Mahanagar Telephone Nigam Ltd. ... vs M/S Vijay Kumar Goel And Anr.
2010 Latest Caselaw 3275 Del

8
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                    Date of Decision: 15.07.2010

%                             O.M.P. 274/2009


      MAHANAGAR TELEPHONE NIGAM LTD. (MTNL)     ..... Petitioner
                    Through: Mr. H.S. Dahiya, Advocate

                     versus


      M/S VIJAY KUMAR GOEL AND ANR.               ..... Respondent
                      Through:  Mr. Vivekanand, 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. The petitioner, MTNL has filed the present petition under

Section 34 of the Arbitration and Conciliation Act to seek setting aside

of the arbitral award made by Sh. S.C. Shrivastava, the sole arbitrator

appointed by the Chief Engineer (BW), MTNL under clause 53 of the

agreement between the parties in relation to the claims made by the

respondent/contractor.

2. The respondent was awarded the civil works vide letter

No.EE(C)/IV/MTNL/99-2000/AL VVR/149 dated 18.11.1999. As per the

agreement, the date of start of the work was 03.12.1999 and the

stipulated date of completion was 02.06.2001 (18 months). The work

was actually completed on 31.10.2002.

3. The respondent/claimant raised its claims arising out of the

contract, which were repudiated by the petitioner. Consequently, the

respondent invoked the arbitration agreement.

4. The Chief Engineer (BW), MTNL appointed Sh. S.C. Shrivastava

as the sole arbitrator, who entered reference to adjudicate the claims

of the respondent. By the impugned award, the learned arbitrator has

awarded various claims made by the respondent. The challenge in this

petition is confined to the award made on claim nos.2, 8, 9, 10 and 11.

5. Under claim no.2, the respondent had claimed the payment of

the escalation amount of Rs.11,44,759/-. This escalation was claimed

under clauses 51.1 and 51.1.1 to 51.1.1.8 of the agreement for the

contractual period as well as the extended period.

6. The term of the contract had been extended by the petitioner

till the actual date of completion, i.e. 31.10.2002, without levy of

compensation. The petitioner/claimant, it appears had opposed the

said claim by placing reliance on a communication dated 29.09.2005

issued by the respondent. The said communication reads as follows:

"This is in continuation to EOT as earlier submitted I further submitted as desired are as under:-

1. That I will not claim anything extra if my EOT is granted without levy of compensation.

2. That my previous letters will also stand cancelled".

7. Before the arbitral tribunal, the respondent/claimant had

submitted that the said communication had been obtained by the

petitioner under duress. This submission of the respondent has been

accepted by the learned arbitrator. It is this finding of the learned

arbitrator, which is assailed by the petitioner herein.

8. The submission of the learned counsel for the petitioner is that

the respondent had produced no material and had led no evidence in

support of the submission that the communication dated 29.09.2005

had been obtained by the petitioner by exercising coercion or duress

upon the respondent. He submits that the finding of the learned

arbitrator is based on no evidence and is, therefore, perverse.

9. The learned arbitral tribunal dealt with the aspect of duress

pleaded by the respondent in the following manner.

"The argument of respondent that extension of time was granted without levy of compensation, in view of an undertaking given by Claimant that no claims shall be raised by him, if EOT is granted without levy of compensation, does not hold water. It is also noted that on note sheet N/35 where EOT case has been processed it has been stated by AE (C) that "letter from agency dated 29.09.05 has been taken by me after hard pursuance to the agency.". This makes it amply clear that the letter was procured under duress. As more than Rs.22 lakhs were not paid to the claimant for 3 years after completion of work, and final bill was not yet finalized, the claimant was forced to give letter of no-claim. This is an example of highly unethical practice. The

extension of time has to be granted with or without levy of compensation based on the facts. It cannot be a case of barter or bargain, overlooking the contract provisions. The escalation payment was required to be adjusted from the Claimant's bill at the end of first quarter in March, 2000 itself and so on. Till stipulated period there was no issue of grant of EOT. But overlooking the contract provision, respondent did not pay/deduct the escalation to/from claimant".

10. The submission of the petitioner is that mere noting in the note

sheet by the AE (C) that the letter dated 29.09.2005 had been taken

by him "after hard persuasion" cannot lead to the inference that the

respondent had been subjected to coercion or duress.

11. In answer to the submission of learned counsel for the

petitioner, Mr. Vivekanand, learned counsel for the respondent submits

that the learned arbitrator had returned the finding with regard to the

duress as aforesaid on the basis of the entire record placed before him.

Apart from the self incriminating note sheet of the respondent

extracted by the learned arbitrator, there were other materials placed

before the learned arbitrator in support of the submission that the

letter dated 29.09.2005 had been obtained under coercion and duress.

Thos documents throw light on the circumstances in which duress was

exercised on the respondent contractor. Mr. Vivekanand has referred

to the hindrance register which recorded that the total hindrance

justified was 541 days, whereas the total hindrance was only 516 days.

This would mean that if the entire period of hindrance justified is

deducted from the period from date of start of work to date of actual

date of completion, the respondent had completed the work before the

expiry of the time available under the contract.

12. He has also referred to the application for extension of time

Part II, which is prepared by the department. In this proforma, the

petitioner had accepted the delay as not being attributable to the

respondent. He submits that even before taking the communication

dated 29.09.2005, as early as on 09.05.2005 and 18.05.2005, the

respective Executive Engineer and Superintending Engineer had

acknowledged the fact that the delay was not attributable to any

default of the contractor. However, the processing of the extension of

time without levy of damages was withheld and was not completed till

after the petitioner had extracted the communication dated

29.09.2005. The communication dated 29.09.2005 itself records that

the same had been given at the „desire‟ of the petitioner. It was not

given by the respondent voluntarily and at its own behest.

13. In his rejoinder, learned counsel for the petitioner submits that

the documents referred to by Mr. Vivekanand have not been referred

to in the award. He submits that the reasoning of the learned

arbitrator has to be tested only on the basis of the note sheet relied

upon by the learned arbitrator.

14. In my view, there is no merit in this objection of the petitioner.

15. Firstly, the letter dated 29.09.2005 itself shows that the same

had been submitted on the asking of the petitioner. Secondly, the note

sheet as reproduced herein above, also shows that the letter dated

29.09.2005 had been procured after pressing the respondent

contractor to issue the same and exerting coercion on the respondent.

Thirdly, the documents relied upon by the learned counsel for the

respondent form a part of the arbitral record. The arbitrator has made

the award after going through and taking into consideration the entire

record. This is so stated by him on page 2 of the award, wherein he

records that:

"AND WHEREAS I have considered and applied my mind to the pleadings, documentary evidences, submissions both oral and written and authorities cited by the Claimant and Respondent in support of their contentions and I have given due thought and consideration to all the above and I have come to conclusion only after giving due and deep thought with careful consideration".

16. Since the materials relied upon by the learned counsel for the

respondent further supports the finding returned by the learned

arbitrator, in my view, the said record can be relied upon by the

respondent in his defence to the objection raised by the petitioner.

17. There is another reason for rejecting the submission of the

learned counsel for the petitioner. Once the extension of time without

levy of compensation had been granted, under the contractual terms,

the respondent became entitled to claim escalation which had

occurred during the initial contractual period and also during the

extended contract period. The purport of the letter dated 29.09.2005,

in any event, would not take within its scope the amounts due to the

contractor under the contractual terms. Consequently claim no2, in

any event, would have been payable to the respondent. Pertinently,

the petitioner does not dispute the computation of the said claim as

made by the respondent.

18. I, therefore, reject the submission of the petitioner that the

claim no.2 for escalation was barred on account of the issuance of the

communication dated 29.09.2005.

19. The next objection raised by the learned counsel for the

petitioner is in respect of claim no.8. Under this claim, the respondent

had claimed payment on account of extra expenditure due to idle tools

& plant and idle staff because the work was hindered by the petitioner

department on various occasions. The amount claimed was

Rs.16,60,680/-.

20. The learned arbitrator allowed the said claim to the extent of

Rs.2,38,000/-. The amount was computed by taking into account the

fact that the work had been prolonged beyond the initial period by

about 17 months. The learned arbitrator assessed the said claim by

assuming the salary of the foreman at Rs.4000/- per month and two

watchmen at Rs.2500/- per month.

21. The objection to the award made on claim no.8 is essentially

founded upon the plea that the respondent had undertaken not to

make a claim due to prolongation of the contract. The said plea has

been rightly rejected by the learned arbitrator and I also find no merit

therein. Consequently, there is no merit in the submission of the

learned counsel for the petitioner that claim no.8 has wrongly been

awarded by the learned arbitrator.

22. Claim nos.9, 10 and 11 pertain to the claim of interest for

different periods as made by the respondent/claimant. The respondent

claimed interest at the rate of 18% per annum. The claim for

pendentilite interest was considered and granted by the learned

arbitrator in the following manner:

(i) Under sub head (a), on the award amount of claim no.1 of Rs.1,10,681/-, interest was granted from six months after the date of completion, i.e. 01.05.2003 till the date of award @ 10% p.a.

(ii) Under sub head (b), interest was granted on quarterly escalation amount not paid, i.e. awarded amount of claim no.2 from one month after the month in which the payment was due. The learned arbitrator computed the interest @ 10% p.a. on quarterly basis beginning December 1999 onwards. This interest was also computed @ 10% per annum.

(iii) Under sub head (c), the learned arbitrator granted interest on delayed payment of final bill amount of Rs.22,44,174/- from 01.05.2003 (i.e. from six months after date of completion of work) till the date of payment of the final bill (04.04.2007) @ 10% p.a.

(iv) Under sub head (d), interest was granted on the amount of Rs.2,91,578/- (towards the non refund of the WCT) @ 10% p.a. It was computed for the period from one month after the date of deduction. In respect of each deduction, the learned arbitrator computed the interest for varying periods.

(v) Under sub head (e), interest was granted on Rs.22,449/-, which was the amount of labour cess not refunded from the date of the final bill payment (4.4.2007) till the date of the award (7.2.2009) which worked out to Rs.4134/-.

(vi) Under sub head (f), the learned arbitrator granted interest on the non refund of the security deposit. The award made on this claim is related to the award made on claim no.4.

Total pendentilite interest awarded to the respondent/claimant is Rs.18,59,718/-.

23. Under claim no.10, future interest has been awarded on the

amounts awarded under claim nos.1 to 5 and 8 to 11 @ 15% p.a. from

60 days after the date of the award till the date of actual payment, if

award amount is not paid within 60 days from the date of the award.

24. The objection raised by the learned counsel for the petitioner

to the award of interest is that even though the work had actually been

completed on 31.10.2002, the respondent/contractor did not take any

steps towards the finalization of the bill. The application for seeking

extension of time without levy of liquidated damages was made after

nearly 2 ½ years i.e. on 25.04.2005. The extension of time without levy

of compensation was granted on 09.10.2005. Even thereafter, the

respondent did not agitate his claims and invoked the arbitration only

on 22.03.2007. It is therefore argued that on account of the laxity of

the respondent/claimant, the petitioner should not be made to suffer

by requiring the petitioner to pay interest. The rate of interest

awarded has also been objected to by the learned counsel for the

petitioner as excessive.

25. In his reply, the learned counsel for the respondent submits

that it is a well known practice that the final bill has to be prepared by

the department. The petitioner department did not prepare the final

bill. The respondent was asked to submit the application to seek

extension of time without levy of compensation and accordingly, the

same was submitted on 25.04.2005. Only after the respondent had

invoked the arbitration agreement on account of the delay in the

settlement of the final bill, the petitioner made payment of the final bill

on 04.04.2007. It is, therefore, submitted there was no delay on the

part of the respondent in agitating his rights and claims.

26. It is also urged by learned counsel for the respondent that in

the objections as preferred before this Court, the only objection to the

award made on claim no.9, 10 and 11 is with regard to the rate of

interest and not to the period for which the same had been award.

27. In my view, there is merit in the submission of the learned

counsel for the petitioner that the attitude of respondent/claimant was

laid back and the respondent did not act with any sense of urgency in

pursuing its claim after the work had been completed on 31.10.2002.

The submission of the learned counsel for the respondent that the

respondent applied for extension of time upon his being required to do

so by the petitioner cannot be accepted. The respondent/contractor

should have known that it was his obligation to apply for extension of

time and the same should have been applied for soon after the

completion of the work. Obviously, unless the said aspect had been

looked into and decided one way or another, the final bill of the

respondent (assuming that the same had to be prepared by the

petitioner) could not have been prepared. The claim for escalation (for

the period after the stipulated date of completion) could also not have

been examined without first deciding the issue as to whether extension

of time should be granted without levy of compensation or not.

Obviously, the claim for escalation after the stipulated date of

completion could have been entertained only after coming to the

conclusion that the delay was not attributable to the

respondent/claimant. As noticed above, though the work was

completed on 31.10.2002, the extension of time was applied only on

25.04.2005. There was a delay of about 2 ½ years (30 months) in the

making of the said application, for which the petitioner cannot be

saddled with interest.

28. There was further delay on the part of the respondent

inasmuch, as, even after the grant of extension without levy of

liquidated damages vide communication dated 09.10.2005, the

respondent did not pursue the matter and invoked the arbitration only

in March 2007. After the extension of time (without liquidated

damages) had been granted, there may have been justification in the

respondent waiting for some time to enable the petitioner to make

payment of the final bill. As the extension of time was granted on

09.10.2005, the respondent could legitimately have waited upto

31.12.2005. However, for the period thereafter there is no justification

for grant of interest upto 28.02.2007, when the arbitration was invoked

in March, 2007. Therefore, there was further delay of 14 months in

agitation of its claims by the respondent for which interest awarded by

the learned Arbitrator should be deleted.

29. Merely because the petitioner may not have specifically raised

a challenge to the award of interest for a particular period, that does

not take away the jurisdiction of this Court to examine the award on

the said aspect. Moreover, I find that in the objection petition the

challenge is to the award of interest generally, which would include the

challenge to the rate at which it has been awarded, and the period for

which it has been awarded.

30. Considering the aforesaid aspects, the award of interest stands

modified as below:

(a) Claim no.1 was for the amount which was due for the work

done but not been paid. At best, the petitioner could have

withheld this amount on account of the prolongation of the

contract, till they had taken a decision on the extension of

time application made by the petitioner. There could be no

justification for withholding of amount payable under claim

no.1 after the date of issuance of extension of time letter on

09.10.2005.

The respondent would be entitled to interest on the amount

awarded under claim no.1 (Rs.1,10,681) for the period from

01.11.2005 till the date of the award @ 10% p.a.

(b) The respondent would be entitled to interest on the quarterly

escalation amount not paid, i.e. awarded amount of claim no.2,

@ 10% p.a., by reducing the period as follows:-

       Sl.    Quarter     Payment     Interest   Period upto   Due amount of
                          due in   calculated     7/2/09*       escalation
      No.
                                    from the
                                                 (months)
                                      end of
      01.   12/99-2/00   3/2000     4/2000        63.25        (-)34,699.94


      02.   3/00-5/00    6/2000     7/2000        60.25         28,227.57


      03.   6/00-8/00    9/2000    10/2000        57.25         16,551.64


      04.   9/000-1/00    12/01      1/01         54.25         45,332.62


      05.   12/00-2/01    3/01       4/01         51.25         5,024.64


      06.   3/01-5/01     6/01       7/01         48.25        1,12,094.16


      07.   6/01-8/01     9/01       10/01        45.25        2,12,025.03


      08.   9/01-11/01    12/02      1/02         42.25        1,77,614.37


      09.   12/01-2/02    3/02       4/02         39.25        1,29,573.05


      10.   3/02-5/02     6/02       7/02         36.25            NIL


      11.   6/02-8/02     9/02       10/02        33.25         73,002.56


      12.   9/02-10/02    11/02      12/02        31.25        2,45,314.71




* After reduction of 42 months.

(c)         On the same parity of reasoning, the interest on the amount of

the final bill of Rs.22,44,874/- could have been awarded from

01.05.2003 to 04.04.2007 minus the period of 42 months @

10% p.a.

(d) From the award of interest under sub head (d), it appears that

the dates of deduction of WCT range between 08.09.2001 and

22.09.2007. Interest has been calculated on the amounts

deducted upto 07.02.2009 which is the date of the award. The

respondent, as noticed above, was not vigilant for a period of

42 months. Consequently, the period for which interest has

been computed in respect of amounts at Sl. No.1 to 5 in the

tabulation found at page 15 of the award is reduced by a

period of 42 months for each of the entries at Sl. No.1 to 5.

(e) Under sub head (e), the award of interest on Rs.22,449/-, being

the amount of labour cess not refunded, @ 10% p.a. has been

granted. In relation to the award of interest on Rs.22,449/-, I

find that the same has appropriately been granted @ 10% p.a.

from the date of final bill payment till the date of the award.

(f)(i) Under sub-head (f)(i), the learned Arbitrator has awarded

interest on the amount of Rs.76,027/- at the rate of 10% per

annum from 01.05.2003 to 07.02.2009. Since the extension of

time without levy of compensation came to be decided only on

10.09.2005, there was no question of any part of the security

deposit being refunded (The delay in this regard is attributable

to the respondent). Consequently, in my view, interest on

Rs.76,027/- at the rate of 10% per annum could not have been

awarded from 01.05.2003 onwards. The same ought to have

been awarded from 01.11.2005 to 07.02.2009 after reducing

from this period the 14 months period towards further delay in

invocation of arbitration by the respondent. Under sub-head

(f)(ii) interest of Rs.1,22,524/- @ 10% per annum awarded

from 04.04.2007 to 07.02.2009. When the petitioner made

payment of the final bill on 04.04.2007, there was no

justification for the withholding of the amount of Rs.1,22,524/-.

Consequently, I find that the award on interest under sub-head

(f)(ii) is completely justified.

Award of future interest @ 15% p.a. on the amounts awarded

under claim nos.1 to 5 and 8 to 11 appear to be excessive.

Keeping in view the inflationary trends prevalent during the

relevant time, future interest is, therefore, reduced from 15%

p.a. to 9% p.a. from the date of the award till payment.

The award stands modified accordingly.

The petition stands disposed of in the aforesaid terms.

VIPIN SANGHI, J JULY 15, 2010 sr