M/S. Gangadeep Builders Pvt. Ltd. vs M/S. Mahanagar Telephone Nigam ...
2009 Latest Caselaw 2038 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                     Date of Decision : 14.05.2009



%            I.A. No. 1283/2000 in CS(OS) No. 1091A/1999


       M/S. GANGADEEP BUILDERS PVT. LTD.          ..... Petitioner
                      Through:  Mr. Rohit Puri, Advocate

                      versus


       M/S. MAHANAGAR TELEPHONE NIGAM LTD.     ..... Respondent
                    Through:  Mr. Harish Malhotra, Sr. Advocate
                              with Mr. Dipesh Sharma, Advocate.



       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI

       1. Whether the Reporters of local papers may
          be allowed to see the judgment?                   No

       2. To be referred to Reporter or not?                No

       3. Whether the judgment should be reported
          in the Digest?                                    No


VIPIN SANGHI, J. (Oral)

1. These are objections preferred by the respondent MTNL to the

award passed by the learned Arbitrator Sh. N.K. Singhal, who was

appointed as the sole Arbitrator to adjudicate the claims and counter-

claims of the petitioner/claimant and respondent/non-claimant in

relation to the disputes which arose out of contract for construction of

Local Duct Network in Karol Bagh Exchange area bearing Contract

No.04/22/90. The learned Arbitrator was appointed by the Chief

General Manger, Delhi Telephones vide letter dated 20.05.1997. I may

notice at this stage that the arbitration agreement was invoked by the

petitioner on 01.12.1993 calling upon the respondent to appoint an

Arbitrator. Thereafter, the petitioner preferred Suit No.AA 62/96 under

Section 20 of the Arbitration and Conciliation Act, 1940 in this court on

17.05.1996. The said petition was disposed of by this court on

22.04.1997 directing the respondent to appoint the sole Arbitrator in

terms of the contract. It appears that only thereafter on 20.05.1997,

the Chief General Manager appointed Mr. N.K. Singhal as the sole

Arbitrator. By virtue of Section 21 of the Arbitration and Conciliation

Act 1996, the arbitral proceedings in respect of the claims of the

petitioner commenced with the request for them to be referred to

arbitration being made and received in December, 1993, i.e. prior to

the coming into force of the 1996 Act. Consequently, the arbitration

award in question is governed by the Arbitration Act 1940. I may also

notice that the parties have also proceeded on the foundation that the

arbitration proceedings and the award are governed by the provisions

of the Arbitration Act 1940. Consequently, the respondent has

preferred the objections under Section 5, 16, 30, 33 of the Arbitration

Act, 1940. The same have been filed on 11.01.2000 though the award

was made by the Arbitrator on 01.05.1999.

2. Mr. Harish Malhotra, learned senior counsel for the

respondent/objector has argued specific objections in relation to Claim

Nos.1, 2, 3, 6, 9, 12 and 14 and the award made on counter-claim Nos.

1, 2 and 3. Claim No. 1 was made by the petitioner/claimant on

account of escalation in the price of PVC Pipes. Before the sole

Arbitrator the said Claim was made for Rs.20,63,255/-. The amount

was revised to Rs.11,35,151/- before the Arbitrator. The learned

Arbitrator has allowed this claim for Rs.11,35,151/-.

3. The basis for making this claim was that the respondent MTNL

had not allowed escalation in PVC Pipes prices beyond the extended

date of completion on the plea that the contractor had failed to

complete the work.

4. The learned Arbitrator returned the finding that permission for

road cutting was not available from MCD in such a manner that work

could be continuously carried out. In fact, the contractor continued to

execute the work even when permission was not available. This

caused losses by way of material and T&P being taken away and the

labour of the contractor being disbanded by the MCD staff. The

Arbitrator held that the period of completion of eight months was fixed

by not taken into consideration the possibility of the road cutting

permission not being available.

5. The learned Arbitrator made his award by taking into

consideration para 8 of Clause 70 on page 120 of the agreement which

reads as follows:

"The escalation of price on PVC pipe is applicable only upto the original date of completion as per stipulation in the contract. However, if the delay in completion is beyond

the control of the contractor and works are agreed to be executed beyond the stipulated completion period, such escalation / de- escalation is permissible."

6. It is also seen that so far as the quantity and the rates of PVC

pipes are concerned, the learned Arbitrator adopted the quantity and

rate as verified by the respondent in its letter dated 15.04.1999.

7. There is no objection raised by the respondent to the

recording of these facts and figures. The only submission of Mr.

Malhotra, learned senior counsel for the objector was that for the

period after extension of time had expired, and no further extension

had been granted, no escalation could be awarded. He also submitted

that sales tax and transportation was not to be paid since it was

included in the price. He further submits that the learned Arbitrator

held that the contractor was not to blame for delay as road cutting

permission was not available. He submits that at the same time, even

the MTNL was not responsible for the said permission not being

granted by MCD and, therefore, the MTNL could not be saddled with

the escalation costs.

8. In my view, there is no merit in these objections of the

respondent. On a reading of the award, the period for which the

escalation has been awarded is not discernible. The award has been

made under Arbitration Act 1940 and there was no contractual

requirement that the award had to contain reasons. Even otherwise,

since the petitioner/claimant had continued to execute the works even

beyond the period for which extension was granted, the claimant

would be entitled to claim escalation since it was established before

the learned Arbitrator that the petitioner/claimant was not responsible

for delay in the execution of the work. So far as the submission with

regard to the inclusion of sales tax and transportation in the claim for

escalation is concerned, I see no merit in the same as the quantity and

rates for computation of escalation were verified by the respondent.

There is nothing to suggest that the escalation awarded is inclusive of

sales tax and transportation.

9. Merely because the respondent consider itself not responsible

for the road cutting permission not being available, it does not follow

that the contractor could have been asked to bear, or even share the

burden of escalation on account of such permission not being

available. Admittedly, it was for the respondent to arrange for, and

obtain the necessary permission for road cutting from the MCD. If the

same was not so arranged, the burden would fall on the

employer/respondent and not on the contractor. Consequently, I reject

the objections to the award on Claim No.1.

10. So far as Claim No. 2 is concerned, the same was made for Rs.

4,55,000/- for work done but not paid. The amount was reduced to Rs.

3,58,206/- vide letter dated 09.11.1998 before the Arbitrator. The

finding of the learned Arbitrator on this Claim is a pure finding of fact.

He has held that the work had been carried out as per the directions of

the respondent and he has allowed the same partly for Rs. 45,000/-. In

my view, there is no merit in the objection to this particular Claim and

no specific objection has been raised by the respondent.

11. Claim No. 3 was made by the claimant/petitioner for

Rs.8,11,882/- towards refund of retention money lying with the

respondent. This included retention money in cash as well as in the

form of bank guarantees. The only justification given by the

respondent for retaining the retention money was that the work had

not been completed and tested. The learned Arbitrator held that after

the abandonment of the work, since 1993 no effort was made by the

respondent to get the work completed. The cost adjustment for

deficiencies in work has been separately discussed in Claim No. 12. In

these circumstances the learned Arbitrator allowed the refund of

Rs.5,79,703.80/- which had been deducted in cash, and released by

bank guarantees of Rs.2,32,178.20/-.

12. Mr. Malhotra argued that the learned Arbitrator had wrongly

concluded that no action has been taken by the respondent to get the

work completed. However, he has not been able to point out from the

record as to how the said finding could be said to be perverse or

contrary to the record. Since the work had to be abandoned as the

road cutting permission was not available, in any event, there could be

no justification for withholding the retention money of the claimant. I

find no error in the award made on Claim No.3. The objection of the

respondent is, therefore, rejected.

13. In respect of Claim No.6, which was made for Rs.22,95,000/-

on account of loss of idle staff and establishment, the learned

Arbitrator awarded the amount of Rs.3,52,550/-. The learned

Arbitrator restricted the Claim on the ground that it was well within the

knowledge of the contractor that road cutting permission is not within

the hands of the respondent. Further, work had been stopped due to

non-payment of escalation charges.

14. The submission of Mr. Malhotra is that the learned Arbitrator

has not given any reasons for arriving at the amount of Rs.3,52,550/-

awarded by him on Claim No.6. As aforesaid, there was no obligation

for the Arbitrator to give a reasoned award. It is not open to the court

to go behind the award and to enquire into the reasons which may

have prevailed upon the Arbitrator in making his award. Consequently,

I reject the objection made by the respondent to the Claim No. 6.

Same is the position with regard to Claim No. 7 which had been made

by the claimant for Rs. 66,51,500/- towards hiring charges/depreciation

of machinery, and had been allowed by the Arbitrator to the extent of

Rs. 1,00,000/-.

15. Claim No. 9 had been made by the claimant for Rs. 5,00,000/-

as bank charges/commission for extending bank guarantees beyond

stipulated period. The Claim had been revised to Rs. 91,984/- vide

letter dated 09.11.1998. The learned Arbitrator hold that since the

work had not been completed due to various reasons beyond the

control of both the parties, the actual expenditure incurred by the

claimant should have been reimbursed. Consequently, the Claim was

allowed for Rs. 91,984/- and the respondent was also directed to

release the expired bank guarantee within 30 days from the

publication of the award. I find no merit in the objection raised to this

part of the award on account of the extension of the contract. The

claimant could not have been made to suffer towards bank

charges/commission for extending the validity of the bank guarantee.

The objection to the award on Claim No.9 is, therefore, rejected.

16. So far as Claim No. 12 is concerned, I find that no objection

has been raised in the objection petition to the award on Claim No.12.

Consequently, I do not consider it necessary to go into the objection

argued by Mr. Malhotra.

17. The next objection raised by Mr. Malhotra is to the award

made in Claim No. 14 which was the claim for interest at the rate of

24% per annum. The learned Arbitrator awarded simple Interest at the

rate of 16.5% on the amount of Rs. 23,64,388.80/- which is the

aggregate of amount awarded on Claim Nos. 1, 2, 3, 6, 7, 9 and 12

w.e.f. 01.12.1993 to 30.04.1999 (the award was made on 01.05.1999).

The amount of interest for the aforesaid period has been worked out at

Rs. 21,13,171.20/-. Further interest at the rate of 15 per cent has been

allowed on the amount of Rs. 45,27,560/- which is the aggregate of the

principle awarded amount of Rs. 23,64,388.80/- and the interest

thereon calculated up to 30.04.1999. The Arbitrator has awarded

interest on the aforesaid aggregate amount at the rate of 15% per

annum in case the payment is not made within 60 days from the date

of publication of the award till payment.

18. The submission of Mr. Malhotra is that the Arbitrator has, in

the aforesaid manner, awarded compound interest, inasmuch as, on

the amount of Rs.21,13,171.20/- which was the component of interest

for the period of 01.12.1993 to 30.04.1999 further interest has been

awarded at the rate of 15% per annum. He also submits that the rate

of interest awarded by the learned Arbitrator is on the higher side.

19. Having considered the submissions of the parties, I am of the

view that the learned Arbitrator could not have awarded interest on

interest. There was no agreement between the parties for award of

interest to the petitioner/claimant. Even otherwise, I find that the rate

of interest awarded is on the higher side considering that in such like

awards, the interest at the rate of 9-12 per cent has been maintained

by the courts. Consequently, I modify the award on Claim No. 14. The

rate of interest for all the periods is reduced from 16.5% and 15% to

9% per annum. It is further directed that on the amount worked out as

interest for the period 01.12.1993 to 30.04.1993, on the principle

awarded amount or Rs.23,64,388.80/-, no further interest shall accrue

and interest shall continue to run only on the principle liability of

Rs.23,64,388.80/- at the aforesaid rate of 9% per annum till realization.

20. Mr. Malhotra has then submitted that the award on Counter-

claim No.1 is erroneous. The MTNL had made the said Claim to

recover the road restoration charges paid by the MTNL from the

petitioner claimant. The said claim was rejected by holding that there

is no such provision in the contract for the contractor to bear such

charges. I find no error in the award since no clause of the contract

has been placed before me which fastens the liability towards payment

of road restoration charges on the contractor. Objection to the award

on Counter-claim No.. 1 is, therefore, rejected.

21. In respect of Counter-claim No.. 2, which was made for

Rs.1,17,532/- towards repair charges payable to MCD for 12" dia water

pipeline, I find that the claimant had agreed to pay the amount as per

actual expenditure incurred by MTNL towards the said repair. It was

for the respondent MTNL to substantiate the said claim to claim

reimbursement. However, it appears that was not done. In view of the

aforesaid, there possibly cannot be any objection to the award made

by the Arbitrator. The award on Counter-claim no.2 is therefore

rejected.

22. Counter-claim No. 3 was made towards liquidated damages

towards 10% of the contract value. The learned Arbitrator has rejected

the same and, in my view, rightly so by holding that the work had been

delayed beyond the control of both the parties and, therefore, levy of

such compensation was not justified. Only in the event of it being

established that the delay in the execution of the work was attributable

to the claimant contractor, liquidated damages could have been

imposed under the contract. Since that is not the case, in my view, no

error can be found in the award made by the learned Arbitrator.

23. For the aforesaid reasons the award made by the learned

Arbitrator Mr. N. K. Singhal, dated 01.05.1999 is made "Rule" of the

court subject to the modification made as aforesaid in relation to the

award of interest under Claim No. 14. Parties are left to bear their

respective costs.

VIPIN SANGHI, J.

MAY 14, 2009 dp