M/S Ircon International Limited vs M/S Suresh Chandra & Ors.
2010 Latest Caselaw 443 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                OMP No.101/2003

                                                      27th January, 2010.


M/S IRCON INTERNATIONAL LIMITED                             ...Petitioner

                                 Through:        Mr. K.R.Gupta and Ms. Kiran
                                                 Dharam and Ms. Shilpa Bansal,
                                                 Advocates.

                                 VERSUS

M/S SURESH CHANDRA & ORS.                                          ...Respondents

                                 Through:        Mr. J.P.Gupta, 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?

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

    %                            JUDGMENT (ORAL)

    VALMIKI J.MEHTA, J

1. By this petition under Section 34 of the Arbitration and Conciliation Act,

1996 the petitioner challenges the Award only with respect to three claims viz

Claim Nos.15 and 16 and the claim with respect to the interest awarded.

OMP-101/2003 Page 1

2. The contract in question was for earthwork for four laning of Delhi-Mathura

Section of National Highway No.2 in UP Sector, Package IV (KM 122 KM to

138.4 KM), awarded by the petitioner to the respondent.

3. Claim No.15 is the claim for charges towards idle labour and machinery for

the period from April, 1994 till July, 1995. The Arbitrator has awarded under this

claim a sum of Rs.2.12 lacs.

Mr. K.R.Gupta, counsel for the petitioner, has very vehemently opposed the

awarding of this Claim, because, as per Mr. Gupta, the contractor had waived all

his claims of every nature by a letter dated 17.6.1997 which is subsequent to the

period of April, 1994 to July, 1995. This letter reads as under:-

          "No.IRCON/NH2/UP/457                                 Dated:17.06.97

          The General Manager/Roads,
          Delhi-Mathura Highway Project,
          IRCON International Limited,
          F-4&5, Madhavpuri, Mathura.

Sub:Earth work of Delhi-Mathura Road Section Km 122 to Km138+400:workorderNo.IRCON/NH2/UP/457/EW/PKG IV Dated 12.07.93.

Dear Sir, This has the reference to my letter dated 06.09.1996 and 15.11.1996 and discussion held in your office subsequently on the subject matter. In this connection I undertake to accept the contract rate of M/s Gyan Chand Jain (Earth work Km.93+830) to Km 1041000) W.O.No. IRCON/NH2/UP/457/Tenders dated 20.12.1994 with escalation to be frozen on 30th April 1997 for making all payment under my contract for the quantities executed or under execution after 4 th November 96 (20th RA bills) till completion of the contract, in the eventuality of this I further undertake that I shall not have any other claim whatsoever against IRCON International Limited as far as this contract for Earth work under reference is concerned.

Thanking you, Yours faithfully, (Suresh Chandra)"

OMP-101/2003 Page 2

4. In my opinion, the contention of Mr. Gupta is well founded. A reference to

this letter dated 17.6.1997, shows that the contractor specifically stated that except

for taking the contract rate of M/s Gyan Chand Jain for earth work with escalation

to be frozen on 30.4.1997, the contractor shall have no other claim whatsoever

against the present petitioner.

A reference to relevant portion of the Award dealing with Claim No.15

shows that the Arbitrator has given a complete go-bye to this letter which showed

the vital defence of the petitioner and the consequent disentitlement of the

respondent to the amount under this Claim.

It is not disputed by Mr. J.P.Gupta, counsel for the respondent, that the letter

dated 17.6.1997 was in fact written by the respondent to the petitioner.

If that be so, the Award is totally perverse while dealing with Claim No.15

because this letter of 17.6.1997 was a complete answer to the claim of the

respondent under this head. In my opinion, the Arbitrator, if he would have dealt

with this letter, he was bound to decline this claim, however, he has preferred the

route of not referring to this vital correspondence.

Accordingly, objection to this claim is accepted and this part of the Award

pertaining to Claim No.15 is set aside.

OMP-101/2003 Page 3

5. The next claim which was objected to was Claim No.16. This claim pertains

to the cost incurred by the respondent towards maintenance of the earth work in the

extended period of the contract. It is not disputed by any of the parties that after

completion of the work, there was a one year warranty in which the respondent

was bound to maintain the work so done.

6. The Arbitrator has awarded a sum of Rs.1,95,634/- under this claim. In my

opinion, once it is admitted that the contract in question was extended up to July,

1997, and consequently, the warranty period ended in July, 1998, that being so, the

cost towards maintenance of this work in the extended period and the warranty

period has necessarily to be to the account of the respondent/contractor. This is

also so, because of the letter dated 17.6.1997 already adverted to while discussing

Claim No.15. Since, as stated above, it is not disputed that the letter dated

17.6.1997 has in fact been written by the respondent to the petitioner, the

respondent therefore waived its rights and accordingly, the Arbitrator could not

have awarded any amount under Claim 16. Once again the Arbitrator has failed to

refer to this letter of the respondent by which the respondent agreed to waive all his

rights except those as mentioned in the letter. Objection to this claim is accepted

and Claim No.16 awarded is set aside.

7. That takes me to the final issue which was urged before this court pertaining

to the rate of interest. The Supreme Court in the recent chain of judgments

OMP-101/2003 Page 4 reported as Rajendra Construction Co. Vs. Maharashtra Housing & Area

Development Authority & ors.2005 (6) 678, McDermott International Inc. Vs.

Burn Standard Co. Ltd.& ors 2006 (11) SCC 181, Rajasthan State Road

Transport Corpn. Vs. Indag Rubber Ltd. (2006) 7 SCC 700 and Krishna Bhagya

Jala Nigam Ltd. Vs. G.Harischandra, 2007 (2) SCC 720 and State of Rajasthan

vs. Ferro Concrete Construction Pvt. Ltd (2009) 3 Arb. LR 140(SC) has held that

the courts must be alive to the changed economic scenario and liberalization of the

interest regime whereby there has been a consistent fall in the rates of interest. The

Supreme Court has mandated the courts to grant lesser rates of interest. This court

also has been accordingly awarding interest at the rate of 9% per annum uniformly.

Accordingly, the rate of interest which is awarded by the Arbitrator at 14% per

annum is reduced to 9% per annum. Accordingly, the amount which would be

payable under Claim 20, would be now calculated for the purpose specified under

that claim, at 9% per annum simple and not 14% per annum. I am however not

changing the period for which interest has been granted.

8. While dealing with this Claim No.20 of interest, I also note that future

interest has been awarded by the Arbitrator at 18% per annum simple from the date

of publishing of the Award till payment. This rate of interest also, in accordance

with the aforesaid Supreme Court judgments, I am reducing to 9% per annum

simple.

OMP-101/2003 Page 5

9. Since the petitioner has been fair in only pressing three claims which, I have

allowed, I leave the parties to bear their own costs.

10. Those claims of the Award to which objections have not been pressed are

sustained and Award to that extent stands.

The petition stands disposed of.

                                               VALMIKI J. MEHTA, J
January 27, 2010
ib




OMP-101/2003                                                                  Page 6