International Airport Authority ... vs M/S. M.L. Dalmiya & Co. Ltd.
2009 Latest Caselaw 895 Del

IN THE HIGH COURT OF DELHI AT NEW DELHI

       FAO (OS) 287 of 1994 & CM APPL Nos. 3799/94,
       1335/95, 186/95, 386/2002

                             Date of decision : March 19, 2009

INTERNATIONAL AIRPORT AUTHORITY
OF INDIA                   ..... APPELLANT
                 Through: Mr. J.P. Sengh, Senior
                 Advocate with Mr. Krishan Kumar,
                 Mr. Mukesh Kumar and Mr. Sumit,
                 Advocates

                    versus

M/S. M.L. DALMIYA & CO. LTD        ..... RESPONDENT
                   Through: Mr. R.K. Watel, Advocate

CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE DR. JUSTICE S. MURALIDHAR

1.     Whether Reporters of local papers may be
        allowed to see the judgment?            No
2.     To be referred to the Reporter or not?   Yes
3.     Whether the judgment should be reported Yes
       in Digest?

                        JUDGMENT

19.03.2009

S. MURALIDHAR, J.

1. This appeal is directed against the impugned order dated 7 th

October 1994 passed by the learned Single Judge in Suit No.

1465 of 1991 and IA Nos. 8060 of 1991 and 296 of 1992.

2. The facts leading to the present appeal are that in December

1977, a global tender was invited by the Republic of Maldives

to upgrade the existing airport of Hulule Island. The Appellant,

International Airport Authority of India („IAAI‟), submitted its

tender to the Government of Maldives on 12 th December 1977.

On 28th February 1978 the Government of Maldives decided to

award the tender to the IAAI for a sum of US $1,07,43,881.92.

The site was handed over to the IAAI on 22nd March 1978. In

terms of the contract the site installation including mobilization

of plant, machinery and material, tools etc. and also

construction of temporary structures had to be completed by

21st July 1978 so that the entire work could commence on the

very next date i.e. 22nd July 1978. In terms of the agreed time

schedule the work had to be completed by 21st December 1979.

3. On 8th March 1978 a back to back agreement was entered

into between IAAI and the Respondent M/s. M.L. Dalmiya &

Co. Limited (MLD) whereunder MLD was to be the

"Construction Associate" to IAAI and had to execute the whole

work for a total sum of US $ 96,82,931.92. On 2nd May 1979 a

sum of US $ 13,43,367.39 was paid by the Appellant IAAI to

MLD as mobilization advance. A sum of US $ 1,79,500 was

paid to MLD as bridging finance. It is the case of MLD that the

fact that it was to execute the whole work on behalf of IAAI

was not disclosed by IAAI to the Government of Maldives. In

terms of the contract MLD was to receive 93.11% of each

running bill and final bill raised by IAAI to the Government of

Maldives. The work of construction of the terminal building

was also awarded to MLD on 21st August 1998. This had to

commence within 30 days of the delivery of the site and be

completed within 24 months. The site was delivered on 22nd

March 1978 and the work had to therefore be completed by 21 st

April 1980.

4. According to MLD out of the mobilisation advance of US $

16,11,559 received by IAAI from the Government of Maldives,

US $ 11,92,801 was given by IAAI to MLD on 2nd June 1978

and US $1,37,000 on 6th September 1978. The bridging finance

of US $ 8,00,000 received by IAAI from the Government of

Maldives was not released to MLD. However, admittedly IAAI

incurred an expenditure of US $ 1,99,956 on behalf of MLD.

The site mobilisation, barring a few pieces of machinery, could

be completed by MLD only on 31st October 1978. According to

IAAI the delay in releasing the mobilisation advance to MLD

was on account of MLD‟s failure to obtain ECGC cover. On the

other hand the case of MLD was that IAAI had to obtain ECGC

cover in a manner that advantage of the same could be taken by

MLD. Further according to MLD although it supplied the

sample of the concrete work to the IAAI in April 1978, six

weeks before the starting of the work, the approval of IAAI was

conveyed to it only on 11th October 1978. The approval for the

Bitumen was not given even up to 10th January 1979, the date

on which the contract was terminated by IAAI. The causeway

for facilitating off loading of machinery brought by ships was

not provided by the Government of Maldives even till the

termination of the contract. As a result ships carrying

machinery for the project had to be anchored five miles away

from the shore and the cargo had to be loaded on to smaller

crafts to be brought ashore. This severely affected the progress

of the work. IAAI had to arrange, at the instance of MLD, to

airlift some of the machinery for fear of the contract being

terminated by the Government of Maldives on account of the

time overrun. Work on the runway to be completed in three

phases made little progress. The resident engineer furnished to

MLD the revised design of the first phase of the runway only on

16th August 1978.

5. On account of the above disputes between the parties, the

agreement was terminated by the IAAI on 10th January 1979.

The project was thereafter completed by the IAAI on 30th

September 1981 at the risk and cost of the Respondent.

Contending that it had incurred a loss of Rs.63,14,541.02 the

IAAI raised a claim in that sum against the Respondent. IAAI

further claimed an amount of US $ 8,55,903.80 being the

balance of the sum advanced to MLD for purchase of plant and

machinery. IAAI filed an application being Suit No.122-A of

1979 in this Court under Section 20 of the Arbitration Act 1940

(„Act‟). By an order dated 18th March 1982, this Court directed

IAAI and MLD to appoint one Arbitrator each. IAAI appointed

Sri V.R Vaish and MLD appointed Shri M.S.Iyengar as

Arbitrator. The said Arbitrators appointed Shri K.B.Asthana, a

retired Chief Justice of the High Court of Allahabad as Umpire.

While IAAI made 8 heads of claims, MLD made 16 heads of

claims before the Arbitrators. The Arbitrators could not reach

an agreement between themselves in respect of the Award and

the matter was referred by them to the Umpire. An Award was

given by the Umpire on 15th April 1991. MLD‟s claims were

accepted in part whereas those of the IAAI were rejected.

6. MLD then filed a Suit No. 1465 of 1991 in this Court under

Section 14 of the Act in which pursuant to the notice issued the

learned Umpire filed the Award in Court. Both parties filed

their objections to the Award and the following issues were

framed by the learned Single Judge:

(i) Whether the Award is liable to be set aside or modified in view of the objections filed by the parties.

(ii) Relief.

By the impugned order dated 7th October 1994 the learned

Single Judge dismissed the objections filed by the IAAI and

directed the Award to be made rule of the Court. Aggrieved by

the impugned order of the learned Single Judge the IAAI has

filed the present appeal.

7. We have heard submissions of Mr. J.P. Sengh, learned Senior

counsel appearing for the Appellant and Mr. R.K. Watel,

learned counsel appearing for the Respondent.

8. One of the objections raised by IAAI is that the reasons given

by MLD for the delay, which were accepted by the Umpire,

were unsustainable as these were not supported by the

documents on record. According to the Appellant, the finding in

this regard is either based on no evidence or is an error apparent

on the face of the Award.

9. The above submissions have been considered by this Court.

It is noticed that the dredging channel that had to be provided

by the Government of Maldives was in fact provided only in

April 1980, after the termination of the contract. The delay in

this regard was not due to the fault of MLD but that of the

Government of Maldives. Therefore, it is not possible to take

the view that the Umpire had committed an illegality in coming

into conclusion that the delay was not on account of MLD. The

finding of the Umpire is based on a correct appreciation of the

documents on record. This court concurs with the learned

Single Judge that there is no provision in the contract which

indicates that time is the essence of the contract. This Court

further agrees that even if there was any delay attributable to

MLD in the execution of the contract, that was not a justifiable

ground for the IAAI to terminate the contract.

10. The next ground urged by the IAAI concerned the release of

the mobilization advance obtained by MLD without obtaining

ECGC cover. The learned Single Judge held that the Umpire

has dealt with this aspect in detail by referring to the relevant

documents and held that there was no ground made to interfere

with the said finding. We are also unable to find any perversity

in the impugned order of the learned Single Judge on this aspect

that calls for interference.

11. Mr. Sengh advanced extensive arguments as regards MLD‟s

Claims 2, 4, 6 and 7. Claim No.2 was for a sum of US $ 58,255

being the cost of furniture, jeeps, equipments etc., which was

purchased by MLD as per the orders of IAAI for which no

payment was made by the latter to MLD. It was urged by IAAI

that some of the items of claim covered by Claim No.2 are

already covered in Claim No.1. This was disputed by Mr. R. K.

Watel, learned counsel for the Respondent MLD who pointed

out that such a contention was never raised by IAAI before the

Arbitrators. According to him factually also this contention is

untenable since Claim No.1 was restricted to works executed

and materials supplied for construction whereas Claim No.2

covers 15 items directed by IAAI to be purchased by MLD

towards building a lab and an office. He referred to the original

purchase vouchers in support of the 15 items of furniture which

MLD placed in support of its Claim No.2 before the Arbitrators

and for which no evidence in rebuttal was led by IAAI.

12. There appears to be merit in the submission of the learned

counsel for the Respondent MLD. This Court finds that in their

reply to MLD‟s Claim No.2, the IAAI took the following stand

before the learned Arbitrators and Umpire:

"The claimant further submits that in so far as Respondent‟s Claim No.2 is concerned, the same relates to the payment of certain items alleged to have been ordered by the Claimant for purchase on their behalf. The Respondents have furnished details of this claim at Pages 91 and 92 - Annexure „B‟ of the statement of facts. The Claimants do not dispute the same in so far as all the 15 items and the quantity of each item as considered by the Respondents in the said Annexure 'B'. The dispute is only regarding the valuation for which the Claimants will make separate submissions." (emphasis supplied)

Clearly therefore the issue was not in respect of „duplication‟ of

claims but their valuation. The learned Umpire has at internal

page 44 of the Award held that MLD‟s Claims 2,5,6 and 7

"stand independently on their own merits as decided hereafter."

The Single Judge has dealt with this contention in a great detail

and has concurred with the view taken by the Umpire. Having

considered the documents on record, we are not inclined to

interfere with the concurrent findings of the learned Umpire and

the learned Single Judge.

13. Arguments were next addressed in respect of MLD‟s Claim

No. 4 in the sum of US $ 85,29,300 being the alleged loss/

damage suffered by MLD with regard to the non-return of the

MLD‟s machinery, tools, plant etc. which were owned by and

brought to the site by MLD. Claim No.4 was later limited by

MLD to US $ 62,45,1000 by restricting the hire charges (for 24

of the 47 items) from 28th April 1980, which was the stipulated

date of completion, till 10th January 1984. Under Claim No.7,

MLD had claimed US $25 lakhs being the depreciated value of

the 47 items of plant and machinery owned by it and brought to

the site but not returned by the IAAI inclusive of interest @18%

per annum from 22nd April 1980 till 21st October 1988. The

learned Umpire allowed Claim No.4 to the extent of awarding

hire charges for 24 items for the period 1 st October 1981 till 1st

January 1984 treating the same as non-operational period and at

50% of the contract rates, in the sum of US $4,78,467. As

regards Claim No.7, he awarded MLD a sum of US $5,94,162.

The contention of the learned Senior counsel for the IAAI was

that the Umpire had allowed hire charges as well as full cost for

the same items under Claim No.7 and therefore MLD was being

paid much more than what it is entitled to. Learned counsel for

the Respondent on the other hand submitted that IAAI never

informed MLD that it was appropriating the machinery and this

was why MLD asked for damages in the form of hire charges

and return of machinery. In the alternative it claimed damages

and the depreciated cost of the machinery on the date of filing

its claims.

14. To this Court it appears that the reasons given by the

Umpire for partly allowing the Claims 4 and 7 are cogent.

During the period the contract was in force, and till its

subsequent completion by the IAAI, the machinery was under

IAAI‟s possession and not in control of MLD although

admittedly they belonged to MLD. Award of the 50% of the

contractual hire charges for 24 of the 47 items and that too

restricted to the non-operational period as damages cannot be

said to be illegal or unreasonable. Likewise the award of the

depreciated value of the said machinery and plant under Claim

7 cannot be said to be a duplication as they pertain to the fact of

non-return of the machinery even after the completion of the

contract period. The conclusion of the learned Single Judge

accepting the award in this regard cannot therefore be faulted.

15. MLD‟s Claim No.6 was for the depreciated value of the

temporary structures raised by it for various site offices,

quarters etc. and for the depreciated value of the furniture used

therein. The claim was reduced by MLD from US $ 2,20,687 to

US $ 1,76,814. The umpire awarded only the salvage value of

the structure and the depreciated value of the furniture used

therein. The Umpire has appreciated the evidence produced by

MLD in the form of documents and arrived at the said

conclusions. Nothing has been shown by the learned Senior

counsel for the Appellant to persuade this Court to hold that the

said conclusion is erroneous or perverse or contrary to the

record.

16. For the aforementioned reasons, this Court is unable to find

any perversity as regards the concurrent findings of both the

learned Umpire as well as the learned Single Judge. The appeal

is, accordingly, dismissed. The pending applications also stand

dismissed.

S. MURALIDHAR, J.

CHIEF JUSTICE

MARCH 19, 2009 rk