Simplex Infrastructures Ltd. vs National Highways Authority Of ...
2010 Latest Caselaw 1222 Del

*                 IN THE HIGH COURT OF DELHI AT NEW DELHI

+                               O.M.P. No.484/2009

                                                              4th March, 2010
SIMPLEX INFRASTRUCTURES LTD.                                                        ...Petitioner

                                Through:       Mr. Sujoy Kumar, Mr. K.V.Singh and Mr.
                                               Manish Dembla, Advocates
                         VERSUS


NATIONAL HIGHWAYS AUTHORITY OF INDIA                                         ....Respondent

                                Through:       Mr. Sandeep Sethi, Sr. Advocate with Ms.
                                               Padma Priya and Ms. Meenakshi Sood,
                                               Advocates

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? Yes

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

% JUDGMENT (ORAL) VALMIKI J.MEHTA, J

1. This is a petition under Section 9 of the Arbitration and Conciliation Act,

1996 whereby the petitioner seeks the following relief:

"(i) pass an ad-interim ex parte order restraining the Respondent from implementing and/or enforcing or otherwise giving effect to its letter nos. NHAI/40020/Tech-III/EW-III/2006/WB-4/735 and NHAI /

OMP 484/2009 Page 1 PIU / Araria / escalation / 2009 dated July 20, 2009 and July 29,2009 respectively, Annexures P-1 and P-2 to the petition, and further restraining the Respondent from deducting any amounts from the payments due to the petitioner or otherwise recovering any payments in pursuance of the said letters until the eventual resolution of the dispute between the Petitioner and the Respondent"

2. Irrespective of the wording of the prayer clause, in effect, the relief which is

being sought by the petitioner is that the interpretation of a Contractual Clause as

given by the petitioner, and as was adopted earlier till modified, be accepted and

payment be directed to be made by the respondent to the petitioner in terms of the

original interpretation given to Clause 70.3 by the respondent and the Engineer of

the project i.e. the relief claimed is for mandatory injunction for payment, akin to

execution of a money decree.

3. The facts of the case are that a contract was entered into between the

petitioner and the respondent whereby the petitioner was granted the work of

widening and strengthening of 4-lane of existing single/intermediate lane

carriageway of National Highway No.57 section from Km.159.357 to 174.383

(Simrahi Kosi Eastern Bund Section) in the State of Bihar on East West Corridor

under NHDP Phase-II Project, Package No. "C-II/BR-4".

4. There is a Clause 70.3 in the Contract, the relevant portion of which reads

as under:-

"Contract Price shall be adjusted for increase or decrease in rates and price of labour, materials, fuels and lubricants in accordance with the following principles and procedures as per formula given below. The amount certified

OMP 484/2009 Page 2 in each payment certificate is adjusted by applying the respective price adjustment factor to the payment amounts due.

(a) Price adjustment shall apply only for work carried out within the stipulated time or extensions granted by the Employer and shall not apply to work carried out beyond the stipulated times price adjustment for extensions for reasons attributable to the Contractor, shall be paid in accordance with Sub-Clause 70.5.

Price adjustment shall be calculated as per the formula given below"

"Note For the application of this Clause, index of heavy machinery and parts has been chosen to represent the Plant and Machinery spares component.

(v) Adjustment for Bitumen Component Price adjustment for increase or decrease in the cost of bitumen shall be paid in accordance with the following formula:

Vb= 0.85xPb/100xRx (B1-Bo)/Bo Vb= increase or decrease in the cost of work during the month 31 NHAI under the consideration due to changes in the rates for bitumen. Bo=the average official retail price of bitumen at the nearest refinery for the place as defined in Appendix to Bid, in the previous month prior to the date of submission of bids.

B1= the average official retail price of bitumen at nearest refinery for the place as defined in Appendix to Bid, in the previous month prior to the last day of the period to which a particular interim Payment Certificate is related.

Pb= Percentage of bitumen component of the work."

"(viii) The following percentages will govern the price adjustment of the contract:

         1.        Labour-P1                                20%
         2.        Plant and Machinery and Spares-Pp        20%
         3.        POL-Pf                                   10%
         4.        Bitumen-Pb                               x%
         5.        Cement-Pc                                y%
         6.        Steel-Ps                                 z%
         7.        Other materials-Pm                50-(x+y+z)%

(Note: x, y, z are the actual cost of bitumen, cement and steel respectively used for execution of work as per the Interim Payment Certificate for the month.)"

5. The disputes between the parties centres around the interpretation of

this Clause. There are two conflicting interpretations placed by either parties

OMP 484/2009 Page 3 upon this Clause. Whereas the petitioner contends that its interpretation is correct

and the expression "actual cost" appearing in Clause 70.3 (viii) means the actual

cost of cement, steel and bitumen, the interpretation of the respondent is that the

ingredients "x,y and z" refer only to the percentages and not the actual cost.

6. The contract in question contains a dispute resolution mechanism in terms of

Clauses 67.1 and 67.3 and which I need not reproduce herein but suffice to say

that if there are disputes between the parties arising out of and related in any

manner with the contract, then, first the disputes are referred to the Disputes

Review Board and on a party being dissatisfied with the decision of the Disputes

Review Board, arbitration proceedings can be initiated. It is thereafter, that the

Arbitration Award, which will become final, will bind the parties. Before I

proceed further, with the discussion in the present case, one thing which is

absolutely clear is that, this court is hearing arguments in a petition under Section

9 of the Arbitration and Conciliation Act, 1996 to which the principles which

would govern are the principles of Order 39 Rules 1 and 2 CPC, 1908 and the

arbitration proceedings are yet to commence and an executable Award is still to

come into existence. Also would be applicable for the disposal of the present

petition the provisions of the Specific Relief Act,1963 which govern the grant of

injunction pendente lite or permanent or mandatory.

OMP 484/2009 Page 4

7. As I have already stated, the relief clause in the present case

effectively seeks a mandatory injunction seeking directions to the respondent to

pay to the petitioner and continue to pay to the petitioner amounts as per the

petitioner's interpretation of the Clause 70.3 of the Contract. The relief prayed is

in effect therefore in the nature of an execution of a decree/Award in which there

is a finding that the interpretation of the petitioner is correct. However, the fact of

the matter is that parties are at serious loggerheads with regard to the

interpretation of Clause 70.3. Proceedings are going on before the Dispute

Review Board and thereafter arbitration proceedings have still to take place. It is

only when the Arbitration Award is passed, will one know, whether the

interpretation of Clause 70.3 of the petitioner or the respondent is correct. I

would definitely not want to venture into the aspect of which interpretation on

merits is correct, because, as on date, the limited issue is that whether by an

interim order, direction can be passed for asking the respondent to make payment

to the petitioner although a final executable Award accepting the interpretation of

Clause 70.3 as urged by the petitioner does not exist.

8. The learned counsel for the petitioner has very strenuously relied upon

the decision of the Supreme Court reported as Transmission Corpn. Of A.P.Ltd.

Vs. Lanco Kondapalli Power (P) Ltd. (2006) 1 SCC 540. On the basis of

OMP 484/2009 Page 5 paragraphs 48, 49 and 57 of this judgment, the counsel for the petitioner

contended that once an interpretation is given of a particular clause in contract,

which has been accepted for a sufficient period of time, and which in the facts of

this case is for a substantial number of 32 Interim Payments Certificates, then

such an interpretation of the clause must continue to govern in future and by

means of a prayer under Section 9, the respondent can be asked to make the

payments in terms of the original interpretation of Clause 70.3. I may note that

the decision of the Supreme Court in the case o f Transmission Corpn. (Supra) is

of a Bench of two Judges. In the said judgment, the Supreme Court does not

discuss the issue as to whether an injunction can be granted during the pendency

of determination of disputes by an appropriate forum the effect of which is that

the petitioner can get payment and continue to get payment, effectively as if to

say by execution of money decree by passing an order of mandatory injunction

under Section 9.

9. The Supreme Court, in the case of Union of India Vs. Raman Iron

Foundary (1974) 2 SCC 231 (a bench of two judges) passed an interim

injunction, under Section 41 of the erstwhile Arbitration Act, 1940, the effect of

which was that the respondent therein was in effect directed to make payment to

the petitioner. This legal position as laid down in this judgment of the Supreme

OMP 484/2009 Page 6 Court was specifically overruled by a three Judge Bench of the Supreme Court in

the case reported as H.M.Kamluddin Ansari Vs. Union of India AIR 1984 SC

29. The Supreme Court specifically overruling the ratio of Raman Iron

Foundary (supra) has held that no injunction can be granted the effect of which

is to direct payment to the petitioner. The decision of H.M.Kamluddin Ansari's

case has been also followed by the Supreme Court in M/s Sant Ram &Co. Vs.

State of Rajasthan & ors, AIR 1997 SC 2557. The following paragraph of the

judgment in H.M.Kamluddin Ansari is relevant and reproduced below.

"We are clearly of the view that an injunction order restraining respondents from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay amount to the contractor-appellants. Such an order was clearly beyond the purview of cl.

(b) of S.41 of the Arbitration Act. The Union of India has no objection to the grant of an injunction restraining it from recovering or appropriating the amount lying with it in respect of other claims of the contractor towards its claim for damages. But certainly Cl. 18 of the standard contract confers ample power upon the Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount."

10. It is therefore quite clear that no injunction can be granted the effect

of which is a mandatory injunction directing payment. I may refer to Section

41(h) of the Specific Relief Act which states that no injunction can be granted

where an equal efficacious relief can be obtained by the petitioner. When

effectively what is sought is a money decree, then, by virtue of Section 41(h), no

interim injunction can be granted because the petitioner has to seek and succeed

OMP 484/2009 Page 7 in getting a money decree/award for its claims. In my opinion, grant of an

injunction as prayed for by the petitioner would be wholly and completely

misconceived because the effect of the injunction order would be that the

petitioner's interpretation as on date should necessarily be taken as correct,

although, substantive proceedings to determine the same in arbitration have yet to

take place. The further effect of the injunction would be that although no

substantive proceedings have started the petitioner's presumption is to be given

effect that there is an executable Award in its favour accepting its interpretation

of Clause 70.3 viz the effect is that the Award has become final by dismissal of

the objections to the Award and there is to take place enforcement and execution

of the Award under Section 36 of the Act. In my opinion, the present is a classic

case of putting the cart before the horse. Surely, the horse is to precede the cart

i.e. an Award giving the benefit of money decree must necessarily precede the

cart of any legal proceedings seeking benefit of an executable Award.

Another aspect which is necessary to mention is that the right to withhold

amounts is independent of a Contractual Clause entitling the same i.e a

withholding can take place under a common law right although there is no

Contractual Clause entitling the withholding. In view of the above discussion, it

is also not possible to accept the argument of the counsel for the petitioner that

OMP 484/2009 Page 8 the case of M.H.Kamaluddin Ansari is distinguishable on facts, because the clear

ratio and mandate of that judgment is that by an injunction payment cannot be

ordered to be made to a person.

11. I am bound by a three bench judgment of the Supreme Court in

H.M.Kamluddin Ansari's case because it is settled law that the decision in

H.M.Kamluddin Ansari's case being of a three Judge bench will prevail over the

decision of two Judge Bench in the case of Transmission Corpn. This is the law

by virtue of Constitution Bench Judgment of the Supreme Court reported as

Union of India Vs. Raghubir Singh 1989 (2) SCC 754.

12. In view of the above, I do not find any prima facie case in favour of

the petitioner. The petitioner will not be caused any irreparable injury which

cannot be compensated in terms of the money.

13. In view of the above, the present petition is dismissed with costs of

Rs.50,000/- in terms of para 37 of the judgment of the Supreme Court in the case

of Salem Advocate Bar Association Vs. Union of India (2005)6 SCC 344 and by

which judgment the Supreme Court has said that it is high time that actual

compensatory costs should now be imposed with respect to the legal proceedings.

I may also note that in terms of Section 35 of CPC 1908, costs have to follow the

event. Since petition is being dismissed, costs in favour of the respondent and

OMP 484/2009 Page 9 against the petitioner are awarded. For the satisfaction of the counsel for the

petitioner I note that nothing herein will tantamount to any expression of opinion

on merits or interpretation of any of the Clauses of the Contract, including Clause

70.3, although I have not given interpretation of any Clause of the Contract. The

petition stands disposed of.

                                                      VALMIKI J. MEHTA, J

March 04, 2010
ib




     OMP 484/2009                                                           Page 10