National Highway Authority Of ... vs M/S. Itd Cementation India Ltd.
2010 Latest Caselaw 380 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          OMP No. 27/2010

                                                          22nd January, 2010

NATIONAL HIGHWAY AUTHORITY OF INDIA             ...Petitioner
                Through: Mr. Vikas Goel, Advocate and
                         Mr. Abhey Joshi, Advocate.

              VERSUS

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

Through:

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)

VALMIKI J.MEHTA, J

1. By means of this petition under Section 34 of the Arbitration and

Conciliation Act, 1996 the petitioner challenges the Award of the three member

Arbitral Tribunal consisting of one retired Judge of this Court and two Engineer

Members. The challenge is with respect to the award of Claim No.1, Claim

No.2.2, Claim No. 4 and Claim No.2.5 for interest.

OMP 27/2010 Page 1

2. In my opinion, notice can be issued only with regard to Claim

No.2.2 and so far as the challenge to Claim No.1, Claim No.4 and Claim No.2.5

are concerned, the same stands dismissed for the reasons given hereinafter.

3. Claim No.1 of the contractor/respondent was the claim towards higher

taxes paid by it to the Government of Maharashtra for Works Contract Tax.

The Arbitration Tribunal has referred to the certificates filed by the tax

authorities which establish the payment of the Works Contract Tax by the

respondent with respect to this specific project. The Arbitrators have also noted

that the report of the Chartered Accountant of the respondent was perused by

the Chartered Accountant of the petitioner, who also visited the

respondent's/contractor's office and examined all the records and when certain

doubts were expressed, these aspects were cross verified by the Arbitration

Tribunal and this is reflected from para 5.4.3.16 which reads as under:

              "5.4.3.16 The         Claimant's    in-house    Accountant
                                                   th

appeared before the Tribunal on 12 June 2008 and with help of original challans and certificates showed the AT and the Respondents that separate documents for each instalment of WCT paid by the Claimant were available and clearly identifiable from the records."

4. In view of the aforesaid facts, it is quite clear that the

respondent/contractor, in fact, paid the higher/additional Works Contract Tax

of 1% and for which not only the necessary certificates of the tax authorities

relatable to the subject project were filed, but also the Arbitration Tribunal itself

examined the record further with regard to the claim of actual payment of the

OMP 27/2010 Page 2 Works Contract Tax. The Arbitration Tribunal after examining all the

documents has arrived at a finding of fact in view of the contractual clauses

which entitles the contractor to higher payment of duty which is paid by it

during the progress of work. The Arbitration Tribunal has accordingly awarded

this claim. In my opinion, in view of the aforesaid, there is absolutely no

illegality or perversity of any nature in the Award so as to enable this Court to

interfere with the finding of the Arbitration Tribunal. In this view of the matter,

objection to this part of the Award relating to Claim No.1 stands dismissed.

5. The next claim which has been urged to have been wrongly

decided by the Arbitration Tribunal is Claim No.4. This claim was made by the

respondent before the Arbitration Tribunal for additional cost and losses caused

on account of delay and disruption of the works.

6. It is undisputed that there are Clauses in the contract which entitle

the respondent for higher cost/losses caused to the contractor and which Clauses

are Clause 6.4, Clause 12.2 and Clause 44.1. In terms of these Clauses, the

Arbitrators have arrived at a finding of facts that the respondent duly notified

the Engineer and employer of various events causing delay in its

correspondences and monthly progress reports. This has been reproduced by

the Arbitrators in para 8.3.1.10 of the Award. The Arbitration Tribunal has in

view of the facts of the case after detailed examination and reference to various

detailed facts arrived at a finding of fact that there has in fact been caused delay

OMP 27/2010 Page 3 to the project on account of the petitioner herein. These conclusions are

contained in para 8.3.1.63 of the Award which are as under:

"8.3.1.63 From careful examination of all the data, documents, records and rival contentions of the parties the AT has come to following conclusions:-

(a) The Works have been delayed due to reasons not attributable to the Claimant for which he was entitled to fair and reasonable Extension of Time and cost compensation in terms of the Contract Provisions.

(b) The Claimant did initially demonstrate his capacity to achieve/exceed the efficiency levels committed in the Contract and that required for completing the Works, as per Bonus Program and did accelerate the progress of work initially to achieve accelerated completion of the Works to avail the Bonus and subsequently to recover the delays which were not attributable to him and for which he was entitled to Extension of Time and additional cost.

(c) It is also observed that additional resources were partly deployed by the Claimant for additional works entrusted to the Contractor. (Approx 14 crores) and partly for the purpose of acceleration of works. It is also noticed that resources from July 2002 were increased though the quantum of earth work executed was much less as compared to the optimum out put of the machinery.

(d) The Respondent's Engineer did not determine the allowable Time for completion in terms of the Contract and insisted upon completing the Works within the original schedule.

(e) The Respondent has benefited from acceleration of the works by the Claimant."

7. After arriving at the aforesaid findings, the Arbitrators have

apportioned the claimed amounts on the basis of the material which was filed

before the Arbitrators. Mr. Vikas Goel, who very ably argued the case, urged

that there is no basis for the Arbitrators to award the claim at the particular

percentages i.e. 33%/40% in the chart given in para 8.3.1.64 of the Award. At

the first blush, this argument may appear attractive, however, it is settled law,

OMP 27/2010 Page 4 right from the judgment of Supreme Court in Mohd. Salamatullah Vs. State

of A.P, AIR 1977 SC 1481 & M/s A.T. Brijpal Singh & Bros. Vs. State of

Gujrat, AIR 1984 SC 1703 that once there are reasonable materials available

before the Arbitrators, then, Arbitrators are entitled to make further honest

guesswork on the basis of such materials and thereafter arrive at its findings

and conclusions more so because now in terms of Section 19 of the Arbitration

and Conciliation Act, 1996, the provisions of Code of Civil Procedure, 1908

and the Evidence Act, 1872 do not strict senso apply to arbitration proceedings.

During the course of hearing, I put it to the counsel for the petitioner that if the

Arbitration Tribunal which comprised of two Engineers and one retired Judge

of the Court, who have heard the arguments in detail and considered all the

aspects of the matter, including all the evidence filed, have given a particular

percentage, then, if this Court gives a different percentage, how would this

percentage, which this Court gives, would in any manner be better than the

percentage as given by the Arbitrators in para 8.3.1.64 of the Award.

Obviously, no convincing answer could be given because once the Arbitrators

give a particular basis, after duly considering all the relevant materials, no

challenge can be laid to the same. Before this Court interferes with an Award, it

is necessary that the Award is illegal or violative of the contractual provisions

or perverse. I do not find any perversity or illegality whatsoever in the

approach of the Arbitrators who have after examining in detail the entire record

made an honest guesstimate, which the Arbitrators were entitled to do. No

OMP 27/2010 Page 5 challenge, therefore, can be laid with respect to this Claim and objections

thereto are dismissed.

8. The last issue which was urged was with respect to the Award of

interest under Claim No.2.5. Once again, if we look at the grant of rates of

interest, the same may appear prima facie to be very high because interest is

granted @ 12% compounded monthly. However, each case has to be seen as

per its facts and circumstances. As per Section 31(7) of the Arbitration and

Conciliation Act, 1996, the Arbitration Tribunal shall consider the contract

between the parties with regard to the award of interest. It is not disputed that

this rate of interest is the contractual rate of interest, and which would have

been awarded to the contractor if the Engineer had certified the amount. Merely

because the Engineer does not think it fit to certify the amounts, and if the

amounts are in fact payable, and which is so held by the Arbitration Tribunal, I

do not think any defence can be validly raised to say that such rate of interest

should not be paid merely because the Engineer has failed to certify the same.

In fact, on the issue of contractual rate of interest, I put it to the counsel for the

petitioner that would the petitioner be also not entitled to such contractual rate

of interest from the respondent? To that the answer was obvious that the

petitioner also with respect to its claims would be entitled to such rate of

interest. If that be so, the scales of justice have to be kept even and both the

parties have to be governed by the same set of rules. In my opinion, therefore,

OMP 27/2010 Page 6 no challenge can be laid with respect to the Award of interest as per Claim No.

2.5.

9. In view of the above, so far as the objections to Claim Nos.1 ,4 and

2.5, the same are dismissed with costs of Rs.50,000/-.

10. So far as the challenge to Claim No.2.2 is concerned, I am of the

opinion that the counsel for the petitioner has been able to establish his case for

issuing of notice. This is because the claim was for Deemed Exports Benefit for

contracts above Rs.100 crores in terms of the EXIM policy of the Government.

The contention of the claimant/respondent was that when it submitted its bid in

terms of the EXIM policy, it was entitled to Deemed Exports Benefits and

which were subsequently withdrawn by the Government and consequently,

benefit of the Deemed Exports Benefits was claimed by the contractor. The

Arbitration Tribunal has referred to the provisions of the EXIM policy which

allows benefits of Deemed Exports only when the contract is over Rs.100

crores. The Arbitration Tribunal has given a finding that this contract was of

the value of Rs.5000 crores. I am very surprised with this finding of the

Arbitration Tribunal because the admitted value of the contract as awarded to

the respondent in the present case is only of Rs.95.97 crores. The Arbitration

Tribunal, in my opinion, has most illegally referred to the figure of Rs.5000

crores for the entire road project of national highway in Maharashtra but it is not

that this entire project has been awarded to the respondent herein so that it could

be said that the contract is of Rs.5,000 crores.

OMP 27/2010 Page 7 Accordingly, issue notice in this petition limited to the findings of

Claim No.2.2 on filing of process fee, both in the ordinary method as well as by

registered AD post, returnable before the Joint Registrar on 25 th February, 2010.

The Joint Registrar shall after completion of pleadings place the matter in the

Court for arguments on 4th May, 2010. The counsel for the petitioner to take

dasti notices for being served upon the Arbitration Tribunal so that the

arbitration record is filed in this Court. The concerned Arbitrator, who has the

arbitration record, is directed to give the record of this case to the counsel for

the petitioner in a sealed cover and who shall thereafter file such records in this

Court. The Joint Registrar to ensure compliance of the directions with regard to

filing of the record of the Arbitration in this Court so that the matter can be

taken up for arguments on the date fixed.

Dasti.

                                                      VALMIKI J.MEHTA, J


January 22, 2010
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OMP 27/2010                                                                   Page 8