unloading and transporting the same to the point of disposal, disposing the top surface of the area after disposal. As the fly ash after excavation is to be disposed off in the low lying areas, any approach required to be made for disposal shall be the contractor liability, and no financial claim whatsoever on this account shall be entertained."

(Emphasis added)

5. A reference to the conditions 4 and 5 make it more than clear that there is no specific site on which the dumping is to take place. Not only is the list of site tentative, but, it is quite clear from the clauses that the Department may also identify other sites for disposal of ash during the course of execution of the work. There is no reference to any distance with respect to these other sites at which disposal of ash would take place during the execution of the contract. I may, at this stage, mention that the contract between the parties is for disposal of

OMP No.5/1999 Page 3 the ash within the entire Union Territory of Delhi as per clause 1. This clause is reproduced hereunder:

"1. The scope of work covers excavating fly ash from any of three or more chambers of ash ponds along Ring Road between „Y‟ shape Rly. Bridge near Bhairon Road crossing and Nizamuddin bridge on river Yamuma and disposing off the ash by closed steel body trucks/dumpers approved by the Department at low lying pockets/dumping ground within Union Territory of Delhi as may be directed by Engineer-in-charge from time to time. The scope of work also includes levelling and dressing of fly ash at the dumping grounds." A reading of the clause 1 shows that the scope of the work covers excavating the fly ash from one or more chambers of the ash ponds and disposing of such ash at low lying pockets/dumping ground in the Union Territory of Delhi as may be directed by the Engineer -in- charge from time to time. Therefore, a conjoint reading of clause 1, clause 4 and clause 5 makes it more than clear that not only the contract is for disposal of ash within the Union Territory of Delhi, there is no fixed site which is specified for disposal of such ash, and nor is there specified any fixed or even an approximate distance specified as the lead for the disposal of fly ash. To cap the issue, clauses 4 and 5 in so many words very clearly state that the rates quoted by the contractor shall be valid for all leads that is with respect to all distances and no claims will be entertained for change in the disposal point involving different leads.

6. Mr. Ashok Bhasin, learned senior counsel for the respondent has per contra referred to the Schedule of Quantities (SOQ) to contend that the disposal has to be at a specific site. The relevant portion of this SOQ which is relied upon by Mr. Bhasin is as under:-

"Note:- Tentative sites of disposal:- Vasant Kunj, Dhirpur/Shalimar Bagh or any other site." (Emphasis added)

Mr. Bhasin has argued that these sites as stated in the SOQ would therefore confine the petitioner to direct disposal of ash by the respondent to such sites only or within leads of such sites only and not for any other leads from the place where fly ash is picked up for disposal.

7. A contract document ordinarily would have provided for the priority of the contractual documents inter se being the notice inviting tender, general conditions of contract, special conditions of contract, the letter of Award and an agreement document which is entered into between the parties. Unfortunately, in this case, the contract is silent as to priority of the documents. I hope, the petitioner will be wiser in future, however in the present, I have to interpret the different terms and conditions as appearing in the contract in a harmonious manner so that the intention of the parties becomes clear from such clauses. I note that in the relevant portion of the schedule of quantities relied upon by Mr. Bhasin that the sites which have been mentioned ends with the

OMP No.5/1999 Page 4 expression "or any other site". This itself, therefore makes it more than abundantly clear assuming any clarification was required even after clauses-1, 4 and 5 of the special conditions of contract, that, there is no fixed site or any fixed distance for disposal of the fly ash under the contract. The disposal as already stated by me is in terms of clause 1 of the SCC was to be at any place in the Union Territory of Delhi and for any lead/distance. Accordingly, I am not agreeable to the contention which has been very strenuously contended on behalf of Mr. Bhasin on behalf of the respondent.

8. The law with respect to interference with an Award under Section 34 of the Arbitration and Conciliation Act, 1996 is very clear. Ordinarily the courts will not interfere with the Award unless the Award is against the contractual provisions or the award is illegal i.e. against the provisions of the law of the land or is so perverse that it shocks the judicial conscience. This interpretation is now well settled with respect to objections which have been filed under Section 34. Accordingly, in accordance with these parameters of law, I note that the award clearly therefore flies and is totally contradictory to the direct contractual provisions namely clauses 1,4 and 5 of the special conditions. I am of the firm opinion that the clauses in the special conditions of contract in the facts of the present case will prevail over the schedule of quantities/SOQ because the language in the schedule of quantities itself refers to "or any other site". The same result will also flow from the harmonious construction of all the relevant clauses. Therefore, without doing any violence to the language in schedule of quantities one can safely interpret clauses 1,4 and 5 of the special conditions of contract that as regards the disposal of fly ash there was no fixed place of disposal or any fixed distance. That being the position there cannot lie any claim on behalf of the contractor for disposal of ash beyond any assumed limit which is taken as the fixed contractual distance/lead. This Award of the Arbitrator therefore being clearly violative of the contractual provisions is liable to be set aside under Section 34. I, therefore, set aside this part of the Award."

3. The counsel for the respondent, however, contended that the judgment in

the case of O.M.P. No.279/98 would not apply in the facts of the present case

because according to the counsel for the respondent in the present contract, the

respondent had written its letter dated 28.7.1993 and in which it was clearly

stated that the rates as given by the respondent/contractor were valid only for

three sites as stated in para 2 of the said letter and which is reproduced as under:

OMP No.5/1999 Page 5 "2. Our Rates are valid for the leads upto 1 of 3 disposal sites mentioned in the Schedule of Quantities i.e. Vasant Kunj, Dheerpur, and Shalimar Bagh. If at any stage the lead exceeds these sites due to change in disposal area, the extra lead will be charged at the rate mutually decided by us and the department."

The counsel for the respondent also relied upon two judgments. First

judgment is of Union of India Vs. Suchita Steels 2006(1)Arb.LR.83(Delhi)

and which is relied upon to contend that a commercial contract must be read as

commercial people understand the same. The second decision relied upon is

that of M.K. Abraham and Company Vs. State of Kerala and Another

2009(7)SCC 636 to urge the contention that a letter supersedes the printed form

and since in the present case the Special Conditions of the Contract (SCC) only

contain the printed form, therefore, as per the counsel for the respondent the

contents of the letter dated 28.7.1993 ought to prevail.

4. So far as the ratio of Suchita Steels case (supra) is concerned there is no

dispute as to the proposition of law laid down therein but how this judgment

applies I have failed to understand. So far as the argument based on the

judgment in the case of M.K.Abraham (supra), I am of the opinion that the

contention of the counsel for the respondent is not correct and the argument as

raised by him of a later document prevailing in fact goes against him. This is

for the reason that the counsel for the petitioner has drawn my attention to the

Letter of Intent dated 25.7.1994 (subsequent in point of time to be letter dated

28.7.1993) in the present case and the para 5 of the said letter reads as under:

OMP No.5/1999 Page 6 " The location where the ash is to be disposed off initially has already been identified to you at Sector-24, Rohini Phase-III at the land earmarked for DESU 66 Kv S/Stn. Other locations for disposal of ash shall be indicated whenever required during the course of execution."

5. The aforesaid para 5 of the Letter of Intent and admittedly which has

been acted upon by the respondent/contractor, and which is chronologically the

last of the contractual documents, and thereby the same gets priority in terms of

the earlier documents more so because the Letter of Intent is the final document

which has been acted upon. Consequently this Letter of Intent clearly

supersedes the earlier letter dated 28.7.1993 which talks of three sites of Vasant

Kunj, Dheerpur and the Shalimarbagh. Para 5 of the Letter of Intent does not

refer to any of the three sites stated in the letter dated 28.7.1993 and in fact

refers to a different and only one site at Sector-24, Rohini and at which site in

fact the entire dumping during the performance of the contract was done by the

contractor/respondent. Further, this paragraph makes it clear that other

locations for disposal of ash shall be indicated whenever required during the

course of the execution and which last line of para 5 has no limitation with

regard to any distance.

I am therefore of the opinion that Claim No.5 as awarded by the

Arbitrator for higher lead/distance is clearly against the contractual provisions

and is bound to be set aside under Section 34 of the Arbitration and Conciliation

Act, 1996 and the reasons given by me while deciding OMP 279/1998 also

OMP No.5/1999 Page 7 additionally apply to the facts of the present case in addition to the reasoning

given in the paras 4 and 5 just above.

6. The next objection which was raised, was, with respect to Claim

No.3. For this claim the Arbitrator awarded idling charges/damages for a period

of 58 days from 1.11.1994 to 27.12.1994. This claim was awarded on the

ground that the contract, though stood expired on 31.10.1994 i.e. after the

stipulated period of 90 days, but, since the respondent/contractor had requested

for an extension of 27 days before the expiry and extension was granted only

later on, viz on 23.12.1994 and whereby the contract was extended from

28.12.1994 to 7.2.1995, consequently, for the period between 1.11.1994 to

27.12.1994 the contractor/respondent could not demobilise his men and material

and therefore had to incur expenses for which the contractor has been held

entitled to be compensated.

7. The counsel for the objector has drawn my attention to a letter dated

16.11.1994 (Ex.P40/1) and in which the objector has clearly stated that the

mobilisation would not be at the risk of the contractor and not of the Objector.

The relevant portion of this aforesaid letter is as under:

" Letter dated 7.11.94:

You have stated that in pursuance of this office letter dt. 31.10.94 you are keeping your vehicles, machinery and staff/labour idle w.e.f. 1.11.94 at DESU‟s risk & cost. In the referred letter we have already clarified that the

OMP No.5/1999 Page 8 matter regarding further renewal of the contract is under consideration on merit by the deptt., which is true as on the basis of your letter dt. 4.10.94 this office has forwarded your request for consideration of the competent authority for extension of the existing contract. However decision of the same is awaited. It is therefore in your own interest that you are keeping the mobilization ready and it can not be at DESU's risk and cost."

8. To buttress his argument of the wrong awarding of Claim No.3 the

counsel for the objector has also drawn my attention to the Award with respect

to the Claim No.2 and under which claim the Arbitrator has ordered for refund

of the security deposit exactly on the totally opposite basis that there is no

extension of the contract but in fact it was a new contract. This finding of the

Arbitrator with respect to claim No.2 is as under:

" It is amply clear from the documents filed by the Respondents that their counter claim is based on the quantum of work increased independent of the original allocation of 1.5 lac Cum. Thus, in so far as the quantity of 1.5 lac Cum is concerned the Respondents have no grouse and they did not undertake execution of this part of the work on risk and cost basis. It can thus be inferred that the matter with regard to transportation of 1.5 lac Cum of ash is finally closed by the Respondents and the award of additional quantum of work was for all purposes a new Contract. I have also not come across any clause in the Agreement which authorises the Respondents to grant extension of time to the Claimants. However, since the claimants had applied for extension of time vide their letter dt. 4.10.1994 (P-24) and the Respondents had agreed to grant the extension clause. The „extension‟, however, as the word implies, has to be in continuity of the original period and there can not be any time gap between the stipulation date of completion and the date from which extension has to run. In the instant case, not only there is a big gap of 58 days between the stipulated date of completion (31.10.94) and the date from which extension was to run (28.12.94) but the intention if clear from the fact that while granting extension vide letter dt. 23.12.94 (P-43) fresh dates of commencement (28.12.94) and completion (7.2.95) were stipulated which implied that a new contract was sought to be created between the parties. Technically speaking, in all Engineering Organisations the extension of time invariably and without exception granted from the stipulated date of completion without leaving any time gap in between. By leaving a time gap of 58 days in between, the Respondents have clearly expressed their new contract. In view of these facts, the termination of the original contract and forfeiture of security deposit and

OMP No.5/1999 Page 9 earnest money for any alleged lapse in respect of the new contract was not justified. I, therefore, award a sum of Rs.81,277/- in favour of the claimants on this account."

The counsel for the objector therefore contended that once as per the

above reasoning it is held that there is a new contract therefore there is no

question holding subsequently under Claim No.3 an opposite finding of

extension of an existing contract being that therefore there was a gap of 58 days

from 1.11.1994 to 28.12.1994 on the basis that an existing contract was

extended. The counsel for the objector has also drawn my attention to the

extension letter dated 23.12.1994(Ex.P43/1) and para 2 of the said letter reads

as under:

"2. The work shall have to be start-----within six days of issue of this letter. Accordingly, the date of start and completion shall be 28.12.94 and 7.2.95 respectively."

According to the counsel for the Objector the fact the word „start‟ is used

clearly shows that a new contract had come into existence and there was no

extension of any existing contract.

9. I agree with the contention of the counsel for the objector because having

held, while dealing with claim No.2, that there is no extension of the contract

and that there was a new contract for transportation of the balance amount of

fly ash which was not lifted and remained the balance quantity under the first

contract, and for which subsequent transportation work, there was a specific

OMP No.5/1999 Page 10 date of start of work and also a specific date of completion and thus clearly

there is a new contract w.e.f. 28.12.1994 and the Arbitrator so has wrongly held

otherwise. Therefore, the Arbitrator has committed an illegality and an apparent

perversity while dealing to the contrary as regards the Claim No.3 by holding

that there is only an extension and not a fresh contract. The two inconsistent

findings are therefore clearly a perversity and the Award in this regard is

accordingly illegal and therefore set aside. I may only add that it has never been

the case of the respondent/contractor that the balance amount of unlifted fly ash

viz 63 thousand cubic meters out of the original contracted quantity of 1.5 lacs

cubic meters (only 87 thousand cubic meters was lifted leaving the balance of

63 thousand cubic meters) was on account of any default on the part of the

objector. In this view of the matter, this objection to claim No.3 is also

accepted and Award allowing claim no.3 is accordingly set aside.

10. Finally, that leaves me with regard to the issue of the rate of

interest. The Arbitrator has awarded interest at the rate of 18% per annum. I

may note that the Supreme Court in the line of recent judgments reported as

Rajendra Construction Co. v. Maharashtra Housing & Area Development

Authority and others, 2005 (6) SCC 678, McDermott International Inc. v.

Burn Standard Co. Ltd. and others, 2006 (11) SCC 181, Rajasthan State Road

Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700 & Krishna

OMP No.5/1999 Page 11 Bhagya Jala Nigam Ltd. v. G.Harischandra, 2007 (2) SCC 720 and State of

Rajasthan Vs. Ferro Concrete Pvt. Ltd. (2009) 3 Arb.LR 140 (SC) has held

that in view of the changed economic scenario and the consistent fall in the rates

of interest, the courts ought to take note of the same and must necessarily

reduce the interest which is granted under the Award. Accordingly, being

bound by the mandate of the said Supreme Court judgments, I feel in the

present facts and circumstances, interest at the rate of 9% per annum simple will

serve the ends of justice. Thus wherever the interest of 18% appears in the

Award the same shall be read as 9% p.a simple. I am not changing the period

for which interest has been granted by the Award.

11. With the aforesaid observations, this petition under Section 34 is

disposed of by setting aside the Award with respect to Claim Nos. 3 and 5 and

sustaining the remaining claims as awarded. Rate of interest also shall be @ 9%

per annum simple as already held by me above. Parties are left to bear their

own costs.

                                                       VALMIKI J.MEHTA, J


December 22, 2009
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OMP No.5/1999                                                              Page 12