Delhi High Court
M/S.Contruction Rasa Pvt. Ltd. vs M/S.National Project ... on 1 April, 2011
Author: Anil Kumar
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ I.A.No. 2515 of 1998 & CS(OS) No. 2172A/1997
% Date of Decision 01.4.2011
M/s Construction Rasa Pvt. Ltd. .... Plaintiff
Through Mr. Viraj R. Datar and Mr. Chetan
Lokur, Advocates
Versus
M/s National Project Construction Corporation .... Defendants
Ltd. & Anr.
Through Mr. Neeraj Kumar Gupta, Advocate
for Mr. Paritosh Budhiraja, Advocate
CORAM:
HON'BLE MR. JUSTICE ANIL KUMAR
Whether reporters of Local papers may be YES
allowed to see the judgment?
To be referred to the reporter or not? NO
Whether the judgment should be reported NO
in the Digest?
ANIL KUMAR, J.
*
1. This order will dispose of the petition filed under Section 14 of the
Arbitration Act, 1940 by the plaintiff/Construction Rasa Pvt. Ltd.
(hereinafter referred to as CRPL) for giving directions to defendant No. 2
Sh. K.C. Goyal, the Sole Arbitrator to file the award dated 28th
September, 1997 and to make the award the Rule of the Court after
dismissing the objections filed by National Project Construction
Corporation Ltd. (hereinafter referred to as NPCC) under Section 30 and
33 of the said Act.
2. The relevant facts to comprehend the dispute for adjudication of
the petition and objections are that, construction of civil works at
Anpara, Shakti Nagar, UP was awarded by letter dated 26th December,
1981 to National Projects Construction Corporation Ltd. (hereinafter
referred to as NPCC) defendant no.1 by UP Electricity Board. The said
construction of civil works was thereafter awarded by another letter
dated 27th December, 1981 by defendant no.1/NPCC to plaintiff/CRPL.
The Work Order No. 148/3 dated 27th December, 1981 was for
construction of service houses, fuel oil pump house etc.
3. The work was executed by the plaintiff, however, disputes
arose between the parties. There had been an Arbitration Agreement
effected between the parties, as enumerated in Clause 4 of the Work
Order No. 148/3 dated 27th December, 1981, which is as under:-
Clause 4: Except where otherwise provided in the
contract, all questions and disputes relating to the meaning
of the specification, designs, drawings and instructions
herein before mentioned and as the quality of workmanship
of materials used on the work or as to any other questions,
claims right matter or thing whatsoever in any way arising
out of or relating to the contract designs, drawing,
specifications, estimates, instructions, order or these
conditions or otherwise concerning to works or the
execution or failure to the execute the same whether arising
during the progress of the work or after the completion or
abandonment thereof shall be referred to the sole arbitrator
of the person appointed by the Managing Director of the
National Projects Construction Corporation Limited acting
as such at the time of dispute there will be no objection to
any such appointment, the Arbitrator so appointed is a
Corporation Officer, that he had to deal with the matters in
dispute of difference. The Arbitrator so whom the matter is
originally referred being transferred of vacating his office or
being unable to act for any reason, the Managing Director
as aforesaid at the time of such transfer, vacating of Office
inability to act shall appointing another person to act as
Arbitrator in accordance with the terms of the Contract.
Such person shall be entitled to proceed with the reference
from the stage at which it was left by his predecessor. It is
also a term of this contract that no person other than a
person appointed by the Managing Director as aforesaid
should act as Arbitrator and if for any reason that is not
possible the matter is not to be referred to arbitration at all.
The Arbitration may from time to time with the consent of
the parties enlarge the time, for making and publishing the
award.
Subject as aforesaid the provisions of the Arbitrator
Act, 1940 or any Statutory modifications or any enactment
thereof and the rules made there under and for the time
being in force shall apply to the Arbitration proceedings,
under this clause.
4. The disputes were referred to Sh. B.N. Waghrey, who was
appointed as the sole arbitrator in 1989 by the Chairman and Managing
Director of NPCC. However the Arbitration proceedings could not be
completed before Sh. B.N. Waghray as he had resigned. After the
resignation of Sh. B.N. Waghrey, Sh. K.C. Goyal, a retired member of
Central Water Commission and Additional Secretary to the Govt. of
India was appointed as an Arbitrator to proceed with the case from the
stage at which it was left by Sh. Waghrey, by NPCC/defendant No.1.
5. The defendant No. 2/Sh. K.C. Goyal gave an award dated 28th
September, 1997. The defendant No. 2, however, did not file the award
as his outstanding dues were not cleared and consequently, the
plaintiff/Construction Rasa Pvt. Ltd. filed the petition under Section 14
of the Arbitration Act, 1940 dated 4th October, 1997. Pursuant to the
petition filed under Section 14 of the Arbitration Act, 1940, the
defendant No.2 by letter dated 27th January, 1998, filed the original
award dated 28th September, 1997 along with the Arbitration
proceedings. Pursuant to filing of the original award and the
Arbitration proceedings, the NPCC/defendant No. 1 filed the objections
dated 12th March, 1998 under Section 30 and 33 of the Arbitration Act,
1940 and sought for setting aside the award. By the award dated 28th
September, 1997, an amount of Rs. 3,98,473/- was awarded in favor of
defendant No. 1 and a lump sum amount of Rs. 30,46,957/- was
awarded in favor of the plaintiff and after adjusting the amount
awarded to defendant No.1, a balance amount of Rs. 26,48,484/- had
been awarded in favor of the plaintiff with interest @ 16% per annum on
the principal amount with effect from 22nd July, 1989, that is when Sh.
B.N. Waghrey, the earlier Arbitrator had entered upon reference, up till
the date of the award, i.e., 28th September, 1997 and an interest @ 16%
per annum on the principal amount from the date of the award till the
date of payment or decree whichever is earlier.
6. The defendant No. 1/NPCC sought setting aside of the award on
the ground that the Courts at Delhi does not have the territorial
jurisdiction as the letter of intent dated 27thDecember, 1981 was
issued by NPCC at their office in Shakti Nagar (UP) and the work order
was also issued at Singrauli, Shakti Nagar (UP) and the agreement was
also executed between the parties at Shakti Nagar whereas the work
was executed at Anpara site, Shakti Nagar (UP), which is where the
disputes also arose and therefore, no part of cause of action had arisen
at Delhi.
7. The defendant No.1 has also contended that the Arbitrator had
mis-conducted himself as he had acted in utter haste and had also
acted malafide in passing the award. It is alleged that time and again
the officers of NPCC were not dealt with properly and were humiliated
and insulted and were not given proper opportunity to understand the
questions during the examination.
8. The other objections raised by defendant No. 1/NPCC are that
during the arbitration proceedings, defendant No. 1 was directed to
produce documents which had no relevancy with NPCC‟s case, but
could have instead been used by CRPL/plaintiff and also that NPCC
was directed to lead negative evidence against themselves.
9. Regarding the utter haste in which the award was passed, it is
pleaded that on 15th September, 1997, the defendant was put to notice
and the Arbitrator had been showing the intention to pass the award,
regardless of whether the extension of time had been agreed to by the
defendant no.1 or not. It has been contended that even an application
for removal of defendant No. 2 was filed on 29th September, 1997,
however, the Arbitrator passed the award dated 28th September, 1997
hurriedly and consequently, the application for removal of the
Arbitrator filed by defendant No. 1 in the High Court on 29th September,
1997 became infructuous. Reliance has also been placed on an
application dated 24th September, 1997 filed before the Arbitrator
complaining about his bias attitude towards defendant No. 1 and his
officers yet the award was passed on 28th September, 1997 even though
time for making the award was given up to 30th September, 1997.
10. The award dated 28th September, 1997 is also objected to on the
ground that the claims were referred to the Arbitrator in terms of the
letter dated 6th July, 1989 of the Chairman and the Managing Director
of defendant No.1. The objection of the defendant No.1 is that the
amounts of the claim which were referred by letter dated 6th July, 1989
were allowed to be modified despite the objections raised by defendant
No.1 and that the Arbitrator had adjudicated the dispute as per the
enhanced claims which according to defendant No. 1, could not be done
by the Arbitrator and in the circumstances, the adjudication of the
enhanced claims was beyond the scope of reference and as such the
award is void on the face of record and is liable to be set aside.
11. Though the lump sum, unreasoned award had been given by the
Arbitrator/defendant No.2, however, the defendant No. 1 has raised
objections against the individual claims such as, that the claim No. 1
was originally for Rs. 20 lacs which was revised to Rs. 52,66,006/-. It
is pleaded that against the said claim No.1, no amount was payable
keeping in view the fact that the total value of work up to 14th RA bill
was Rs. 81,52,128.40 and this was duly accepted by the petitioner as
well and the petitioner was duly paid for up to 14th RA bill. According
to defendant No. 1, the plaintiff was required to complete the entire
work within 12 months, i.e., up to 31st December, 1982, however up till
16th April, 1985 even 70% of the work was not completed. The work
was allegedly abandoned on 16th April, 1985 and as such final
measurements were taken on 13th May, 1985 for finalization of the
amount of the plaintiff and the total value of the work done was
estimated to Rs. 83,64,155.74 on which Rs. 11,49,029.37 was payable
as escalation. According to defendant No. 1, the balance work was
completed by defendant No. 1 on his own and the total bills for the
work including escalation up to 12th December, 1987 were for Rs.
161,87,022.31. The defendant no.1 allegedly had to get the work
executed for Rs.66,73,836.20 after the abandonment of the work by the
plaintiff on 16th April, 1985. Similarly, it has been contended that claim
No.2 was illegally enhanced from Rs. 5,75,000/- to Rs. 6,11,014/-
which was not payable by the defendant no.1 to the plaintiff. Regarding
the security deposit, it was asserted that the same was adjusted as per
Clause-8 of the conditions of the Work Order No. 148/3. Grievance was
also made in respect of non furnishing of any performance bank
guarantee for Rs. 1.25 lacs by the Plaintiff.
12. The defendant No.1/objector also objected to enhancement of
Claims No. 3 to 10 and contended that the amounts claimed under
respective heads could not be enhanced nor could it be considered by
the Arbitrator. Regarding claim No. 11, it was asserted that no work
was executed by the plaintiff, and that it was executed by another
agency and also that the plaintiff had not even objected to that work
being executed by the other agency during the contract period.
Reliance was also placed on MB No. 76/70 by which payment was made
to the agency who executed the work.
13. Regarding Claims No. 16, 18, 19, it is contended that they are not
separate items of contract and no rate was given for them in the
contract and these claims were duly paid for under other relevant items
of the work.
14. Regarding Claim No. 12, the defendant No.1/NPCC contended
that it was not admissible under Clause-10 of the General Condition of
the Work Order No.148/3. Regarding claim No. 13, the defendant No. 1
objected that the load testing of RCC slab was to be carried out to the
satisfaction of defendant No.1 as per the terms of the agreement and
that nothing was payable on account of the expenses for the test. The
objection regarding claim No.21 raised by defendant No. 1, is that the
special claim is without any basis and in the circumstances, it is
contended that the claims were not sustainable and were beyond the
scope of the agreement. The award dated 28th September, 1997
awarding interest was also objected to on the ground that there was no
justification for awarding interest as the final bill was on the negative
side and no amount could be paid without making
adjustment/deduction.
15. The plaintiff refuted the objections filed by defendant No. 1/NPCC
and filed a reply dated 22nd July, 1998. The details of various
adjournments sought on behalf of defendant No.1 were given by the
plaintiff to substantiate his plea that the objection by the defendant
no.1 is only to scuttle the arbitration and harass the plaintiff and to
prolong the arbitration proceedings as long as possible. It has been
contended that the objections have also been filed with a view to delay
the payment of the amount awarded by the Arbitrator to the plaintiff
company. The plaintiff denied that the Courts of Delhi does not have
the jurisdiction. It was, however, not denied that defendant No. 2 was
appointed by letter dated 6th April, 1993, which appointment was
accepted by defendant No.2 by letter dated 18th April, 1993 but there
after the defendant No. 1 had adopted dilatory tactics. The plaintiff has
given the details of various proceedings before defendant No.2 to
demonstrate that despite the due opportunities, the cross examination
could be concluded only on 13th March, 1996 and thereafter various
adjournments were sought by defendant No.1 for concluding the
arguments. It is pleaded that on various dates the officials of the
defendant No. 1 did not appear before the Arbitrator. The allegation
made by defendant No.1 that the officials of defendant No.1 Corporation
were not dealt with properly and were humiliated and they were not
given proper opportunities were denied. Rather it was asserted that the
officials who appeared before the Arbitrator, even of the rank of
Assistant Engineers and Executive Engineers could not explain the
facts, despite the Arbitrator explaining the queries in Hindi as well and
they also failed to produce the relevant records and files. The plaintiff
has contended that the objections raised by defendant No. 1 are vague
and on mere allegations the award is not liable to be set aside.
16. The plaintiff has also contended that the time to make the award
was expiring on 30th September, 1997 and as the defendant No. 1 did
not agree for extension of time, therefore, the Arbitrator was left with no
option and he gave the award dated 28th September, 1997. The learned
counsel for the plaintiff/non-objector has very emphatically contended
that an application was filed by the objector under Section 11 & 12 of
the Arbitration Act, 1940 for the revocation of the authority of the
Arbitrator on the ground that the Arbitrator was biased, which
application came up for hearing before the Court on 29th September,
1997. The Court, however, neither stayed the Arbitration Proceedings
nor revoked the authority of the Arbitrator nor directed the Arbitrator
not to proceed with the arbitration and the application was adjourned
for 17th November, 1997. It is also pertinent to note that the time to
make the award was to expire on 30th September, 1997. However, the
respondent/objector had not agreed to extend the time for making the
award and hence the arbitrator had no option but to make the award
before 30th September, 1997. From the record, it is apparent that it is
none other than the objector, who is liable in the facts and
circumstances.
17. The Arbitrator in the award dated 28th September, 1997, had also
detailed about the delaying tactics adopted by the defendant .1. The
relevant portion of the award detailing various steps taken by the
Arbitrator on account of non-appearance on the part of the defendant
no.1 are as under:-
"AND WHEREAS the learned Consultant for the claimants
advanced his arguments on 15th and 16th October, 1996 and
was to continue the same on the next dates of hearing which
were fixed as 10th 11th and 12th December, 1996.
AND WHEREAS the respondent‟s representative
continuously failed to appear, except for their counsel at the
subsequent hearings, which were adjourned, a number of
times as would be apparent from the proceedings dated
10.12.96 and 11.2.97.
AND WHEREAS the claimants consultant, therefore, filed
his written arguments on that date i.e. 11.2.97 which were
taken on record and a copy of the same supplied to the
respondent‟s counsel and sent to the Unit Officer of the
Respondents.
AND WHEREAS, subsequent dates for the argument of the
respondent‟s counsel were fixed as 8th, 9th and 10th April,
1997, 7th and 8th May, 1997 but the respondent‟s counsel,
who appeared, could not start his arguments and stated
that no respondent‟s representative has appeared on these
dates and requested that the hearings be adjourned, as
would be apparent from the proceedings dated 8th and 9th
April, 1997 and 7.5.97 and 8.5.97.
AND WHEREAS in the interest of justice, the next date of
hearings for arguments by the respondent‟s counsel were
again fixed as 8th and 9th July, 1997 and registered notices
were sent to the Unit Officer, Anpara Unit of the Respondent
and the Chairman and Managing Director of NPCC Ltd.,
clearly notifying that if no representative of NPCC Ltd.
appears on these dates and the Respondent‟s counsel does
not start his arguments, the Arbitrator shall be constrained
to make the AWARD, on the basis of the documents and
affidavits and counter-affidavits already filed by the parties.
AND WHEREAS, Shri M.P. Singh, Assistant Executive
Engineer of the Anpara Unit, did appear on the 8th and 9th
July, 1997, yet the respondent‟s counsel did not start his
arguments on the plea that he has not been properly briefed
and requested for another adjournment.
AND WHEREAS, his request was again granted and the
next dates of hearing were fixed as 19th, 20th and 21st
August, 1997 with the clear stipulation that if the
arguments are not advanced on these dates and the parties
do not agree to extend the time which is expiring on 31.8.97,
the Arbitrator shall made the AWARD on the basis of the
records and affidavits and counter-affidavits already filed by
the parties.
AND WHEREAS a large number of notices vide my letter no.
KCG/PF/CRPL/RPNN/80/120 dated 10.4.97 and No.
KCG/PF/CRPL/RPNN/80/124 dated 9.5.97 were sent to the
Chairman and Managing Director of NPCC Ltd. by
Registered post as well as by courier, with copies to the Unit
Officer, Anpara Unit of NPCC Ltd., stating that if the
respondents fail to appear and put up their arguments, the
Arbitrator shall have no alternative but to give his award on
the basis of the documents and affidavits and counter-
affidavits filed by both the parties with him.
AND WHEREAS, a last notice was again sent to Unit
Officer, Anpara Unit, with copy to Chairman & Managing
Director vide my letter no. KCG/PF/CRPL/RPNN/80/128
dated 18.7.97 on the same lines.
AND WHEREAS, the respondent‟s counsel filed an
application during the hearing on 19.8.97, drawing the
attention of the Arbitrator, that orders have not been passed
on his earlier application, requesting that the claimants,
CRPL be directed to file certain documents, in order to
ascertain the correctness of their claims; and whereas on
the request of the Respondent‟s counsel, such directions
were issued and the hearings were adjourned for compliance
of these directions, to the next dates which were fixed as
23rd and 24th September, 1997.
WHEREAS, M/s. CRPL submitted their reply to the above
directions before the next date of hearing, drawing attention
to their previous letter in this connection, where position of
record is said to have been fully dealt with.
AND WHEREAS even on the 23rd September, 1997, the
Respondent‟s counsel, requested that in view of the latest
instructions received by him from his client, he may be
allowed one day‟s time, to move an application in connection
with the above arbitration matter, which request was
granted.
AND WHEREAS on 24.9.97, the Respondent‟s counsel
moved an application, that the arbitration proceedings be
kept on hold and did not agree to extend the time for
making the AWARD, beyond 30th September, 1997. He did
not start any argument in countering the claims of CRPL or
in support of NPCC‟s own claims.
WHEREAS, a large number of opportunities have already
been allowed to the Respondents, who continuously failed to
advance their arguments in the matter and a large number
of notices were issued to the Unit Officer of NPCC Ltd.,
Anpara Unit and Chairman & Managing Director, giving
them due opportunities to direct their counsel to start and
complete his arguments, which they have failed to start.
The latest application filed on 24.9.97 is only an effort to
stall arbitration proceedings. This arbitration matter started
in January, 1989 and has been continuing for over 8 years.
It would not be in the interest of justice to allow the matter
to prolong any further. "
18. The application filed by the defendant no.1 for revoking of the
authority of the Arbitrator was not pressed on 17th November, 1997, as
the award had already been pronounced by the Arbitrator on 28th
September, 1997. Since the defendant no.1 had not been ready to
extend the time for making the award, nor on the application of the
defendant no.1 to revoke the authority of the award, the arbitration
proceedings were stayed, hence making award on 28th September, 1997
before the expiry of time for making award, cannot be construed or
termed as misconduct of any type on the part of the Arbitrator.
Consequently, the objection to this effect is not sustainable and is
repelled.
19. The other objection of the defendant/objector is that the
Arbitrator was appointed by the competent authority to adjudicate upon
those claims only which were referred to him by letter of reference and
he had no authority or jurisdiction to entertain any such claims, which
were not the part of reference made to him by the Appointing Authority.
Consequently, it is contended that the learned Arbitrator could not
enlarge the scope of reference. The plea of the respondent is that the
Arbitrator, in the facts and circumstances, has not only acted beyond
his power and jurisdiction but has also entertained such new claims
which did not form part of reference and he adjudicated upon them and
consequently the entire award, which is a lump sum unreasoned
award, is null and void and non-est in the eyes of law.
20. Reliance has also been placed on the fact that the petitioner did
not seek amendment of any of the claims which formed part of the
reference made by the Managing Director of NPCC by his letter dated 6th
July, 1989 nor had the Arbitrator passed any order allowing the
plaintiff to bring in new or changed claims. In the circumstances, it is
asserted that the claims of the plaintiff are beyond the terms of
reference and are never the less barred under the contract entered
between the parties. The objector has also pleaded that there are
several claims which could not even be adjudicated by the sole
arbitrator or which were otherwise based on no evidence and were
outside the term of reference.
21. This objection of the respondent/objector is contested by the
plaintiff contending, inter alia, that the claims were raised by the
respondent and consequent thereto the plaintiff also raised 26 claims.
However, while raising the claims, it was categorically stipulated that
the plaintiff/claimant reserves his right to amend his claims as and
when further records would be made available to the plaintiff.
Consequently, when the records became available to the plaintiff, the
amount of claims were modified by the plaintiff and they also filed two
documents dated 27th September, 1989 and 13th October, 1989
explaining the details of their claims and modifying the amounts
according to available records. The claims as raised by the plaintiff
initially and the modified claims after the records were made available
to plaintiff are as under:-
Claims Original Claims Claims modified
(Rs.)
Claim No.1 Amounting to Rs.20/- lakhs for 52,66,906/-
the balance amount for the works
executed, but not paid.
Claim No.2 Amounting to Rs.5,75,000/- for 6,11,014/-
refund of Security Deposit, release
of Bank Guarantee thereof.
Claim No.3 Amounting to Rs.50,000/- for 55,000/-
refund of the amount wrongly
deducted/withheld from the
claimants.
Claim No.4 Amounting to Rs.4,29,520/- for 1,12,622/-
refund of amount, deducted at
10% of the cost of steel and
cement and materials issued to
the claimants under the contract.
Claim No.5 Amounting to Rs.1,20,000/- for 5,22,672/-
refund of recovery made at penal
rate for materials issued by
respondents without submitting
the theoretical consumption
statement and without issuing any
proper and valid notice.
Claim No.6 Amounting to Rs. 11 lakhs for 7,89,568/-
balance payment of escalation in
the market prices of men and
material.
Claim No.7 Amounting to Rs. 40,000/- for 26,457/-
repairing respondent‟s old and
unserviceable centering and
shuttering and other tools and
plants.
Claim No.8 Amounting to Rs. 3 lakhs for 3,76,193/-
balance payment due to under-
payment for work of Facia.
Claim No.9 Amounting to Rs. 8 lakhs for 4,57,272/-
payment for leveling course under
water proofing treatment over roof.
Claim No.10 Amounting to Rs. 2,50,000/- for 2,50,000/-
hire charges of claimant‟s tools
and plants, machinery and
equipment under use of the
respondents.
Claim No.11 Amounting to Rs. 3 lakhs for 50,391/-
strengthening of Purlins due to
design defects.
Claim No.12 Amounting to Rs. 1,50,000/- for 1,20,041/-
payment for idle labour due to
respondent‟s delay.
Claim No.13 Amounting to Rs. 1,00,000/- for 24,721/-
payment for load testing for RCC
slabs.
Claim No.14 Amounting to Rs. 1 lakh for Dropped by the
payment for dewatering and Claimants
pressure grouting of walls, on the
SERVICE HOUSE side, due to
seepage from the plant area.
Claim No.15 Amounting to Rs. 1 lakh for Dropped by the
rectification of chajjas due to Claimants
design defects.
Claim No.16 Amounting to Rs. 1 lakh for 90,000/-
payment for extra work on water
treatment plant RAMP due to
design defect and due to delays by
respondents.
Claim No.17 Amounting to Rs. 1 lakh for Dropped by the
payment for doing the flooring Claimants
twice, for BST trenches, work
required to be done by the
respondents.
Claim No.18 Amounting to Rs. 1 lakh for 61,769/-
additional payment for extra
height of centering and shuttering
and scaffolding for RCC slabs.
Claim No.19 Amounting to Rs. 1 lakh for 88,588/-
replacing pre-cast RCC slabs due
to faulty design.
Claim No.20 Amounting to Rs. 50,000/- for Dropped by the
payment for providing glass strips Claimants
in the flooring.
Claim No.21 Amounting to Rs. 10,000/- for 22,069/-
cutting road and making good the
same.
Claim No.22 Amounting to Rs. 3 lakh for 1,06,215/-
payment due to difference of
actual weight at which steel was
issued and the book coefficient
weight at which payment was
made for steel work.
Claim No.23 Amounting to Rs. 3,50,000/- for 1,16,046/-
loss of profit due to arbitrary
reduction in the scope of work by
the respondents.
Claim No.24 Amounting to Rs. 12 lakhs for loss 12,00,000/-
and damages due to delay and
default and breaches of contract
by the respondents.
Claim No.25 (a) Pre-suit interest on the amount of 2,26,563/-
the claimants withheld/deducted
by the respondents wrongly and
unauthorisedly at 18% per annum
from the date it was withheld, till
the date of application for
arbitration.
Claim No.25 (b) For pendetilite and future interest
For pendentilite
on the amount of the award from interest the
the date of application to the date
amount cannot
of decree or payment whichever is be worked out by
earlier at 18% per annum. the claimants
unless the award
is declared.
Claim No.25 (c) --- Future interest-
This amount will
also depend
upon the amount
awarded.
Claim No.26 Cost of arbitration at Rs. 2000/- For cost of
per hearing. arbitration which
is at the
discretion of the
Arbitrator.
22. In the circumstances it is asserted that no new claim was raised
on behalf of the plaintiff. After the records were made available to the
plaintiff, the amounts of the claim had been amended in accordance
with the record. Therefore, the claims raised on behalf of plaintiff are
not beyond the scope of reference made by the Chairman of defendant
no.1. In any case while raising the claims the plaintiff had reserved his
right to change or modify the claims on the availability of the records
which were admittedly not with the plaintiff. The learned counsel for the
plaintiff has also relied on (1998) 7 SCC 141, State of Andhra Pradesh
Vs. I. Chandrasekhara Reddy & Ors. to contend that if the claimant has
reserved his right in the notice to make additional claims, award
allowing additional claims made later on could not be assailed.
Reliance has also been placed on (1999) 9 SCC 188, H.L. Batra & Co.
Vs. State of Haryana & Anr, holding that when an arbitrator is
appointed for settling the disputes, addition of more claims to the
original claim does not result into enlarging the scope of the arbitration
contrary to law and all the claims which pertain to the contract and are
within the terms of the reference then the award cannot be set aside on
the grounds that it was beyond the scope of arbitration.
23. Perusal of the record reveals that Mr. K.C. Goyal, defendant No.
2/Arbitrator was appointed in place of Sh. B.N. Waghrey, Original Sole
Arbitrator, who had resigned subsequently. Defendant No. 2 was
appointed to proceed from the stage at which Sh. Waghrey had left. Sh.
Goyal, defendant no.2 had accepted the appointment by letter dated
18th April, 1993. At that time 26 claims were raised by the plaintiff.
The 26 claims which were originally referred were the same as detailed
herein before. This cannot be disputed nor anything has been shown to
the contrary that while raising 26 claims, it was not specifically
stipulated and the right was not reserved by the plaintiff that he would
not have the right to amend his claims as and when further records
would be made available to him. From the pleas and contentions raised
by the parties and the material available on the record, it is inevitable to
infer that the entire record was not available with the plaintiff when the
claims were made initially. The plaintiff had been entrusted with the
sub-contract of constructing the thermal power station in a contract
which initially was awarded to NPCC/objector. The learned counsel for
the objector has also not been able to show that the entire record was
available with the plaintiff and that no record was made available to
him after the plaintiff had filed his claims in the first instance. If the
plaintiff had to base his claims on the record and the entire record was
not available to him, then subsequently, whenever the record was made
available to the plaintiff, no embargo could be placed on his rights to
modify his claims based on the records. Comparison of the claims
raised by the plaintiff earlier and modified by him later on rather reveals
that after seeing the records, the plaintiff had dropped some of the
claims. This is also not disputed and cannot be disputed that while
raising the claims in the first instance, he had reserved his rights to
modify the claims as and when the records would be made available to
him. Comparison of the original claims and the modified claims of the
plaintiff also reveals that only the amounts were modified and no new
claims were added. The claims which were raised in the first instance
were adjudicable by the Arbitrator and were within the scope of the
Arbitration Agreement between the parties. If the disputes/claims are
within the scope of the Arbitration Agreement, modified claims would
also be within the jurisdiction of the Arbitrator.
24. In I.Chandrashekhra Reddy (Supra), total claims including the
claims in sub heads for Rs. 46,93,858/- were raised. Later on in the
rejoinder the amount of claims were enhanced to Rs.80,03,950/-. The
Arbitrator, however, awarded an amount of Rs. 38,34,097/- only. In
para 9 of the said judgment, the Supreme Court had held that where a
right to make additional claims was reserved in a notice by the
claimant, he could not be prevented from making such claims later on.
The Supreme Court had also noticed in the said judgment that no
argument was raised before the Arbitrator to the effect that the claim
put forward before the Arbitrator by the contractor was in excess of the
original claim and therefore, could not be adjudicated upon. From the
letters produced in that case, it was apparent that the claimant had
reserved liberty to put forward further claims on topics of disputed
items. Reliance has also been placed on State of Orissa & Anr. Vs.
Civien Construction Company & Anr., AIR 1983 Orissa 48, where it was
held that as per the terms of notice when the amount of claim was
subjected to further variation, if found necessary, additional claim could
be submitted by the claimant before the Arbitrator.
25. In the present case also, while referring 26 claims to the
Arbitrator, it was categorically stipulated that the claimant/plaintiff
shall be entitled to modify the amounts whenever the records would be
made available to the plaintiff. Letters dated 27th September, 1989 and
13th October, 1989, were filed with the earlier Arbitrator Sh. B.N.
Waghrey explaining the details of the claims and modifying the amounts
according to the available records. In the circumstances, the plea of the
defendant/objector that no permission was granted or no liberty was
sought by the plaintiff to modify the amount of the claims cannot be
sustained. In any case, the defendant ought to have raised objection to
modification of the amount of claims before the learned Arbitrator who
had awarded the lump sum amount by a non speaking award. In
absence of any such objection from the defendant, and the fact that
right to file the modified claim was reserved, this objection of the
defendant no. 1 is liable to be rejected.
26. In H.L. Batra (supra) the Supreme Court had held that the
Arbitrator is appointed for the purpose of settling the disputes between
the parties and if the disputes pertain to the agreement between the
parties, additional claims, if raised, will not enlarge the scope of the
Arbitrator. This is not disputed that in the present case, that the
reference was not made under Section 20 of the Arbitration Act, 1948
and the disputes were not referred by the Court rather the Arbitrator
was appointed by the defendant no.1 pursuant to the disputes between
the parties. Therefore, all the disputes and claims which were within
the scope of reference and which pertained to the agreement between
the parties, could be referred to the Arbitrator and the Arbitrator was
liable to adjudicate upon them and give an award in respect thereto.
27. The objections regarding the claims of the plaintiff besides the
objection that some of them were enhanced, are that the claim no. 2
was not payable at all; against claim no. 4 deductions were made
correctly and the payments were made according to the agreement and
the plaintiff did not raise any objection; claim no.6 was not
maintainable; claim number seven did not relate to any contract item;
claim no. 9, the payments were released and duly accepted by the
plaintiff; claim no. 10 is a contract item and not maintainable and
regarding the claim no. 11, it was asserted that no work was executed
by the plaintiff but by another agency and the plaintiff did not object to
the same.
28. The objection has been made to claim no.12 on behalf of the
plaintiff by which an amount of Rs.1,50,000/- was claimed for idle
labour attributable to the delay on the part of the respondent. This
amount of Rs.1,50,000/- on account of idle labour attributable to the
defendant was modified to Rs.1,20,041/-. The general conditions agreed
between the plaintiff and the defendant, however, in terms of Clause-
10, categorically stipulated that no claim for idle labour on whatsoever
ground will be entertained and no compensation shall be payable to the
plaintiff. Learned counsel for the respondents/objectors has objected on
the ground that the same is not an arbitrable claim. The counsel has
very emphatically contended that the claim of idle labour is barred
under the contract and relied on Clause 10 of Work Order 148/3. The
said Clause 10 is as under:-
"10. No claim for idle labour on whatsoever ground it may
be will be entertained by the corporation. Further no
compensation shall be payable due to break down in
machinery, water supply, or electricity, or delay in supply of
material, or damages due to rain and floods or other
reasons beyond control of NPCC."
Learned counsel has contended that though it is a lump sum
award and no reasons have been given, yet since the claim has been
considered which could not be considered by the arbitrator, therefore,
the award is liable to be set aside.
29. Despite clause 10 if the claim is raised by the plaintiff, he would
not be entitled for the amount so claimed nor would the Arbitrator be
entitled to award the amount claimed. However, it cannot be held that it
is beyond the scope or jurisdiction of the Arbitrator to adjudicate and
hold that the amount claimed cannot be allowed to the plaintiff.
Perusal of the objection raised by the respondent rather reveals that no
such objection that the claim No. 12 is not within the jurisdiction of the
Arbitrator has been taken in the objections filed under Section-30 and
33 of the Arbitration Act, 1940. If no such objection had been taken,
then it would not be permissible to allow the respondent to raise such
an issue before this Court. In any case, it cannot be held that the
amount claimed under Clause-12 will be an "Excepted matter" and the
charges for idle labor had to be determined by someone other than the
Arbitrator. If under the agreement the plaintiff was not entitled for any
amount on account of idle labor, no amount under this head could be
awarded to the plaintiff. But it cannot be held that the Arbitrator did
not have jurisdiction to consider the claim.
30. This is no more res judicata that where the resolution of dispute
is through the forum of Arbitration, the parties can still agree for
determination of certain issues/disputes by any higher authority of the
employer/department along with condition of finality attached to any
such determination. Such clauses are termed as "Excepted matters".
It is only in such matters which are termed as "Excepted matters" the
Arbitrator will not have jurisdiction, however, the claim of amount for
idle labour under Clause-10 is not an "Excepted matter" because clause
10 of general conditions only disentitles the plaintiff to claim any
amount. However, the jurisdiction of the Arbitrator is not barred, if the
claim is raised the Arbitrator could consider it and hold that the
plaintiff would not be entitled for the said amount. Since the award is a
non speaking award it cannot be culled from the award whether the
said claim has been allowed by the Arbitrator. This is also not the case
of the respondent that the question of idle labour is to be adjudicated
by some other authorities other than the arbitrator.
31. In Sudersan Trading Co. Vs. Govt. of Kerala and Anr., (1989) 2
SCC 38, it was held by the Supreme Court that it is not open to the
Court to probe the mental process of the Arbitrator and speculate where
no reasons are given by the Arbitrator, as to what impelled the
Arbitrator to arrive at his conclusions. Since, the award, which is
challenged by the respondent is a non-speaking lump sum award, the
defendant cannot contend that the amount on account of idle labour
has been granted to the plaintiff. The total amount awarded to the
plaintiff is much less than the total amount claimed including the
amount claimed on account of idle labour charges. In the
circumstances, it cannot be held that the Arbitrator has awarded Claim
No. 12 to the petitioner for which the plaintiff is not entitled under
Clause 10 of the general conditions of Work Order 148/3.
32. The learned counsel has placed reliance on Punjab State
Electricity Board v. Punjab Pre-Stressed Concrete Works, 2001 VI AD
(SC) 33 holding that when the award is a non speaking award and if it
was not known whether any part of the award made by the arbitrator
related to a particular claim which was not tenable, the award has to be
set aside inasmuch as it is not possible to say that the award did not
relate to claim which was not tenable and in the circumstances, it was
held that there were sufficient reasons for setting aside the award and
remitting the matter back to the arbitrator. However the case relied on
by the defendant/objector is distinguishable. In the said case an
amount of Rs.18.75 for claim no.1 was claimed in respect of increase in
value of poles and there were other claims also totaling to Rs.39.50
lakhs. Arbitrator had awarded a sum of Rs.17.71 lakhs with interest.
For other claims it was held that it was not known on what basis any of
the other claims were awarded for items for which arbitrator had no
jurisdiction. The case of the plaintiff is distinguishable is as much as
none of the claims were beyond the scope of the Arbitrator and were
arbitrable but in view of the clauses in the agreement the plaintiff was
not entitled for the amount for the said claim. However from the
language of the award it cannot be held that the amounts have been
awarded to the plaintiff. Perusal of the claims of the plaintiff reveals
that first claim was for Rs. 52,66,906/- whereas the Arbitrator has
awarded only Rs.30,46,957/- and after considering the claims of the
objector, a part of which were allowed the Arbitrator has awarded
Rs.26,48,484/- only. In the circumstances like other cases relied on by
the objector, in case of plaintiff it could be that only part of the claim
no.1 has been awarded and none of the other claims have been awarded
to the plaintiff.
33. Learned counsel has also challenged the award on the ground
that claim No.13 for Rs.24,721/- was barred under Clause No.31.079
(A) of the Contract 14 AC clearly stipulating that no payment shall be
made for carrying out load test on pre cost unit. Clause 31.079 (A)
regarding measurement is as under:-
"Measurement:
(a) No payment shall be made for carrying out load
test on pre cost unit. Unit rate for item of present
RCC slabs shall be inclusive of the cost of testing."
34. Mr.Budhiraja, learned counsel for the defendant/objector has
also challenged the consideration of Rs.88,528/- under claim No.19 for
replacing pre costing RCC slabs due to faulty design. The objection by
the respondents is based on Clause 10 of general conditions of the
Work Order 148/3 and Clause 10.02 of Special Conditions of the
Contract 14 AC.
35. Learned counsel has also relied on Clause 2.200 of Scope of Work
for service house to contend that the payment for replacing pre cost
RCC slabs due to faulty design could not be considered and the
awarded by the arbitrator. The said Clause 2.200 is as under:-
"2.200 These drawings are representative and are only
indicative of the nature of work included in this contract.
The actual detailed construction drawings as prepared by
the contractors shall be issued to the successful tenderer
after the award of the work. However, all the drawings
required for the execution of the entire works included in
this contract shall not be made available simultaneously on
award of work but shall be issued from time to time for
various works as per programme and priorities fixed by the
Engineer-in-Charge and depending on the actual progress
of work. The architectural treatment indicated in the
front elevation is only indicative in nature and changes,
if any, shall have to be done by the contractor without
any extra cost. Similarly, the quantities or work given are
also likely to change. The contractor can quote rates for any
extra item, he feels necessary for the completion and
commissioning of this job. Immediately after the award of
work, the contractor shall give a programme indicating
therein any particular or special sequence in which he
would like to carry out the work under this contract.
However, the decision of the Engineer-in-Charge on such
programmes and sequence of constructions shall be final
and binding on the contractor. In case work is delayed due
to delays in the issue of construction drawings, the
contractor shall be given suitable extension of time as may
be decided by the Engineer-in-Charge. However, the
contractor shall not be entitled to any type of claim
whatsoever on this account."
After perusal of the said clause the learned counsel for the
objector had to agree that the said clause was only in respect of front
elevation and was not applicable for all the construction done by the
plaintiff. In the circumstances it could not be held that the plaintiff was
not entitled for the extra work done by him as has been contended by
the learned counsel for the objector.
36. The objection on behalf of the respondent that the claims of the
plaintiff were beyond the scope of agreement has not been
substantiated in the facts and circumstances. Besides making these
general objections, the learned counsel for the respondent has not been
able to show any claim which is not within the scope of agreement or
which has not arisen on account of rights and liabilities between the
parties. Therefore, it cannot be held that the claims of the plaintiff were
not within the scope of agreement between the parties and could not be
adjudicated by defendant no.2/Arbitrator.
37. The objection that several claims could not be adjudicated upon
by the sole arbitrator is also without any legal basis. The learned
counsel has not been able to show any claim which could not be
adjudicated by the arbitrator, as being an „Excepted Matter‟. If under
the agreement, the plaintiff was not entitled for any amount and the
claim was raised, the Arbitrator was not to award the amount in respect
of the said claim but it cannot be held that the claim was beyond the
jurisdiction of the Arbitrator to adjudicate. In case of a non speaking
award, Court cannot speculate with respect to the mental process of an
Arbitrator. It is well settled that in matter of challenging the award,
there are often two distinct and different grounds. One is an error
apparent on the face of the record and the other is that the arbitrator
has exceeded his jurisdiction. In the latter case the court can look into
the arbitration agreement but under the former it cannot, unless the
agreement was incorporated or recited in the award. An award may be
remitted or set aside on the ground that the arbitrator, in making it,
had exceeded his jurisdiction and evidence of matters not appearing on
the face of it, will be admitted in order to establish whether the
jurisdiction had been exceeded or not, because the nature of the
dispute is something which has to be determined outside the award,
regardless of what might be said about it in the award or by the
arbitrator. Mere consideration of the claim would not render the award
bad. Only in a speaking award the court can look into the reasoning of
the arbitrator stipulated in the award. It is not open to the court to
probe the mental process of the arbitrator and speculate, where no
reasons are given by the arbitrator, as to what impelled the arbitrator to
arrive at his conclusion. In State of Andhra Pradesh and ors. Vs
R.V.Rayamin and ors., (1990) 1 SCC 433, it was contended that the
award has purported to grant damages on the basis of escalation of cost
and prices; and such escalation was not a matter within the domain of
the bargain between the parties and having taken that factors into
consideration the award was bad. The Supreme Court had held that
from reading the award it is clear that the arbitrator has considered the
claim made on the basis of „escalation and damages‟ but he has
awarded a total sum of Rs 19.39 lakhs insofar as he finds admissible in
respect of the claims which the arbitrator has adjudged. It speaks no
further. In such a situation it is not possible to contend that there was
any exercise of jurisdiction by the arbitrator beyond his competence.
The objections regarding claims beyond jurisdiction of the Arbitrator
cannot be accepted in the facts and circumstances. Court cannot
speculate the mental process of Arbitrator in a non speaking award and
if under the agreement, the plaintiff was not entitled for any amount
and the claim was raised, the Arbitrator is not to award the amount in
respect of the said claim but it cannot be held that the claim is beyond
the jurisdiction of the Arbitrator to adjudicate. The objections in this
regard in respect to various claims cannot be accepted and are rejected
in the facts and circumstances.
38. The objector has also objected to the grant of interest @ 16% per
annum on the principal amount from the date the arbitrator entered
into reference, i.e. 22nd July 1989 up to the date of award, 28th
September, 1997 and also interest at the same rate from the date of
award to the date of payment or decree whichever is the earlier.
According to learned counsel for the defendant/objector the Court
should take into consideration the changed economic scenario and the
consistent fall in the rate of interest. In the circumstances it is
contended that the rate of interest awarded by the Arbitrator must be
reduced.
39. The Supreme Court in a number of judgments reported as
Rajendra Construction Co. v. Maharashtra Housing & Area Development
Authority and others, 2005 (6) SCC 678, McDermott International Inc. v.
Burn Standard Co. Ltd. and others, 2006 (11) SCC 181, Rajasthan State
Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700 &
Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra Reddy & Anr., 2007
(2) SCC 720 and State of Rajasthan Vs. Ferro Concrete Pvt. Ltd. (2009) 3
Arb.LR 140 (SC) has held that the changed economic scenario and the
consistent fall in the rates of interest must be noticed by the Court and
interest awarded by the Arbitrator can be reduced according to facts
and circumstances of the case.
40. In the Rajendra Construction Company (Supra), the claimants
had claimed interest in the suit, however, the matter was referred for
arbitration, and arbitrator had awarded interest at the rate of 18% per
annum on the principal amount from the date of the suit to the date of
the award. The Apex Court keeping in view the facts and circumstances
that a contract was entered into in 1987 and the work was completed in
1990 after extension granted by MHADA and that arbitrator had passed
the award in 1995 with interest at 18% per annum had reduced the
rate of interest from 18% to 10% per annum and had held that
reduction of interest is proper and equitable and is in the interest of
justice. In McDermott International Inc. (Supra) resorting to exercise its
power under Article 142 of the Constitution of India in order to do
complete justice between the parties, the Apex Court had directed that
the claimants shall be entitled for interest at the rate of 6% per annum
in place of 18% per annum. Relying on Mukand Ltd. v. Hindustan
Petroleum Corporation Ltd., (2006)9SCC383 where the Supreme Court
had confirmed the decision of the Division Bench upholding the
modified award against the order of the learned single judge and had
reduced the interest awarded by the learned single judge subsequent to
the decree from 11% to 7 ½ % per annum, holding that 7 ½ % per
annum would be reasonable rate of interest that could be directed to be
paid to the claimants. For reducing the rate of interest long lapse of
time was taken into consideration.
41. Similarly, in Rajasthan SRTC (Supra) since a long spell of time
had passed since the amounts were claimed by the claimants and the
interest at the rate of 12% per annum was considered to be
burdensome to the company, therefore, the Apex Court in the facts and
circumstances, had reduced the rate of interest from 12% to 6% per
annum. In Krishna Bhagya Jal Nigam Ltd. (Supra), the Supreme Court
considering the economic reforms in the country and that the interest
regime had changed and the fact that interest rate had substantially
reduced, reduced the interest from 18% to 9% per annum. Similarly, in
UP Cooperative Federation Ltd. (Supra) the rate of interest was reduced
in the entirety of the facts and circumstances.
42. In the present facts and circumstances the construction of civil
works was awarded by letter dated 27th December, 1981 and work order
no. 148/3 dated 27th December, 1981 was issued for construction of
service houses, fuel pump houses, etc. The claims are about the work
executed which was not paid; refund of security deposit; amount
wrongly deducted; recovery made at penal rate etc. What was the rate of
interest agreed or customary during the said period has not been
established by any of the parties. Therefore, taking the totality of the
facts and circumstances, and the law laid down by the Supreme Court,
it will be just and appropriate to award simple interest at the rate of 9%
per annum from the date the arbitrator entered upon reference, i.e.
22.7.1989 up to date of award, 28.9.1997 and simple interest also at
the same rate from the date of award up to the date of payment made
after passing the decree, by the defendant/objector.
43. For the foregoing reasons the objections filed by the
respondent/objector being IA No. 2515/1998 under Section 30 and 33
of the Arbitration Act, 1940 for setting aside the award dated 28th
September, 1997 passed by Shri. K.C.Goyal, Sole Arbitrator is
dismissed and the said award is made rule of the Court. The plaintiff is
also awarded interest, as stipulated hereinbefore from the date of award
till the payment of awarded amount @ 9% simple interest per annum.
Decree sheet be drawn. All the pending applications are disposed of.
Considering the facts and circumstances, parties are left to bear their
own costs.
ANIL KUMAR, J.
April 1st, 2011
rs
